All Forum Posts by: Mike S.

Quote from @Patricia Drew:

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

Term life insurance is cheap when you are young. It is extremely expensive or even not even available when getting older. More than 95% of term life insurance expire without paying.

Permanent life insurance, is to cover your whole life. As death is a certainty, it will pay back eventually.

Also do not confuse permanent life insurances minimally funded (maximum death benefit for minimum premium) with maximum overfunded permanent life insurances (maximum premium to MEC limit, for minimum death benefit) that are used for cash value. Completely two different case use with different performances.

Quote from @Don Konipol:

People with a financial incentive to promote the sale of investments should not be relied upon in any way when they give an analysis of the merits of said product.  This is why the investment industry has moved from stockbrokers who are paid a commission to financial advisors who are compensated as a percentage of assets under management. 

Seriously? You definitely did not look at the industry. Have you seen the huge rebuttal from the financial industry when the administration wanted all financial planners to become fiduciary? They got it scrapped away because they still want to be paid on commission...

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.

Quote from @V.G Jason:

Inside liability protection for LLC is the same in every state.

Outside liability protection for LLC depends from the state.

Some states have charging order protection as sole remedy for single and multi member LLC. WY is one of them.

Some states have charging order protection as sole remedy for multi-member LLC only, but not for single member. FL is one of them since Olmstead vs FTC.

So using your holding LLC in WY will give you outside liability protection for all the sub LLC owned by it in other states.

In my setup, I have one multi member holding LLC in WY. I also have one C-Corp acting as management company. This C-Corp is a 1% member of the WY holding LLC, so it is technically one of the owner of the properties titled in the sub LLC, and as such can manage them without needing a property manager license in some state.

Using a C-Corp for the property management let me get all the fringe benefits you can get with a Corp (health reimbursement plan, solo 401k, deduct all investment expense). I can choose how much active income my C-Corp makes to match its expenses. The C-Corp is public and I am the face of the corp. But for the tenants I am only the property manager, I can always blame the 'owner' for the rent increase. In Florida, the lease can be signed by the property manager and the owner does not have to be disclosed. In some states, the lease need to mention the name of the owner, but that would be an LLC where you can't track the beneficial owner as it points out to an anonymous WY holding.

Quote from @Dominick Johnson:

When you are a trusted advisor for someone’s finances, it is unethical to push a certain type of policy on them just because it’s your source of earned commission and not the best option for their financial situation. I don’t care how much “work” you put into it, you are biased and not doing it with the client’s best interest in mind. That is way different then paying for a tire to be fixed or purchasing home owners insurance. You know up front what the people selling those do.

Do you know that the agent is making less commission with these optimized policies than with a standard policy?

Do you believe that 'financial advisors' who are selling only wall street products where they are making a lot of commission are also ethical when they are telling you that you should not invest in real estate?

Hopping that financial advisors have an unbiased opinion is complete utopia. Look at all the industry uproar when the administration tried to force them to become fiduciary...
Even fiduciary ones are here to educate you on the products they know. They don't offer all products, but only some. They are here to offer you a comprehensive strategy that make sense to them. You are still the final decision maker.


@Thomas Rutkowski has always been upfront on this forum and on his website he is specialized in life insurance product. As an agent he can sell you these products but he also offers advice for hire without sale. His website has plenty of free information on how to use a specific type of life insurance with real estate investment in mind. That is financial advice.

Again you may not want to use these products for your own portfolio and that is perfectly fine. But because it does not make sense to your situation, does not mean it will not for someone else.

Every time someone is paid for a service, it is a sale. So everyone is a salesman per your definition and should not use any other title at all. So you should not call yourself a broker but a salesman.

Quote from @Dominick Johnson:

I know how they work and I understand them well. My previous financial advisor sold me on this being a good investment and tax savings. I applied and got the packet with the tables, same as the article I posted.

Obviously not as the policy in your post is not what we are talking about.

It's like saying it is stupid to use leverage to buy real estate. I got a quote from a short money lender at a 13% APR. When everybody else is talking about an FHA loan at 3%... Both of them are loans but are build differently for different purposes.

Quote from @Dominick Johnson:

Sounds like you sell these garbage investments and call it financial advising. Funny how the majority of people who think this is a good investment are the ones who get commissions for selling them. The fees are extremely high for both strategies you are comparing. Want to know why? They are the same investment - Indexed Universal Life Insurance. A Roth IRA with Vanguard charges only 0.03% fees annually. The numbers don't lie, the people selling these policies do!
 

You may or may not want to use these kind of products in your own investment structure, but calling them garbage is showing that you don't understand what they are. Please educate yourself before making this kind of broad statement, you are just making yourself look like a fool. There are many investors in this forum, including myself, who are successfully using overfunded permanent life insurances in our investment flow. They are complex products and need a good execution plan to make them perform properly. But when you do, these are excellent financial products that are increasing your return while providing tax free, asset protected, and secure growth. Are these very specifically designed life insurance contracts to be used instead of other investment? Absolutely not, they are to be used simultaneously with them to enhance their return.

Quote from @Don Konipol:

Or, you can just invest the money that you would be putting into the maximum funded insurance policy and then borrowing against directly into real estate and avoid paying the large cumulative fees charged to pay for sales, marketing, administration, overhead, asset management, and profit to the insurance co. 

I disagree with you. While investing directly into real estate will give you a better return initially, if you funnel the same amount through a life insurance first and borrow it to reinvest in the same real estate deals, on the long term, your return will be enhanced by this process. It's basic mathematics.

This long thread https://www.biggerpockets.com/... has some basic calculations proving it....

Quote from @Tommy Feraco Jr:

@Thomas Rutkowski Thank you for your insight into this topic. I did have a question. So, why wouldn't I just continue to utilize the BRRRR method or HELOCs to pull out capital on investment as using it on another property? I am definitely new to this strategy, but I feel that using overfunded life insurance is the same notion as the two strategies mentioned.

I am also asking due to the fact that I am working with an agent now and wanted to learn more about this topic from this platform. I currently have two properties with about 50k in equity that I could BRRRR. So, would it make sense to even use this investment vehicle for my situation?

Using an overfunded permanent life insurance policy is not in replacement of other investment strategies. It is in addition to them.

So instead of just doing your BRRRR, you are putting all your cash flow back into life insurance premium, you are then borrowing from the life insurance to reinvest in your next BRRRR.

By adding the life insurance in your flow, you are increasing your return on the long term, but it will for the first four to seven years add a little big more drag. You are also protecting your family with a substantial life insurance death benefit if something happens to you. As a side bonus, the life insurance is creditor protected so you also get some asset protection too.

Don't forget to get a registered agent in that new state.

Also you may want to pay attention to the possible loss of some asset protection (ie charging order as sole remedy in Florida for multi member LLC). Also you may want to review your operating agreement to make sure that it covers working in that state too.

Depending on the reasons for you to have to register in another state, it may be the same price but better for asset protection to create another LLC only for that state.