- Savvy business owners
earn 100% to 500%
by using safe, positive leverage.
In this educational video episode,
I'm going to explain and answer a question
that I've been asked numerous times,
how savvy business owners
or even real estate investors
maintain liquidity, safety and earn predictable
rates of return tax-free on their money.
But they also earn 100 to 500% rates of return.
You may be going, "Yeah, right."
Put on your seatbelt, I'll explain.
(upbeat music)
So, I'm Doug Andrew.
I've been a financial strategist
and retirement planning specialist and a business owner
and real estate investor
for five decades now.
I've been helping a lot of business owners
and a lot of people who invest in real estate
optimize their assets and do very well with what they do.
But I gave them some insights into opportunities
where they could make 100 to 500% rates of return
and they went, "Oh, my heavens.
I thought I knew how money works until I met you."
So let's talk about some basics first
and then I'll talk about how money works
and how they've been able to earn
or what I call double dip on their assets.
So if we're talking about a business owner
or a real estate investor,
a lot of business owners know that they can make 100%,
even two, three, 400, 500% on what they invest
in their business.
And they say, "Doug, I already know how to do that."
Now, some businesses don't, but some do.
Others, they go, "Well, I'm a real estate investor
"and yes, I've been able to double my money
"when I buy a property and it appreciates
at an average of 7.2%."
Which is pretty common and so they buy a rental property
for a million and 10 years later
or 7.2 years later, if it's appreciating at 10%,
they sell it for twice what they paid it for.
They say that's 100% return.
Well, yeah, but no, it takes 10 years
or it takes 7.2 years to double your money.
So that's okay.
But a lot of times, they're only using
half of the strategy
that they thought was good because nobody taught them
about really how to leverage safely.
Now, there are three marvels or miracles
of wealth accumulation that I discuss in my various books
that I've written.
I've been blessed in my life
to have authored 13 books so far.
I'm gonna gift you a copy of a 300-page book
at the end of this episode, so stay with me.
But when people understand
these three marvels or miracles,
they go, "Oh, my heck, I thought I understood them."
The first miracle or marvel is compound interest.
And sometimes people think,
"Oh, I understand compound interest."
I go, "Oh, really?"
I usually give them a sheet of paper,
a copy paper, you know, that is 26 pound copy paper.
And I'll say,
"Okay, let's see how well you understand compound interest."
How about, fold that in half, now fold it in half again.
Now, they folded the sheet of paper in half twice, I say,
"Now, imagine if you could fold that in half
48 more times, a total of 50 times."
You can't physically do that 'cause of the folds.
But imagine if you could, I want you to write down
how thick you think that would be.
And these are CPAs and tax attorneys
who say I understand compound interest
and they write down a half an inch,
three quarters of an inch, six inches.
Some even say a mile and they get laughed out of the room
when I'm teaching Advanced Continuing Education
to CPAs and tax attorneys.
I go, "I thought you understood compound interest."
What is this sheet of paper
doing every time you fold it in half?
It's doubling.
Double, double, double, double, double.
So then I show them mathematically,
if a sheet of copy paper which is 5/1000 of an inch thick,
were to be doubled 50 times,
it would be from here to the sun.
It would be 93 million miles thick.
Double, double, double.
If you could fold it over one more time, 51 times,
it'd be from here to the sun and back.
If you folded it over 42 times,
it'd be from here to the moon.
And you know they said, "Oh it'd be a mile high."
And they got laughed out of the room.
They were writing down six inches
and they thought they understood compound interest.
Now, see compound interest is what Albert Einstein said
was, you know, the eighth wonder of the world.
Well, Rothschild is the one that said,
"No, compound interest tax-free
is the eighth wonder of the world.
Because $1 doubling every period for 20 periods
will be worth 1,048,000, if it's tax-free.
If it's taxed as earned the way most Americans save,
$1 doubles to $2 and you pay tax at 25% rate,
you only have a buck 75.
A buck 75 doubles to 350, you pay taxes 25% on that.
Guess what you'll have instead of a million?
You'll have only $72,000.
In a 33% bracket, you'll only have 27,000 out of a million.
So Rothschild said tax-free compounding
is the eighth wonder of the world.
That's the second marvel of wealth accumulation,
is compounding tax-free.
The third marvel is safe, positive leverage.
Now, leverage without liquidity is stupidity.
That's why I always keep my business working capital
or my real estate equity,
safely tucked over in insurance contracts,
LASER Funds compounding, okay?
Because the real estate property
or the business is gonna do whatever it does,
regardless of whether I'm putting my cash in there
or using OPM, other people's money
that I borrow from the bank, so to speak.
So far, so good.
Now, what's leverage?
Leverage is the ability to own and control assets
with very little or none of your money tied up
or at risk in that asset, okay?
So if you paid cash for $500,000
piece of real estate and you say, "I doubled my money."
I'm not impressed until I know what?
How long you held on to it.
Because if you paid 500,000 cash
and you sold it for a million and it took you 10 years,
10 into the rule of 72, you only got an average
of 7.2% compounded annual rate of return.
That's not that impressive.
But if you used 500,000 of OPM
or you only put $100,000 down
and you borrowed the other 400,000, okay?
Now, it's a different story.
Because that's still gonna double to a million,
but you only tied up 100,000.
And so you looked at the rate of return
based on your investment of 100,000
and people said, "Well, what about the 400,000?
That's not free."
Wait a minute here.
How do banks and credit unions make their money?
They make millions and billions with OPM
by paying interest.
Some people think paying interest is an expense.
Now, if banks and credit unions did not pay interest,
they would wither up and die.
If you borrow at 6% deductible interest
for that piece of real estate in a 33% bracket,
it's costing you four.
Every $1 million, you borrow at 6% tax deductible interest
in a 33% bracket is costing you four.
So that's a net of 40,000.
You pay 40,000 a year, okay?
Now, you pay 40,000, money inside of my LASER Funds
have been averaging 10, 11.
Let's just say eight.
So on a million over in the LASER Fund,
I keep my money over there earning eight.
How much more is eight than four?
Don't say four.
It's 100% more.
It's 80,000.
So many, many times when I leverage,
I am paying 40,000.
Why?
Because I'm making 80,000 on that money
and so I make 80, it cost me 40.
Would you hire an employee for 40 that made you an extra 80?
Would you buy a widget machine for 40,000
that made you an extra 80,000?
That's 100% rate of return on employment costs
or equipment costs.
Are you starting to get it?
But there are times when I have borrowed money
at 3% tax deductible,
net cost of two.
And in my Indexed Universal Life,
I have earned 11 netting 10 tax-free.
How much more is 10 than two?
500%.
On a $1 million on real estate properties,
I've been paying 20,000 a year in interest
and making 100,000.
And how much more is 100,000 in 20,000?
It's 500%.
It's five times.
The real estate is going to double from 500,000
to a $1 million.
A $1 million piece of real estate,
it's gonna double to 2 million,
whether it's mortgaged to the hilt or free and clear.
But while that's doing what it's doing,
I can make money.
I can make 100 to 500% rates of return
on top of whatever it appreciates to
or whatever the cash flow is generating.
Is this making sense?
Same thing for a business.
Many business owners will use OPM
and they will borrow money at two, three, 4%
and they will make eight, nine, 10, 20, 30, 40, 50%
in their business.
But many savvy business owners
will use max-funded Indexed Universal Life
as a repository for their working capital.
I'll end with a story here.
I have a very savvy business owner,
whose business is real estate.
And so he will buy big apartment complexes,
fix them up and flip them.
He doesn't like to keep owning them.
And so he in 2017, he wanted to buy
this multi-million dollar apartment complex.
And he called up and he said,
"Doug, I wanna borrow not withdraw,
"borrow a million out of my IUL policy to tie up
this piece of property with an earnest money."
And he asked for the form.
It's one-page form.
His name, policy number.
You don't have to qualify for the loan.
It's his money.
The insurance company said, "You wanna withdraw or borrow?
"Well, borrow.
Which way?"
And he goes, "Indexing."
So he borrowed a million, they charged him in 2017,
5% on that $1 million loan.
He didn't have to write out a check, okay?
It's a sort of like a phantom loan.
It's collateralized by his money and his policy.
They charged him 50,000,
which was deducted from what he earned on the million
that he left in the policy that he borrowed against.
He earned that year 25% on his IUL.
250 grand is what he made tax-free minus the 50,000.
He netted 20% or 200,000 tax-free
on his million and his policy
while he was using a million from his policy,
so to speak, to make 3 million in his real estate.
This is what savvy business owners
and real estate investors do.
They use max-funded IUL like I do,
as a working capital account
to be able to make 100%, 200% even 500% rates of return
on top of whatever the real estate
or the business is also generating.
If this is giving you insights, folks,
you need to study more.
Claim your free copy of The LASER Fund.
Go to laserfund.com
and you contribute a nominal amount
towards the shipping and handling.
You have to have some skin in the game.
I'll cover the rest of the shipping cost.
I'll pay for the book and I'll send out a copy to you.
There's 300 pages here of charts, graphs and explanations
and 62 actual stories of how The LASER Fund is used
by real estate investors, business owners,
people for retirement, college funding.
But this is about you and your brighter future.
And check out in there,
there's educational webinars we teach.
You can even schedule an appointment with an IUL specialist
to show you how a LASER Fund can be designed
for what your goals are
in your particular set of circumstances
because this is about you and your brighter future.
I don't want you to miss out.
(upbeat music)