All Forum Posts by: Mike S.

@Adam Widder

There are pages and pages of information that you can find online about IRR. I even believe that there were blog posts on it on BiggerPockets.

@Lee Lightfoot

It all depend on the timeframe.

For money short term (less than 6) months, I put some in crypto stable coins that give me a 7 to 10% APY. It has some risks but good return.

For money that I keep for around a year, I am putting money in short term real estate loans usually giving me 8 to 10%.

I would not even consider stock market for anything that I would need in less than two years as while liquid you don’t want to be in a correction when you withdraw and will have to wait it out.

But most of my cash flow is going into an overfunded permanent life insurance policy. It is a very safe, liquid, tax free, asset protected and with a moderate growth. I then borrow against it to reinvest at a low rate while it continues to grow on the full value. I have then my money growing at two places at the same time.

@Adam Widder

IRR: internal rate of return. It is a metric that we very often use in real estate as it give you the effective rate of return that you would need with the same amount of investments over the same period of time to get the same result. It takes into account the cost of money and the timeframe of the payments.

For me it is one of the most important metric for all my investment with risk factor, duration of investment, liquidity and taxation.

Unless a lien was filed by the HOA with a specific amount, the only source of information would be the HOA to give you an estoppel of the current fee due. I am sure that the bank also had that information during their decision process to foreclose, but it may have been a year or two old with their slow pace.

Unfortunately, you will be on the hook for it. The past property taxes will be payed by the auction proceed before the bank mortgage. But the HOA bill will stay with the new owner.

You can try to negotiate with the HOA, but they have no reason to indulge you. They can put a new lien on your property to get it.

Now, you may try to reason with them that once all past due bills, interest and their legal fee are paid, they should waive any additional penalty fee. It would be fair to get them waived, but if I was a co-owner in that HOA, I would definitely make sure that no other rebate is extended.

Originally posted by @Jody Sperling:

Any year could theoretically prove this wrong, but my policies have been averaging 6.5% growth after factoring in the dividend. 4% of that is guaranteed, so even if the insurer had a terrible year, I'm 100% certain I get my money. And loans are liquid and easy to get ahold of if you need them to pay for emergencies.

In a whole life, don't forget that the real IRR is not the guaranteed + dividend rate. This rate is before the multiple fees. You should expect in a properly overfunded Whole Life a long term IRR of 3 to 5%. If you use an Index Universal Life, the yearly rate will fluctuate widely from 0 to the cap of the index that you used, but you should expect a long term IRR of 4 to 7%.

I agree that they are great tools to have for managing your wealth as they are liquid, safe and with moderate growth. I am using them myself and as you can see in my posts, I am recommending it. But they are not for everyone as they are complex tools that need some proper planing. But if used properly, they can be a great wealth multiplicator while adding financial safety to your family.

While an LLC with your wife is technically a multi member LLC, if you file jointly for your taxes, it will probably be seen as disregarded by the IRS and a judge may decide that charging order won't apply.

My setup is as follow:

The base is my living trust. My personal residence has a Lady Bird deed to my living trust. All my personal bank accounts are titled to my living trust. My IRA and 401k beneficiaries are my living trust (it may be more advantageous to have designated beneficiary instead, but in my specific case it was not).

I have a WY multi member holding LLC owned at 99% by my living trust and 1% by a C Corporation. The C Corp is the manager of the WY LLC and of most of my other LLC.

The WY LLC owns my brokerage accounts and all the sub LLCs.

I have multiple sub LCCs own my rental properties and other syndications. For the properties in FL, I have single member LLCs, manager managed. On top of it I have Florida land trust on each property.

Originally posted by @Allen Wu:

Note: I own 2 whole life from a large mutual. I bought it because it was a safer wealth accumulation vehicle. In retrospect, probably better to save money the last 12 years and bought 1-2 properties. I’m keeping it now because alreAdy water under bridge and policy is finally close to breaking even.

You are just breaking even after 12 years? That was not a maximum overfunded policy. On a properly setup max overfunded WL, you should get ahead between year 4 to 7 depending on the funding scenario.

I am using Index Universal Life to fund my real estate investments. It is a way to have your money work at two places at the same time, and on top of it you get financial protection for your family.

If you use a third party lender, you can get arbitrage on the loan rate vs the policy rate, and you can also deduct the cost of the interest as investment expenses.

It is a long term play, as the front loaded fee will need four to six years before you get ahead of investing without the use of a maximum overfunded permanent life insurance.

For whole life insurance, there are mainly four companies that I would recommend. Some other may appear better on paper, but they don't have enough history to back it up. You can expect an IRR of 3 to 5% with very little variation.

For IUL, I like 5 companies. A conservative IRR of 5 to 7% is very reasonable but there will be wide variation years after years of the yearly yield. The good point about IUL is the worst you can get one year is 0. There is no negative yield like in the stock market. And if you spread your indexing over different crediting methods you can insure that there will never be a 0 either.

These products are complex and need a good agent who knows how to optimize your policy to minimize the fee (and his/her commission) and maximize your return. Depending on your goals and funding scenario there are different ways to set it up. The best being to put the same amount of premium for at least 5 years. The more confident you are in your funding scenario, the better the optimization can be done. Even with a set funding, there is still a lot of flexibility.

Permanent life insurance seems to be a very heated subject with some people saying that it is the worse thing on the market, while other like me and a lot of high net worth individuals and banks are using it as a very powerful tool to increase their return while gaining a lot of tax, asset protection and estate planning advantages.

A revocable trust does not bring any asset protection. Florida Land trust give some asset protection.

For just a revocable trust and a Florida LLC, probably most estate planning oriented attorney could do it.

However if you look at an asset protection structure, there are a few attorney specialized in that area in the tri-county.

There is an expensive one in Boca Raton that I would not recommend at all.

There a few others locally that have good websites with plenty of information, but I have no personal experience with them.

And there are also the few nationwide outfits that are focused on real estate investors that have been mentioned many times in this forum, but they don't have a local office.

I am not an attorney and you should consult with one.
However my layman understanding is:
- in Florida, trustee of land trust don't need to be bonded or have a specific license. It could be a person, a corporation or an LLC.
- acting as trustee of a Florida land trust is not considered doing business in the state (as long as you just acting as trustee and are not involved in extensive day to day business of the trust). So no Florida registration is required and you could use an out of state entity like a WY LLC. As the trustee has no liability (Florida land trust statutes provide inside liability protection to the beneficiary and the trustee) and no asset, you probably don't need the WY charging order. You may go with a cheaper option and use a NM LLC. You still have the anonymity and no yearly filing fee. NM has lower asset protection than WY, but in that case it is not an issue. However you want to make sure that this LLC is only acting as trustee and has no other assets.