All Forum Posts by: Account Closed

@Adam Adams @Tim S. - thanks guys, that's helpful. The CFPB provisions and template reference the servicer sending the notices, so thought it was odd when FCI said they don't. But helpful to hear it's not uncommon.

@Bob Malecki - I used OSC as well, they must have different options available because the program I use let's me pick the coverage amount I want, but I also have to send notices to the borrower and inform FCI of any updates. Again, not difficult, but not ideal since amongst other reasons, the borrower can get confused when they have multiple parties reaching out to them (the servicer on payment stuff and the lender on insurance items).

Just wondering for non-performing note investors, does your servicer send the 45/30/15 day forced place insurance letters or do they have you do it? I'm using FCI who does not send them out (even if I use their recommended insurance provider). It's not difficult to do, but would just be ideal if all the communications (including FPI letters) came from the servicer..

That's awesome, thanks guys. 

@Dave Van Horn - your example is the type of thing I had in mind, great to see the type of impact volunteering in this space can have. It's pretty easy to take what we've learned for granted, not everyone is so lucky.

@Steven M. Hughes - what will be your nonprofit's strategy, focusing on millennials as well?

Hey guys - I just finished listening to episode 8 of the Biggerpockets Money podcast. Aside from the fantastic guest, my biggest takeaway was learning there are volunteering programs focused on the financial education space. For some reason I had never even thought of that when thinking about which charities to get involved with. 

So while I spend the next couple hours googling this some more, I was curious to hear if anyone on BP volunteers with a financial literacy non-profit, and what your experience was like?

I probably shouldn't have used the word "promise" 6.4%, you can replace that with "pays a dividend of" 6.4% or something similar.

Thanks @Thomas Rutkowski - I think I'm starting to follow. So there are two parts working here. Part 1 is that you contribute to an IUL where the contributions are invested in an index promising let’s say 6.4%. The investment's downside is limited at 0%, but the upside is also capped at 6.4%, so any returns over 6.4% don't go to you (they presumably go to the insurance company or whoever on Wall Street they sold the security to). Part 2 is that you can take out a loan secured by the value of your IUL, so that while the money in your IUL is still invested, you can separately take out a loan to make an investment purchase, hoping to arbitrage any difference between the loan's interest rate and the investment's return. Have I got that about right?

Just a couple follow-up questions. Note, I'm not trying to paint this strategy in a negative light with my questions, just trying to understand what the potential issues are, just like I would any other investment (including real estate). I really appreciate you taking the time to comment, always interesting to learn about other strategies.

1) What are typical terms for the loan (e.g., 1 year term vs 5+ years term, variable rate vs fixed rate)?

Trying to understand in what scenarios I could potentially fail to repay the loan, and risk losing the money I have in the IUL (since I assume my IUL secures the loan). If the loan is long term and fixed rate, that's manageable. But if the loan needs to be repaid in 1 year, or is variable rate and interest rates shoot up (a likely scenario nowadays), that creates a risk to be very mindful about when weighing the benefits of this strategy.

2) What is typically in an index that promises 6.4%?

If the index was an S&P 500 index, I would expect the promised rate of return to be somewhere around 3-4%. I would be surprised if I was offered 6.4% and told on average it earns 7-8%, since the average long term return on the S&P is 7-8%, and I don't think any insurance provider would promise me the long-term average of the S&P 500 index, while also promising to cap any losses at 0%?

3) Is the average of 7-8% you mention just looking at 2009-2018, or a much longer period that includes a recession?

I know you don't want to be hung up on the returns of the IUL, and instead focus on the arbitrage when you take out a loan, but if the cash in my IUL isn't earning an attractive return over the long run (after factoring periods of recessions), the benefits of this strategy are less attractive. For example, if the IUL earns 7-8% over the last 5 years (a historically great bull market), but earns 2-3% over the last 20 years (after including periods of recessions), then I could have kept that cash in a low cost Vanguard S&P index and get a loan against my property or a HELOC.

Thanks!

Thomas Rutkowski - out of curiosity, what is an example of a “principle protecting asset” that yields 6-7%? I would think if you’re earning that type of return, you’re running the risk of losing principle, which is why this infinite banking concept has always confused me. Just seems like there’s nothing special about using your life insurance, since you could do this with any investment that allows you to refi at a lower cost than the investment is yielding. As an example, couldn’t you do the same thing if you buy a property and take out a loan against it that costs less than the property’s yield. And save on any fees the insurance provider may charge? Maybe I’ve missed something though?

I remember in an earlier thread @Bob Malecki discussed a similar issue, he may have some ideas on possible next steps.

I have several friends who are FX traders at banks. It's never been clear to me that anyone has a clue how to consistently predict something as complicated as macro policy and its impact on FX and Interest rates. As an example, when I lived in Europe, all the FX research being circulated was saying EUR/USD would go to parity - it's now at 1.24. And everyone (including many "sophisticated macro investors") was convinced GBP/USD would stay above 1.60 and Brexit would never happen - turns out Brexit happened and the exchange rate moved down to as low as 1.20. 

But hey, maybe your friend knows something they don't...

@Tim Porsche - do those returns include transaction cost? And how would you invest in a broad commodity basket? (ETF comes to mind but I'm not sure a commodity ETF would be the best approach)

If the returns aren't much different from simply investing in a Vanguard Stock index, not sure if the costs and reallocation effort is worth it, but to each his own I suppose. If you're worried about a market correction, maybe it makes more sense to break up your inheritance and just invest a portion of it in a Vanguard index every month vs buying all at once (I don't think Vanguard charges commission for buying on their platform)? I would think volatility and a correction shouldn't be a big concern if your plan is to invest for the long term and regularly contribute to your investment account regardless of what the market is doing.