Rental Property Investor · Henderson, NV · Member since 2019 · 105 posts · 60 votes
Real estate investors ❗🫵
🏘️🏠🏞️
WHY❓
..... are you relying on banks for funding your deals when whole life insurance offers the same function but with (many) MORE benefits, both short and long term?
🤔💡
**Access to Cash Value**
Why limit yourself to banks, savings withdrawals, or retirement account loans when you can use your policy's cash value to fund diverse deals like fix-and-flips, rental properties, commercial ventures, land development, and REITs?
**Continued Growth**
Did you know your cash value continues earning interest and dividends in certain products, even when you borrow against it, unlike withdrawing from a savings account?
**Tax and Term-Free Loans**
Are you leveraging the advantage of tax-free loans against your policy’s cash value, with the added benefit of no mandatory repayment terms? This flexibility is unmatched by traditional banks. Or retirement accounts.
**No Credit Checks**
Forget the hassle and delays of credit approvals. Access your funds almost instantly, without a credit check, making it faster and easier to capitalize on investment opportunities.
**Fast Capital Access**
Seize real estate opportunities swiftly with very fast access to your capital, ensuring you never miss out on a lucrative deal. I can access cash value in one of my policies and as little as the next day through a policy loan. No questions asked!
**Asset Protection**
Benefit from the protective features of whole life insurance, where your investments are safeguarded against creditors and market volatility, providing a stable funding platform even in uncertain times (and there will be uncertain times!).
🤔 So, why not leverage the full potential of your financial resources?
Consider the strategic use of whole life insurance to make your real estate investments in residential, commercial, or speculative land work smarter.
Financial Advisor · Stateline, NV · Member since 2023 · 131 posts · 122 votes
2y
As a financial advisor and professor of finance, I want to provide a more detailed analysis of the use of whole life insurance as a funding source for real estate investments:
High Fees: Whole life insurance policies often have upfront commissions that can be as high as the first year's premium, and ongoing management fees. These costs reduce the cash value and overall return on investment. For example, a $1 million policy could have an initial commission of $50,000 to $100,000, significantly impacting the policy's cash value in the early years.
Limited Access to Capital: Accessing the cash value requires taking out a policy loan, which accrues interest, typically at a rate of 5-8%. This interest can compound over time, reducing the net cash value available for investment.
Restricted Investments: The growth rate of the cash value in a whole life policy is often lower than the average return on real estate investments. For instance, the average annual return on the S&P 500 over the past 90 years is about 9.8%, while the dividend yield on whole life policies is typically 5-6%.
Opportunity Cost: The premiums for whole life insurance can be significantly higher than those for term life insurance. For example, a 40-year-old healthy male might pay around $500 per year for a 20-year term life policy with a $500,000 death benefit, compared to $4,000-$5,000 per year for a whole life policy with the same death benefit. This difference could be invested directly in real estate, potentially yielding higher returns.
Long-Term Commitment: Whole life insurance is designed to be a permanent policy, with the expectation that premiums will be paid for the policyholder's entire life. Surrendering the policy early can result in substantial surrender charges and a loss of the death benefit.
Tax Implications: While the policy's cash value grows tax-deferred, policyholders must be cautious of the potential tax consequences of a policy lapse or surrender. For instance, if the cash value exceeds the total premiums paid, the excess amount is taxable as ordinary income.
Risk of Policy Lapse: If the policyholder cannot maintain premium payments, the policy can lapse, resulting in the loss of the death benefit and potential tax liabilities on the cash value. This risk is particularly concerning during economic downturns or personal financial hardships.
In summary, while whole life insurance can provide certain benefits, it is crucial to consider the costs, limitations, and long-term implications before using it as a funding source for real estate investments.
To be clear, I don't fault @Brandon Beaudoin for promoting products like this. Insurance companies often prey upon agents (Especially new ones) telling them only half the story to encourage them to sell as many of these "infinite banking" policies as possible and make large commissions. I was one of these agents 13 years ago and have since educated myself on both sides of the coin.
Financial Advisor · Stateline, NV · Member since 2023 · 131 posts · 122 votes
2y
As a financial advisor and professor of finance, I want to provide a more detailed analysis of the use of whole life insurance as a funding source for real estate investments:
High Fees: Whole life insurance policies often have upfront commissions that can be as high as the first year's premium, and ongoing management fees. These costs reduce the cash value and overall return on investment. For example, a $1 million policy could have an initial commission of $50,000 to $100,000, significantly impacting the policy's cash value in the early years.
Limited Access to Capital: Accessing the cash value requires taking out a policy loan, which accrues interest, typically at a rate of 5-8%. This interest can compound over time, reducing the net cash value available for investment.
Restricted Investments: The growth rate of the cash value in a whole life policy is often lower than the average return on real estate investments. For instance, the average annual return on the S&P 500 over the past 90 years is about 9.8%, while the dividend yield on whole life policies is typically 5-6%.
Opportunity Cost: The premiums for whole life insurance can be significantly higher than those for term life insurance. For example, a 40-year-old healthy male might pay around $500 per year for a 20-year term life policy with a $500,000 death benefit, compared to $4,000-$5,000 per year for a whole life policy with the same death benefit. This difference could be invested directly in real estate, potentially yielding higher returns.
Long-Term Commitment: Whole life insurance is designed to be a permanent policy, with the expectation that premiums will be paid for the policyholder's entire life. Surrendering the policy early can result in substantial surrender charges and a loss of the death benefit.
Tax Implications: While the policy's cash value grows tax-deferred, policyholders must be cautious of the potential tax consequences of a policy lapse or surrender. For instance, if the cash value exceeds the total premiums paid, the excess amount is taxable as ordinary income.
Risk of Policy Lapse: If the policyholder cannot maintain premium payments, the policy can lapse, resulting in the loss of the death benefit and potential tax liabilities on the cash value. This risk is particularly concerning during economic downturns or personal financial hardships.
In summary, while whole life insurance can provide certain benefits, it is crucial to consider the costs, limitations, and long-term implications before using it as a funding source for real estate investments.
To be clear, I don't fault @Brandon Beaudoin for promoting products like this. Insurance companies often prey upon agents (Especially new ones) telling them only half the story to encourage them to sell as many of these "infinite banking" policies as possible and make large commissions. I was one of these agents 13 years ago and have since educated myself on both sides of the coin.
As a financial advisor and professor of finance, I want to provide a more detailed analysis of the use of whole life insurance as a funding source for real estate investments:
High Fees: Whole life insurance policies often have upfront commissions that can be as high as the first year's premium, and ongoing management fees. These costs reduce the cash value and overall return on investment. For example, a $1 million policy could have an initial commission of $50,000 to $100,000, significantly impacting the policy's cash value in the early years.
Limited Access to Capital: Accessing the cash value requires taking out a policy loan, which accrues interest, typically at a rate of 5-8%. This interest can compound over time, reducing the net cash value available for investment.
Restricted Investments: The growth rate of the cash value in a whole life policy is often lower than the average return on real estate investments. For instance, the average annual return on the S&P 500 over the past 90 years is about 9.8%, while the dividend yield on whole life policies is typically 5-6%.
Opportunity Cost: The premiums for whole life insurance can be significantly higher than those for term life insurance. For example, a 40-year-old healthy male might pay around $500 per year for a 20-year term life policy with a $500,000 death benefit, compared to $4,000-$5,000 per year for a whole life policy with the same death benefit. This difference could be invested directly in real estate, potentially yielding higher returns.
Long-Term Commitment: Whole life insurance is designed to be a permanent policy, with the expectation that premiums will be paid for the policyholder's entire life. Surrendering the policy early can result in substantial surrender charges and a loss of the death benefit.
Tax Implications: While the policy's cash value grows tax-deferred, policyholders must be cautious of the potential tax consequences of a policy lapse or surrender. For instance, if the cash value exceeds the total premiums paid, the excess amount is taxable as ordinary income.
Risk of Policy Lapse: If the policyholder cannot maintain premium payments, the policy can lapse, resulting in the loss of the death benefit and potential tax liabilities on the cash value. This risk is particularly concerning during economic downturns or personal financial hardships.
In summary, while whole life insurance can provide certain benefits, it is crucial to consider the costs, limitations, and long-term implications before using it as a funding source for real estate investments.
To be clear, I don't fault @Brandon Beaudoin for promoting products like this. Insurance companies often prey upon agents (Especially new ones) telling them only half the story to encourage them to sell as many of these "infinite banking" policies as possible and make large commissions. I was one of these agents 13 years ago and have since educated myself on both sides of the coin.
I couldn't help but notice you didn't disagree with anything I wrote. That's probably why you can't "fault" me for "promoting" a product like this. Really, though, I'm not promoting the product here as much as I'm promoting a strategy. A strategy that works, mind you, and works very, very well for lots of people. It does need the right product behind it to facilitate implementation, that much is true.
Instead of refuting anything positive that I stated, you did however offer risks and other items to consider. And I respect that....I do the same. I posted what I did because most people are unaware of the TRUE benefits of the whole life and IBC and only focus on, well, what you did.
To that end, here's my 0.02 based on what you wrote:
1. High fees - Any business has startup and ongoing costs. Using whole life products to create a banking system (i.e. our bank or "the business") to then fund real estate deals (benefits in my original post) are well worth any associated costs. Also, the higher costs are also attributable to a lifelong benefit over that of a temporary (20-30 year term). How much are renewal costs of a term policy again? In most cases much, much higher....but that is never talked about it. Hmm..
2. Limited Access to Capital -This is only true if you don't pay back policy loans with returns from real estate investments. You also make no mention of dividend payments in non-direct recognition policies that increase cash value over time regardless of the policy loans outstanding. And it just gets better and better over time....
3. Restricted Investments - Why are you making this an "either or" thing? And how did you go from growth rate of cash value compared to real estate returns compared to S&P 500?? You have access to your cash value no questions asked and can invest in anything you want. Seems out of line with the bulleted title "Restricted Investments".....odd.
4. Opportunity Cost - How much are renewed term premiums? Talk about costs...
5. Long-Term Commitment - Policies designed for IBC do have long term commitments in their effective use and management but the reality is that policyholders can stop paying premiums much, much earlier in their life spans (5, 7, 10, 20 pay etc)
6. Tax Implications - Certainly need to be aware of this. Much like the tax implications of any investment vehicle or retirement plan.
7. Risk of Policy Lapse - This is a risk and policyholders need to be cognizant of it. But, any retirement plan or investment strategy should have firm understandings of associated risks and the discipline to mitigate and steer clear of them.
Brandon W. Beaudoin Founder - Abundant Life Products & Strategies, Inc Licensed Life Insurance Agent Infinite Banking Practitioner & Coach Book a Call: https://calendar.app.google/praigJnXx4u4eC3Q8 Cell: 619.306.8823 Email:[email protected] Proverbs 22:7: Just as the rich rule the poor, so the borrower is servant to the lender
It doesn't look to me like Josh did any more than type a question into Chat GPT and paste the result here. A pure junk response.
The only important factor to consider is "Can a real estate investor build more wealth by leveraging the cash value of a life insurance policy instead of using their own cash?"
The answer is YES. Anybody who talks about high fees just doesn't get it. Fees or not, the investor is able to put their money to work in two places at one time and the combined growth is going to be higher than using your own money. End of story.
Financial Advisor · Stateline, NV · Member since 2023 · 131 posts · 122 votes
2y
The only reason I even respond to these solicitations of insurance sales is to show another side of the story. As I've mentioned in other posts I don't work off any commissions or take any kickbacks from anyone, I structured my business to be fee-only and transparent so that people are paying for planning and not a product. In other words, I don't have a horse in this race. Anyone advocating for this strategy you're suggesting makes substantial commissions which I view as a conflict of interest.
@Thomas Rutkowski doesn't it get tiring attacking people based on things you make up and not based on facts? This isn't the first time you've made a false assertion on a BP forum with nothing to back it up, let's stick to facts and information for the readers so that this can be a helpful resource. Just because you say "end of story" doesn't mean you've proven a point, do better! Nobody wants to be subjected to bickering on an educational forum.
If the Financial Planning Association gets its legislation passed on title protection you won't be able to call yourself a financial planner anymore, you don't have the bare minimum qualifications of education or experience. To me, this tells the readers all they need to know. I can understand needing to make a living, and you do that by selling commission products, like many others. But that doesn't mean it should be at the expense of other people's financial well-being. It would be a long road but I would advocate for you doing the CFP® curriculum and one day trying to act in a fiduciary capacity for clients. People deserve someone who always acts in their best interest. Before you say "I am a fiduciary" please go submit your ADV or regulatory documents to the Institute for the Fiduciary Standard as I have and get third-party approval that you are in fact a fiduciary. (Hint - You can't accept commissions to be considered).
@Brandon Beaudoin Certainly there are situations where this infinite banking policy could make sense but it is after many other financial planning possibilities have been exhausted.
I think @Jonathan Bock said it best, we don't have to sell it but we CAN if it makes sense in their overall financial life plan.
Shoutout to Chat GPT for helping me write any post someone disagrees with 😏😅
The only reason I even respond to these solicitations of insurance sales is to show another side of the story. As I've mentioned in other posts I don't work off any commissions or take any kickbacks from anyone, I structured my business to be fee-only and transparent so that people are paying for planning and not a product. In other words, I don't have a horse in this race. Anyone advocating for this strategy you're suggesting makes substantial commissions which I view as a conflict of interest.
@Thomas Rutkowski doesn't it get tiring attacking people based on things you make up and not based on facts? This isn't the first time you've made a false assertion on a BP forum with nothing to back it up, let's stick to facts and information for the readers so that this can be a helpful resource. Just because you say "end of story" doesn't mean you've proven a point, do better! Nobody wants to be subjected to bickering on an educational forum.
If the Financial Planning Association gets its legislation passed on title protection you won't be able to call yourself a financial planner anymore, you don't have the bare minimum qualifications of education or experience. To me, this tells the readers all they need to know. I can understand needing to make a living, and you do that by selling commission products, like many others. But that doesn't mean it should be at the expense of other people's financial well-being. It would be a long road but I would advocate for you doing the CFP® curriculum and one day trying to act in a fiduciary capacity for clients. People deserve someone who always acts in their best interest. Before you say "I am a fiduciary" please go submit your ADV or regulatory documents to the Institute for the Fiduciary Standard as I have and get third-party approval that you are in fact a fiduciary. (Hint - You can't accept commissions to be considered).
@Brandon Beaudoin Certainly there are situations where this infinite banking policy could make sense but it is after many other financial planning possibilities have been exhausted.
I think @Jonathan Bock said it best, we don't have to sell it but we CAN if it makes sense in their overall financial life plan.
Shoutout to Chat GPT for helping me write any post someone disagrees with 😏😅
You still don't seem to understand the business model. This is not Life Insurance as part of a comprehensive financial plan. This is life insurance for the purpose of leveraging the cash value. It's about putting your money to work in two places at one time. Not one thing that I started is false or a lie as you accuse without any evidence. The death benefit is a bonus, but is not the sole reason for purchasing the policy. Your response completely misses the mark and really doesn't belong in this thread.
Financial Advisor · Stateline, NV · Member since 2023 · 131 posts · 122 votes
2y
@Thomas Rutkowski thanks for your thoughtful response I appreciate you taking the time. I've wanted to reply sooner but I'm at SHIFT, a financial conference dedicated to holistic human-first advice.
As a lifelong learner and professor of finance, I'd like to get your advice on how to better educate myself on this concept you are so passionate about. I have read Becoming Your Own Banker (The book that pioneered this concept) and The Banker's Secret to learn more about the Infinite Banking concept. The concepts were murky at best and read like an anti-government manifesto. I'm a firm believer that even the most complicated financial strategies should be able to be explained simply. How have you educated yourself on Infinite Banking, and on other concepts of financial planning that people could harness as part of their strategy as an alternative to IB? I must be missing something
The other thing that comes to mind when reading your passionate posts is that over 12 years I've helped over 11,000 clients with their financial lives with several of those years solely focusing on helping clients who invest in real estate and I have yet to meet someone who built their wealth using a policy like you describe. I have however helped dozens of clients who have had to deal with their policies not being liquid, being charged 5 or 6 figures a year in fees, dealing with the tax implications of surrender fees, and almost unanimously nobody has understood what they were sold.
As someone who is such a champion of these ideas, I'm hopeful you have some examples for all of us in this forum who would like to learn more. I'd love to see some actual facts, examples, and case studies of someone who has built their wealth in this way. if it truly is as powerful as you imagine, wouldn't the Brandon Turners of the world all own policies like this? Why are there no publicly available stories of people owning these policies? Are you the only one who is in on this secret Thomas? Perhaps you yourself have bought and sold hundreds of properties since you must be a defacto infinite bank by now. What are we all missing Thomas? I've been consulting some of the most respected and world-renowned financial advisors over the past few days and the Infinite Banking concept is a joke in these circles and is referred to as a scheme, money-grab, and something that is used to abuse the trust of those that fall for it.
I would love nothing more than to be proven wrong and learn a new strategy to help my clients. Please educate me Thomas, I'm all ears!
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
2y
I absolutely detest the fact that the insurance industry has decided that the way to sell their insurance products is to disguise insurance salespeople as “financial advisors”. Amazingly their “answer” to any financial question is “insurance”.
In the circles I am running in, those who've been practicing IBC for many, many years now, do actually have these policies and (a lot) of real estate as part of their portfolio often acquired by leveraging said policies. In fact, since you're touting your conference, I was just at one of the largest STR conferences in TN this past February and wouldn't you know it....there were other successful real estate investors there who practice IBC! How can that be, though....YOU with all your credentials and experience haven't come across a single person who's established their wealth, or a portion thereof, using IBC?! Truly.....odd.
The insurance industry can and must, to one of your points, do better to educate clients on the underlying principals, mechanics, and ongoing use of policies designed for IBC. And IBC practitioners and life agents at large should be leading the front on that effort. That said, many of the issues you pointed out have more to do with the policyholder than the product often times and ironically are parallels to what I'm certain to be issues many of YOUR clients face (inability or lack of desire to understand finances, nuances of financial planning, budgeting, investment options, taxes, retirement planning, estate planning, etc.). They come to you because they don't want to, can't, or don't care to figure things out for themselves. The information and resources are there for them to do so.
Not that I need to speak for @Thomas Rutkowski but I do know there's nothing to prove to you and from what I've experienced....there is no educating you nor anybody with your mindset. Your mind is made up and IBC simply doesn't work. And everyone in your circles will nod their head and emphatically agree with you. That, unfortunately, doesn't make it a fact.
Financial Advisor · Stateline, NV · Member since 2023 · 131 posts · 122 votes
2y
@Brandon Beaudoin I'm open to learning a new perspective or point of view but nobody seems to be willing to share one. Do you have resources you would like to share? Perhaps a book or course? A famous client example of someone who has built wealth using IB? I would have to imagine if it is as prevalent as you say there would be at least one BP Podcast episode of someone talking about it. Do you happen to know which episode that might be?
Eager to learn more, my mind is not made up and I am trying to approach this with an eager mind. Like most things in finance, I don't think this is black and white and I am always happy to admit I was wrong. Especially if it means I found a better way to build wealth for me and my clients.
I can't help but feel that I am asking a lot of questions and not getting any actual responses to those questions. I understand feeling defensive when someone doesn't align with a strategy you very much believe in. I just need it to make sense and I have not gotten that clarity yet.
I absolutely detest the fact that the insurance industry has decided that the way to sell their insurance products is to disguise insurance salespeople as “financial advisors”. Amazingly their “answer” to any financial question is “insurance”.
I agree with you Don. The financial planning association has made it its mission in 2024 to enforce stricter education and experience requirements for someone to refer to themselves as a financial advisor. I think I speak for most CFPs when I say that I hope it reduces consumers being misled.
I absolutely detest the fact that the insurance industry has decided that the way to sell their insurance products is to disguise insurance salespeople as “financial advisors”. Amazingly their “answer” to any financial question is “insurance”.
I agree with you Don. The financial planning association has made it its mission in 2024 to enforce stricter education and experience requirements for someone to refer to themselves as a financial advisor. I think I speak for most CFPs when I say that I hope it reduces consumers being misled.
Just because you don't understand it, does not mean that anyone is being misled. You keep asking for resources to learn more yet everything you need is in my posts above. 1. You fund a maximum over-funded policy. 2. You borrow AGAINST that policy 3. Invest the loan proceeds in real estate.
It allows the investor to put their money to work in two places at once. They will build more wealth, more quickly over time. It's really that simple. It's really no different from a BRRR approach to investing.
The people who come to me already want to do this. I simply fill in the blanks and answer any remaining unknowns.
I don't post here to change the mind of people like you. I post here for the many people who can actually put two and two together and make four.
Financial Advisor · Stateline, NV · Member since 2023 · 131 posts · 122 votes
2y
@Thomas Rutkowski I've read this oversimplified version of how the policy works in theory but we both know it is far more complicated than that with an incredible amount of fees and rules layered onto the policy. I believe that people come to you already wanting to do it, there is a ton of misinformation and misleading marketing regarding infinite banking out there and people are fooled every day at no fault of their own trying to alleviate their financial problems and build wealth. DO you worry that more lawsuits like this are happening all the time?
I think the attorney made a good simple point here: Quoted from the article👇
Bixby, Hawkins’ attorney, said he has seen an increase in the number of cases involving universal life policy problems.
“The agents and advisors who sell these types of products oftentimes do not truly understand the products,” he said. “Projections are frequently far too rosy and difficult for the consumers to understand.”
Your description could be applicable to a 401k, 403b, 457, TSP, and so many other types of accounts that offer loans. The explanation is extremely complicated and unable to be explained simply which in itself is a red flag to practicing financial planners (Who do not stand to gain a commission when selling this product)
@Thomas Rutkowski I've read this oversimplified version of how the policy works in theory but we both know it is far more complicated than that with an incredible amount of fees and rules layered onto the policy. I believe that people come to you already wanting to do it, there is a ton of misinformation and misleading marketing regarding infinite banking out there and people are fooled every day at no fault of their own trying to alleviate their financial problems and build wealth. DO you worry that more lawsuits like this are happening all the time?
I think the attorney made a good simple point here: Quoted from the article👇
Bixby, Hawkins’ attorney, said he has seen an increase in the number of cases involving universal life policy problems.
“The agents and advisors who sell these types of products oftentimes do not truly understand the products,” he said. “Projections are frequently far too rosy and difficult for the consumers to understand.”
Your description could be applicable to a 401k, 403b, 457, TSP, and so many other types of accounts that offer loans. The explanation is extremely complicated and unable to be explained simply which in itself is a red flag to practicing financial planners (Who do not stand to gain a commission when selling this product)
I absolutely agree that many insurance agents do not fully understand the products they sell. But if you don't understand the issues with why Universal Life policies from 30-50 years ago are lapsing now, then you are doing a huge disservice to the investing community. I know these policies inside and out and my clients don't buy anything until they are confident that they are making a great decision. @Brandon Beaudoin can speak to the education I provide.
What you posted has nothing to do with what we are discussing here. Minimally-funded and Maximum over-funded policies are two completely different animals.
There is nothing inherently wrong with Universal Life. Interest rates were very high in the 80s and 90s. It is important to realize that in a TRADITIONALLY FUNDED policy, the insurance company does not collect any more premium than they absolutely need for the policy to remain viable. Their "Worst Case" or Actuarial or Guaranteed Rate is not the rates they make through their investing activities.
The cash value, for all practical purposes,is the policy owner saving up the death benefit over the life of the insured. The savings should displace the insurance company's risk if the insured lives a normal life expectancy. Given a worst-case growth assumption they can calculate the amount of premium they need to make that happen.
Because of the premium flexibility in a universal life policy, clients could UNDERFUND the policy with the expectation that rates would be enough to offset the a lower premium. That expectation was the mistake made here.
When interest rates dropped, nobody wanted to increase the premium to make up for it. Clients didn't understand or chose not to add premium. Many agents didn't understand. The insurance companies sent out plenty of warnings.
Now what YOU really need to understand is that we are talking about MAXIMUM OVER-FUNDED policies, not "Traditional" or what I would consider a Minimally-funded policy. A Maximum over-funded policy is, by definition, OVER funded. It is not at the mercy of the interest rates in the market. If rates are low, the CV grows at a lower rate. If rates are high, the CV grows had a higher rate. The Death Benefit costs (COI) are minuscule compared to the cash in the policy.
