Creative Real Estate INVESTING (not just creative real estate financing)
Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votesCreative Real Estate INVESTING (not just creative real estate financing)
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Investor · Houston, TX · Member since 2019 · 95 posts · 29 votes
6moGreat post Don — and as a fellow Texan, I appreciate the perspective from someone with 45+ years in the game.
I'd add one creative strategy to your list that doesn't get enough attention in these forums: using properly structured whole life insurance as a capital deployment tool for real estate.
I know — most people hear "life insurance" and tune out. But here's what it actually looks like in practice:
I've flipped houses using policy loans from my whole life policy. When a deal shows up, I take a loan against my cash value — check arrives in 3-5 business days. No bank approval, no credit check, no underwriting committee. My cash value keeps compounding even with the loan outstanding because the insurance company lends against it as collateral, not from it.
When the flip sells, I pay the loan back and the system resets — except now the cash value is bigger than before. Each cycle makes the next one more powerful.
I've also used this to become a private lender. Borrow from the policy at ~5%, lend to other investors at market rates. The spread is profit, and the policy is still growing underneath.
This isn't for everyone — it takes time to build meaningful cash value, and the policy has to be structured specifically for high early cash value (most retail policies aren't). But for investors who want a capital reservoir they control completely, with no market risk and no third party who can freeze or call the loan, it's one of the most underutilized tools in real estate.
It fits perfectly into your point about creative INVESTING vs creative FINANCING. This is about how you structure your entire capital stack — not just how you finance one deal.
5 Replies
- 6moMike GrudzienPro MemberLender · Eugene, OR · Member since 2019 · 2k+ posts · 1k+ votes
Thank you Don!
- Washington, DC · Member since 2025 · 11 posts · 0 votes6mo
Can’t wait to start these books- thank you!
- Investor · Indianapolis · Member since 2024 · 93 posts · 49 votes6mo
Thank you for the book suggestions!
- Investor · Houston, TX · Member since 2019 · 95 posts · 29 votes6mo
Great post Don — and as a fellow Texan, I appreciate the perspective from someone with 45+ years in the game.
I'd add one creative strategy to your list that doesn't get enough attention in these forums: using properly structured whole life insurance as a capital deployment tool for real estate.
I know — most people hear "life insurance" and tune out. But here's what it actually looks like in practice:
I've flipped houses using policy loans from my whole life policy. When a deal shows up, I take a loan against my cash value — check arrives in 3-5 business days. No bank approval, no credit check, no underwriting committee. My cash value keeps compounding even with the loan outstanding because the insurance company lends against it as collateral, not from it.
When the flip sells, I pay the loan back and the system resets — except now the cash value is bigger than before. Each cycle makes the next one more powerful.
I've also used this to become a private lender. Borrow from the policy at ~5%, lend to other investors at market rates. The spread is profit, and the policy is still growing underneath.
This isn't for everyone — it takes time to build meaningful cash value, and the policy has to be structured specifically for high early cash value (most retail policies aren't). But for investors who want a capital reservoir they control completely, with no market risk and no third party who can freeze or call the loan, it's one of the most underutilized tools in real estate.
It fits perfectly into your point about creative INVESTING vs creative FINANCING. This is about how you structure your entire capital stack — not just how you finance one deal.
- Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes6mo
Perhaps I should provide an actual examples of what I consider creative real estate INVESTING
About 5 years ago I was asked to provide refinancing secured by a retail/service center in Houston. The center appraised at about $2.5 million, the owner owed $1.4 million, the center consisted of 2 separate buildings, was 60% leased, and net operating income with $110k. Unfortunately, the owner had a hard money loan at 13.5%, so his payments were $189,000 interest and about 15k principal for a net NEGATIVE cash flow of $94k annual. Further, the owner was in default, didn’t have the money for build out to fill the 40% vacancies, and was looking at foreclosure.
My partner and I made the following offer to the owner/borrower which was eventually accepted with no significant changes. We would use our good credit capacity with one of two local banks we had a relationship with to refinance the existing mortgage note. We were able to obtain a $1.3 million loan from the bank at 4% interest fixed for 25 years. We also were able to obtain a second mortgage for $200,000 at 7%. The extra $100,000 cash out went for tenant buildouts.
For using our credit to obtain this financing my partner and I received 60% ownership in the property. Additionally we lend the owner $200,000 personally secured by his 40% ownership in the newly formed LLC holding title to the property.
The interest payments on the $1.3 million first were $52,000 annual, and on the $200k second $14,000. This was a savings of $123,000 annually in interest. We then arranged to sell the back building to a warehouse operation down the block that needed more space, for $1,050,000. The bank asked for a pay down on its $1.3 mortgage to $800,000 for its release of collateral. We spent $500,000 of the proceeds paying down the bank, and $200,000 paying off the second mortgage. About $75,000 closing costs and broker commission, leaving $275,000 to the owners of which my partner and I received about $150 000.
We moved the tenants in the back building into the front building, using the $100,000 cash out for tenant improvements. This allowed us to increase their rent to where our net operating income rose to $125,000. Interest expense on the $800,000 loan was $32,000.
After 4 years we sold the property for $1,800,000 with $700,000 down and a wrap around $1,100,000 note at 9.99% interest. Our bank allowed and signed paperwork acknowledging the wrap mortgage.
Our 60% share of the $1,800,000 sale price was $1,080,000. We agreed to take our share as the note with our partner getting most of the cash to satisfy his interest. We actually got a $50,000 cash “bonus” from his proceeds to allow him to get most of the cash, and of course got paid back our $200,000 loan for which we had 0 investment having gotten the $200,000back with the distributed proceeds of the back building sale.
By this time the $800,000 loan had been paid down to about $685,000. We were collecting interest of $108,000 on the wrap and paying interest of about $28,000. So for just over 2 years we collected a net of $160,000. We had collected $150,000 from the original refinancing. During the 4 years of ownership we had collected our share of net rental income of about $190,000. We received $250,000 cash upon the sale. And our loan was paid off after 25 months so we collected $1,080,000 and paid off $650,000 to the bank, net another $430,000.
Bottom line is we netted just over $1,150,000 on what was an $200,000 note (loan) investment.
Let me know what you think!
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