Rental Property Investor · Chicago, IL · Member since 2015 · 21 posts · 3 votes
I'm an active REI at Gavin Royce Homes and I personally use this strategy. It has been a game-changer for acquiring more deals as well. Would you like to take advantage of an opportunity that creates Generational Wealth & TAX-FREE? It's a better way to earn MORE ROI while doing the exact same processes you do today to close deals. This can work for anyone at any financial status. If interested in learning this strategy send me a message.
You overfund a permanent life insurance policy (wholelife or Index Universal Life are most common for this use).
You borrow from your cash value and reinvest it.
As the cash value still compound on the full value, it will on average grow faster than the interest of the loan.
At the same time the money that you borrowed is growing too and if set up properly, you can even deduct the interest of the loan.
So your money is growing at two places at the same time. You get on top of it a life insurance policy that will go to your heir tax free.
Due to the front loading cost of life insurance policies, this strategy takes a few years to excel as the first few years the fees make it drag behind other strategies. But on the long run, it is far ahead of many others.
You never want to surrender or sell your policy as you will incur taxes. The goal of these policies is to keep them until you die to get all its tax benefits and to borrow out of the cash value when you need money.
My wife and I financed all of our properties this way.
Agreed, do NOT cash policies in... You are able to fund to specific limits otherwise they lose the Tax Preferred status. I am very happy to answer specific questions. I had posted my contact info but was told it was not appropriate. I am on Linkedin... Best! Larry
@Gonzalo Gaston Mike explains the set up very well with the exception of fees in the beginning. I didn’t experience that my policies doesn’t have any new/beginner fees. I was mainly targeting the individuals that has stated they had money sitting around not making money. I want to make everyone aware that on average it’s 7-10% Growth.
This can also be great for those who have 401K accounts that they would love to save and/or invest with. If you have liquid cash sitting and you started one of these policies you can have access to that within 30 days. Now that cash is working for you several way CI, Dividends, Cash Flow (REI), and Tax Free. You truly become your own bank.
Mike explains the set up very well with the exception of fees in the beginning. I didn’t experience that my policies doesn’t have any new/beginner fees.
There are fees in any permanent life insurance policy. If you optimize it by overfunding it to the maximum allowed, you will probably the first few years have a cash value that will be around 70 to 80% of the premium that you paid. These fee are paying the commission to the agent, the policy underwriting cost, the life insurance cost, etc... This 20 to 30% upfront fee may seems high and it takes a few years to overcome it. However, if you look over the life of the policy (after 20 or 30 years), the average yearly cost will be around 0.25 to 0.75% depending on the products, in par or lower than most mutual fund or 401k costs. So these kind of life insurance products are made to keep for the rest of your life.
I am surprised by your return of 7 to 10%. It seems high to me. For a whole life product you can expect a consistent net IRR in the 3 to 5% range and with an IUL, with a lot more volatility, the average net IRR should be in the 5 to 8% with some years being way above, and some other being at zero.
@Mike S. Was that upfront fee mandatory for your policy? I do not have 20-30% upfront fee and my rates are lock in for life at 7% with a 3% divided annually. We definitely have different policies.
@Mike S. Was that upfront fee mandatory for your policy? I do not have 20-30% upfront fee and my rates are lock in for life at 7% with a 3% divided annually. We definitely have different policies.
What kind of policy do you have?
What was the cash value/surrender value of your policy compared to your premium when you started it?
Do you have the illustration that give you the IRR (after all fee)?