All Forum Posts by: John Perrings

HELOC for investment property is expensive and 80% of total value less what you owe. Rates start around 8 cap at 22% okay for short term investment that you intend to pay it in full in 12 months or less. HELOC costs anywhere from $500- $1400 to set up. FEW lenders doing investment HELOC so no big box bank will touch them. You have to qualify full documentation soooo the whole novel.

Life insurance loan, need the exact rate, number of months, and terms. Five percent for how long? What is needed to be approved?

No matter which way you go if you are using a loan you have to provide proof of the payment, term, and funds. 

Here is everything you need to know about infinite banking that a so called “financial advisor” won’t tell you. Anyone pushing this on you is a life insurance salesperson and getting a commission from it. Fire them and get an honest financial advisor. If something is this complicated to explain and understand, you won’t even know you’re being ripped off. 
https://www.personalfinanceclu...

Cue all the salesmen crying “this article is not comparing the same policies! you have to  max fund it and get the lowest LI policy!”….see lie #10 of the article. Why don’t you advise your clients about a self directed 401k (solo401k)? Because you don’t make commission on it, that’s why. Go ahead and comment back salesmen, I won’t read it.

Quote from @John Perrings:

Quote from @Steve Vaughan:

Quote from @Chris Fritz-Grice:

@Steve Vaughan I definitely see what you mean, and I thank you for your input! I think the appeal in this strategy is let's say you have $50k in an over funded policy growing at 4% then I borrow $45k at the same 4%, use that as a downpayment on an STR, pay the loan back within a year or two plus adding profits from the STR to the Cash Value that's already been stored. Two roads to the same end I suppose but the concept of the Cash Value never going away, building faster because initial capital doesn't deplete and is guaranteed to grow I think is what gets me excited and was worth getting peoples opinion on!

Would you say this strategy should be more a diversification tool rather than a savings account alternative?

 Borrowing and paying back your own money isn't special to an insurance policy.  The biggest benefits to RE are leverage and control.  Insurance offers a ton of fine print and fees and no control. 

I'm glad you understood this takes a substantial investment. I was afraid you were trying to borrow back $1200 or something. 

 You are right that leverage is not unique to life insurance. But I think you've got it backwards with your point about control.

You are not in control of a bank loan collateralized by real estate. The bank is in control of that money, not you. If you don't pay the loans according to the bank's schedule, you'll have some problems. The underlying collateral (RE) is also not guaranteed.

Life insurance policy loans, on the other hand, have no pay back terms. You can pay them whenever you want or not pay them back at all. You only have to make sure the policy loan doesn't capitalize past the amount of your cash value. The underlying collateral for the loan is guaranteed by the lender, the insurance company. How awesome is that.

We have way more control with policy loans.

I was more speaking of controlling the asset you are leveraging than a bank mortgage.

Maybe you can answer this?  A typical mortgage is 16 pages, easily understood.  How many pages is one of these policies on average?  What is the probability Jill and Bill Shmoe will be able to understand it?

@Steve Vaughan I definitely see what you mean, and I thank you for your input! I think the appeal in this strategy is let's say you have $50k in an over funded policy growing at 4% then I borrow $45k at the same 4%, use that as a downpayment on an STR, pay the loan back within a year or two plus adding profits from the STR to the Cash Value that's already been stored. Two roads to the same end I suppose but the concept of the Cash Value never going away, building faster because initial capital doesn't deplete and is guaranteed to grow I think is what gets me excited and was worth getting peoples opinion on!

Would you say this strategy should be more a diversification tool rather than a savings account alternative?

Quote from @Chris Fritz-Grice:

@Steve Vaughan I definitely see what you mean, and I thank you for your input! I think the appeal in this strategy is let's say you have $50k in an over funded policy growing at 4% then I borrow $45k at the same 4%, use that as a downpayment on an STR, pay the loan back within a year or two plus adding profits from the STR to the Cash Value that's already been stored. Two roads to the same end I suppose but the concept of the Cash Value never going away, building faster because initial capital doesn't deplete and is guaranteed to grow I think is what gets me excited and was worth getting peoples opinion on!

Would you say this strategy should be more a diversification tool rather than a savings account alternative?

 Borrowing and paying back your own money isn't special to an insurance policy.  The biggest benefits to RE are leverage and control.  Insurance offers a ton of fine print and fees and no control. 

I'm glad you understood this takes a substantial investment. I was afraid you were trying to borrow back $1200 or something. 

This thread is getting exhausting! I have several whole life policies and I am using them to invest in certain kinds of high cash flowing real estate syndications and private lending. I do the same thing with my HELOC. I prefer the life insurance because it has additional benefits and the cash value still grows while I borrow against it. The HELOC was great when interest rates were low - now the advantage has shifted to the life insurance, but I will continue to use both.

There is certainly merit to the argument about commission sales - but to generalize and say ALL commissioned life insurance agents are pushing high commissions over quality advice is just false. I am a former financial advisor and I sold commissioned products and fee-based. I understand how these products work and how the commission structure works. It is critical to find an agent who understands your objectives and goals with these policies or they will absolutely set it up wrong. They will also set it up wrong if they are just handing out the "standard" advice - you need to find an agent who understands the concepts of infinite banking (or whatever term you want to use) and is willing to earn lower commission to set up one of these policies. Just because most insurance agents don't understand this does not mean they are all evil and trying to take your money! That is a whole different discussion - I think you can have a conversation about the entire financial industry pushing products that maximize profits for their employers - whether they are fee-based or commission based or fiduciaries or not.

The bottom line is that if you find a financial advisor or insurance agent who chooses to put your needs before their compensation AND they are knowledgeable and take the time to understand your situation, then you have found the right person. If they shout from the rooftops that annuities are bad or life insurance is bad or mutual funds or stocks are bad - then they don't understand nuance or investing strategies and you should find someone else.

Finally - if you are arguing that commission sales are bad because all agents will always try to maximize commission at the expense of the customer, I would recommend you think about that for a while.  Maybe that is how YOU would act if YOU were a commissioned sales agent, but that is certainly NOT how all commissioned sales people act.  There are plenty of commissioned sales agents who want to build wealth for their clients and get paid for it.  In fact, you won't last long if you are just trying to maximize your commission at the expense of your clients because you need new clients to grow your business and 90% of advisors find their next client from their last one.

It is easy to yell and scream about how bad a financial product is - in this case life insurance - but maybe instead of listening to the shouters, you should listen to the people here who have posted that they are having success with a particular financial product.  Just a thought.

If you need life insurance to provide for your family in case you die, buy term life instead of whole life.

If you're buying whole life for investment purposes, there are better ways to invest your money.

https://www.fool.com/retiremen...

Quote from @Chris Fritz-Grice:

@John Perrings thanks for your response! So in theory I should be able to borrow do from my insurance policy and since it’s using the cash value as collateral and has no terms (if I understand it right, if you never pay back the loan it comes from the death benefit ultimately) then a mortgage lender shouldn’t count it as debt. 

However, just be aware of the seasoning requirement of your down payment for your lender. You may have to take the life insurance loan one month in advance and let sit the money in your bank account to satisfy the lender.

That’s your best response?  Attack the messenger when you don’t like the message.  Of course you can get a job where HONESTY is an attribute, not a negative.  

@John Perrings thanks for your response! So in theory I should be able to borrow do from my insurance policy and since it’s using the cash value as collateral and has no terms (if I understand it right, if you never pay back the loan it comes from the death benefit ultimately) then a mortgage lender shouldn’t count it as debt.