All Forum Posts by: Eric Lunsford

I have a hard money lender that will lend to me without a job/steady income at around 5% for 30 amortized loan. This would be the option I'd go when I refinance cash out. That said, I understand not having the W2 significantly decreases my options in getting loans and being creative with investments. I'm getting to a place where I don't enjoy my job and would like time to spend with my young family and focus on creating more active and passive income. My job takes roughly 50-55 hours away from that a week. 

This post is purely opinion based although I suppose some may have experience with this. I work for a company that is employee owned and have stock that I can't touch until I leave. If I were to leave at the end of the year this year, after taxes, I would have about 100k to invest. 

My question is this - should I get a new job so I can keep a steady income while gaining access to the stock $ for investing or should I take some of that money and live off of it for a year while focusing all my attention on real estate? In my area, that would be the difference of either buying 2 properties at a time or 3 at a time (if I were to keep a day job.) 

It is highly likely I will not replace my monthly income in just one year of real estate investment so likely I'll have to go back into the job market. But what's better/worse - taking a job immediately or getting one after a year of very focused intent on growing my portfolio and likely other ways to make and invest active income? 

I'm interested in thoughts, opinions, experiences. 

Thanks!

I apologize if this has been answered before. I did a brief search and didn't find anything that answered my question. 

I'm wondering how private lenders get taxed on their earned interest as they loan money to RE investors. My strategy for REI has been to build a portfolio directly purchasing and leasing real estate but at some point start to transition my funds into private lending others' opportunities and getting away from being the actual owner and manager of properties.

I know there are a lot of tax benefits and write offs associated with owning real estate that would be lost as a private lender, but can anyone tell me what to expect? If I lend money as a first lien holder and get interest payments only (no profit on the back end, etc.)? I also know this is dependent to the states as well, but generally speaking I'm curious on a federal level. 

Thanks in advance. 

@Thomas Rutkowski

I have another question for you that may be a bit more of an opinion, but I thought I'd post anyway as there may be some others in the future with a similar question. First of all, one thing that wasn't clicking for me earlier which caused my last post about adding income is that as income grows you can always get another policy, correct? Is there a limit to how many different whole life ins policies one person has? 

My primary question thought was surrounding debt - still wrapping my head around this infinite banking concept. I have about $17k of consumer debt I'm working on getting rid of. I pay about $750/mo more than the minimum payments in a snowball method. Is there any value, that you see, in putting that money (about $8400/year) toward a whole life policy and then when the cash value equals or exceeds my debt amount in the next couple of years, borrowing against my policy to pay the debt off? All of this compared to simply just paying the 700 directly to debt? 

I see the benefit as my money is growing while I have a policy and while I'm repaying the loan to my policy. But I'm not sure all of that is worth it as I'm waiting a couple of years at least just to have enough CV to take a loan out. 

Any advice or input is appreciated. 

@Thomas Rutkowski

Thank you. I'm not interested in ULI at this time based on the research I've done so far, but I might dig into it a bit more as I would love to continue to put my cash flow from properties into the plan. What makes that challenging though is I predict my cash flow will double each year at least. It would have been easy if it were an option to just continue using the Whole life plan as a savings account. 

As you mentioned, if I took the 30k I currently have and did a 5 pay design I would need to essentially put $6k a year in as premium. I believe I would be able to do that with my cash flow for the first year but theoretically at year 2 I would be able to put that plus a significant amount more in (and more in year 3 and so on). I'm not too interested in the death benefit but would love to take advantage of getting more and more CV from the plan in an effort to ultimately fund my real estate deals. 

@Thomas Rutkowski - another question if you don't mind. If you were to set up a plan where you're putting, say, $5,000 a year into premiums, do you have the option to put more I ask because my cash flow will likely go up throughout the year and I'd like to use it as a "savings" account and just put any profit into the plan. Is that possible? Does that benefit the growth of the plan per CV? 

Thanks @Thomas Rutkowski! I imagine that by year 2 I will likely have at least 2-3 properties that cash flow at least $350/mo so the $6k/year premium isn't completely out of the picture. 

I have a little "bad" debt that I'd like to use that cash flow to pay off but then I imagine what I'll do is save the the cash flow to reinvest. Instead of simply saving in my bank account, it seems whole life insurance could be a solution. 

@Thomas Rutkowski I watched your video you recommended. Very good explanation - I was (obviously) completely unaware that the first year is a big determining factor. A couple of clarifying questions if you don't mind: 

1. You mentioned spreading the $30k over a 5 year period. So essentially designing a plan at $6k a year for the first 5 years? I'd still plan on investing my $30k now on real estate but maybe fund that plan with the cash flow from investment property now? 

2. You also mentioned doing a face reduction after the first 5 years. I assume this essentially "refinancing" in a way? Renewing your premium agreement? 

3. Lastly, you mentioned getting as small base policy as possible. What does this mean exactly? Is it reasonable (maybe even beneficial?) at this time to purchase a policy where I simply put my cash flow from REI into the policy? As that number grows, would I be allowed to put more than the premium in?

Thank you again for the wealth of knowledge. I'm simply trying to figure out how to eventually be my own banker in order to get loans for REI. Running the numbers, I can see how my DTI in REI will quickly get to a point where banks will not want to lend. Yes, there's private money but it's always good to have multiple sources.

@Thomas Rutkowski your site and resources are exactly what got me into looking into whole life and making this post. :) I appreciate the value you add! 

All - there is some great information on here regarding utilizing a maximum overfunded whole life insurance policy to then take a loan out and invest in rental properties. One question I can't seem to answer or grasp onto is if you can open a policy with a lump sum? 

I'll give you context, I am taking about $30k equity from my personal residence. I'd like to utilize that to buy investment properties. It sounds like a benefit could be opening a whole life insurance policy to "triple play" the situation but is it possible to open a policy with a "lump sum" rather than a premium (or maybe in addition to premium.) 

What would my options be or would it be better if I just invested "normally" for now and keep the insurance policy in mind for when I have more cash flow coming in? 

Any advice from those who are knowledgable and have used the whole term policy is greatly appreciated!

Eric