All Forum Posts by: Mike S.

@Srinivasa Murthy

I will go against the previous posters thoughts and will argue that you should get an LLC per property. Spending $100 a year to get liability and asset protection is a cheap insurance.

Will an LLC protect you against act where you are personally responsible? Of course not.

But will an LLC protect your personal assets against a major lawsuit arising from a tenant claim? Yes

Are there cases of piercing the veil of the company? They are extremely rare and results from gross mismanagement of the member/owner that can be easily avoided.

Now, if you have a personal liability attack against you (your kid is involved in a vehicle homicide for instance), an LLC in a charging order state will protect your real estate from being taken away from you.

Last if you use anonymity protection with an LLC, you will avoid a lot of possible nightmare stories of harassment, threats, vandalism, libel to your home, work and social media by a disgruntled tenant.

It may also protect you from frivolous lawsuits as an asset search by ambulance chaser lawyers will return nothing.

To answer your questions:

Yes if your LLC is disregarded for tax purpose, there will be no change to your tax return. Your LLC will collect the rent and then turn it back to you.

I would suggest that you watch Clint Coons YouTube channel that goes in depth in asset protection for real estate investor and the proper use of LLC.

Quote from @Todd Goedeke:

@Mike S.you neglect to talk about the cost of life insurance that is subtracted from earnings or is a drag on growth of cash value. Every year you grow older the cost of insurance increases.

As an individual, not a business tell me on what tax form or schedule you deduct the interest you paid. 

While I did not mentioned in that specific thread the upfront fee, you can see it more detailed in my other posts. Yes there is a front loaded fee that will give you an initial drag that will take usually 4 to 5 years to overcome. This is a long term strategy. While the cost of insurance increase when you get older, the growth of your policy exceed the cost of insurance. Also when you stop funding it, you will reduce the death benefit to the MEC limit, a that time the yearly cost of your policy will be approximately 0.25%~0.50%, way lower than most mutual fund or management fee in any retirement accounts. Minimally funded IUL have a risk of imploding if the cost of insurance rise higher than planned. In the case of a maximum overfunded IUL, this risk is non existent.

When you are borrowing money with a HELOC to reinvest, you can deduct the interest of your HELOC from the proceed of your investment. It is the same when you borrow from a lender that uses your life insurance cash value as a collateral (however it is not the case when you borrow directly from the insurance company). As long as you can trace the use of the borrowed fund to another investment your interest expenses will be deductible. Depending on the type of investment, your investment income and expenses may be reported on different forms.

Quote from @Dominic Bailey:

I recently signed up for iul. However now I'm hearing stories that they may be a scam or some type of pyramid scheme. Does anyone have any experience with them

IUL can be great products, but like all great products, you need to find the right one. If you are looking for maximum overfunded IUL some insurance companies have way better products than others. Some IUL may be great for death benefit, but not for cash value accumulation. Some companies also have only recently entered the IUL market and don't have a long history and their illustration may be too optimistic. Some other companies are known to lower their cap rate more than others over the years. Also you need to find a good insurance agent who knows how to set them up properly to lower your cost and increase the long term growth.

I am using IUL myself in conjunction with my real estate investments and I recommend them to other investors. They are complex products and need to be understood fully as it is a long term game: you need to stay consistent and committed for a number of years. If you deviate from the game plan, the return will be poor and you can even have policy issues later on if you underfunded it.

Quote from @Todd Goedeke:

You don t get a return on the money you are borrowing from the UL policy. You are paying interest on what you borrow no different than borrowing vs stocks held in your brokerage account or taking a HELOC loan vs the equity in your house.

Not exactly correct.
When you are using your cash value as a collateral, your FULL cash value still continue to grow in the life insurance.
At the same time, the money that you borrowed can be reinvested in any third party investment, like the STR mentioned. Yes, the total return of this investment will be lowered by the interest you are paying, but this interest is also tax deductible.
So yes, your money grows at two places at the same time.

It is, as you mentioned, the same as with an HELOC.

Quote from @Todd Goedeke:

The returns of a life insurance product ,InfinityBanking,are far inferior to direct investing. Anytime a middle man such as an insurance company or RE syndication is involved there is no way you will get returns as high as directly investing in RE. 

Yes the direct return is much lower (in the 4 to 8% range depending if you are using WL or IUL). But the beauty of it, is that you get that return AND you can use the same money, at the same time, to invest in other direct investment like STR you mentioned.

I am using both;

If you are eligible for a solo 401k, I would highly recommend it instead of a self directed IRA. No UBIT, much less fee to manage, and higher contribution limit.

The permanent overfunded life insurance is my biggest bucket. All my cash flow goes toward the premium, and I am using the cash value as collateral for a loan at prime rate to reinvest. Not only can I deduct the interest of the loan, but also my money grows at two places at the same time...

Quote from @Matt Appel:

Life insurance policies are also great for asset protection! 

Life insurance are protecting your cash but not your assets.

LLC and insurance are not the same thing. Both have their place. An LLC cost between a few dollars per yer up to a few hundred dollars depending on the jurisdiction.

It will protect you against inside liability. Depending on the jurisdiction it may also protect you against outside liability.

You need to research the subject more and change CPA has he does not seem to understand the liability part.

Spend some hours reviewing Clint Coons Youtube channel. A lot of very pertinent content that will answer your questions.

Why do you want to display all the information of the original poster on the forum list. I really don't care how many posts or votes the original poster has when I am browsing for topics. I don't mind you displaying it when I open a thread, but not on when I am looking at the list of threads. You are cluttering the screen with useless information at that stage. I only want the title of the post, and I want as many of them on a single page. I hate scrolling or clicking just to read four more subject header. My eyes are much faster to browse and choose a topic of interest than my hands.

I am using maximum overfunded permanent life insurance policies as an intricate part of my investment master plan.

The big drawback with life insurance is that the first few years, you can only use a portion of what you paid in, due to the front loaded cost of these policies. So it will set you back behind a bit initially (a properly set up policy should let you get you around 75 to 85% of your premium in the first year). However, on the long term, it enhances your return compared to a system where you did not include life insurance in the mix. It also has plenty of other advantages as it is asset protected, liquid, tax free and on top of it gives you a life insurance in case of your early demise to protect your family.

So if you don't have the money to invest now, life insurance won't create it for you out of nowhere. However if you have some money or regular cash flow, look at funneling it through a life insurance before reusing it in other investments; as in the process your money will grow at two places at the same time.