Wealth Outside Wall Street and the book "Retire in 10 Years or Less"

Member since 2020 · 4 posts · 2 votes

BP Community I could use your help. I recently read the book "Retire in 10 Years or Less" by Ryan D. Lee and Robert G. Allen after listening to an episode of the Ken McElroy Show, where they interviewed Ryan Lee. Most of the topics covered in the book are similar to the principles that I have already learned listening to Bigger Pockets and reading other books. The one thing that differed was utilizing the "Vault" which is a system using a whole life insurance plan as a way to become your own banker. I have seen other post here referring to an "infinite banking" or other similar systems and there seems to be mixed reviews on the use of this system. I have never heard this discussed on the BP podcast.

I also reached out to their team to learn more and they are charging approximately $5,000 initially and $400 a month after that to be a part of their mastermind program. This will get you individual coaching to assist setting up your "vault", someone to work tax strategies, turn key real estate, and personal coaching. I am seriously considering this investment, but would like some advice from this community before spending that kind of money on coaching. Does anyone have any experience with this company or have any experience with similar coaching or information in utilizing whole life policies as savings vehicles? I appreciate your help ahead of time.

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Chris SeveneyBusiness Member

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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

8mo

Quote from @Matt Neil:

These programs are pretty controversial here on BP. I take a middle of the road approach like I do real estate. For some people these plans are another tool in their tool belt. I would argue though if your net worth is less than $1M I am not sure one of these plans is better, and you may be better off getting a term policy and just saving and using the cash to buy real estate vs. putting into a whole life policy only to borrow against it and pay the interest. If you are paying $5k upfront and $400/month that is $10k, I would say you should have atleast $400k liquid to do the program, anything less than much of anything you make just gets eaten up in fees. This is just my opinion.

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Thomas RutkowskiPro Member
Financial Advisor · Boynton Beach, FL · Member since 2015 · 834 posts · 798 votes
8mo
@Matt Neil
Its really not that difficult if you get past the marketing terms like "vault".
Leveraging the cash value of a maximum overfunded life insurance policy allows you to literally put your money to work in two places at one time. Insurance companies are required by law to make loans, secured by the cash value, to their policy owners.
Most of the naysayers simply don't understand how life insurance truly works and the difference between a normal life insurance policy and one that is maximum overfunded. They are completely different animals.
If you want to learn more, I have links to a ton of videos on my profile. This is what I specialize in
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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
8mo
Quote from @Matt Neil:

BP Community I could use your help. I recently read the book "Retire in 10 Years or Less" by Ryan D. Lee and Robert G. Allen after listening to an episode of the Ken McElroy Show, where they interviewed Ryan Lee. Most of the topics covered in the book are similar to the principles that I have already learned listening to Bigger Pockets and reading other books. The one thing that differed was utilizing the "Vault" which is a system using a whole life insurance plan as a way to become your own banker. I have seen other post here referring to an "infinite banking" or other similar systems and there seems to be mixed reviews on the use of this system. I have never heard this discussed on the BP podcast.

I also reached out to their team to learn more and they are charging approximately $5,000 initially and $400 a month after that to be a part of their mastermind program. This will get you individual coaching to assist setting up your "vault", someone to work tax strategies, turn key real estate, and personal coaching. I am seriously considering this investment, but would like some advice from this community before spending that kind of money on coaching. Does anyone have any experience with this company or have any experience with similar coaching or information in utilizing whole life policies as savings vehicles? I appreciate your help ahead of time.

These programs are pretty controversial here on BP. I take a middle of the road approach like I do real estate. For some people these plans are another tool in their tool belt. I would argue though if your net worth is less than $1M I am not sure one of these plans is better, and you may be better off getting a term policy and just saving and using the cash to buy real estate vs. putting into a whole life policy only to borrow against it and pay the interest. If you are paying $5k upfront and $400/month that is $10k, I would say you should have atleast $400k liquid to do the program, anything less than much of anything you make just gets eaten up in fees. This is just my opinion.
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Mike Kirby
Rental Property Investor · New Braunfels, TX · Member since 2021 · 290 posts · 257 votes
8mo
Quote from @Matt Neil:

BP Community I could use your help. I recently read the book "Retire in 10 Years or Less" by Ryan D. Lee and Robert G. Allen after listening to an episode of the Ken McElroy Show, where they interviewed Ryan Lee. Most of the topics covered in the book are similar to the principles that I have already learned listening to Bigger Pockets and reading other books. The one thing that differed was utilizing the "Vault" which is a system using a whole life insurance plan as a way to become your own banker. I have seen other post here referring to an "infinite banking" or other similar systems and there seems to be mixed reviews on the use of this system. I have never heard this discussed on the BP podcast.

I also reached out to their team to learn more and they are charging approximately $5,000 initially and $400 a month after that to be a part of their mastermind program. This will get you individual coaching to assist setting up your "vault", someone to work tax strategies, turn key real estate, and personal coaching. I am seriously considering this investment, but would like some advice from this community before spending that kind of money on coaching. Does anyone have any experience with this company or have any experience with similar coaching or information in utilizing whole life policies as savings vehicles? I appreciate your help ahead of time.
Matt, what have you accomplished in your real estate career in the last 5 years since your last post?

There aren't any shortcuts to success. You certainly don't want to pay someone to tell you what to do, pay yourself with knowledge. All the information you need is on the internet for free.

You have to get in the game, learn how to buy properties and add value to them.
1 Reply
Jules Aton
MD/DC · Member since 2024 · 1k+ posts · 1k+ votes
8mo
Whole life insurance isn’t attractive to me on any level and even mentioning that as a strategy would be a red flag for me.
0 Reply
- Tracy Thrall
  Member since 2026 · 1 post · 1 vote
  1mo
  That to me means you don’t completely understand how they work. If you did you would be more apt to take advantage of the power they produce
  1 Reply
Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
8mo
Quote from @Matt Neil:

BP Community I could use your help. I recently read the book "Retire in 10 Years or Less" by Ryan D. Lee and Robert G. Allen after listening to an episode of the Ken McElroy Show, where they interviewed Ryan Lee. Most of the topics covered in the book are similar to the principles that I have already learned listening to Bigger Pockets and reading other books. The one thing that differed was utilizing the "Vault" which is a system using a whole life insurance plan as a way to become your own banker. I have seen other post here referring to an "infinite banking" or other similar systems and there seems to be mixed reviews on the use of this system. I have never heard this discussed on the BP podcast.

I also reached out to their team to learn more and they are charging approximately $5,000 initially and $400 a month after that to be a part of their mastermind program. This will get you individual coaching to assist setting up your "vault", someone to work tax strategies, turn key real estate, and personal coaching. I am seriously considering this investment, but would like some advice from this community before spending that kind of money on coaching. Does anyone have any experience with this company or have any experience with similar coaching or information in utilizing whole life policies as savings vehicles? I appreciate your help ahead of time.
My opinion on these “massaged” insurance/whole life/ borrowing programs is well known here on BP, so in a way I’m biased as I believe the fees negate any very marginal positivity that is gained. And the fees can be enormous when compared to any other in the financial industry. 50 years ago when the insurance industry decided to disguise itself as part of the financial industry (insurance salesman became “wealth advisors; except that their only “advice” was to buy insurance), they’ve been mixing up financial products for which they charge huge sales fees for as well as highest asset management fees in the industry, tax “advantaged” products (which pale in comparison with a Roth IRA or Roth 401k), and some insurance thrown in to pacify the politicians they bought off.

But let’s look at this another way. One of the authors of the book you’ve mentioned is Robert G Allen; a (former) guru from the 1970s who gained fame with his RAND (Robert Allen Nothing Down) seminars, real estate clubs and book(s). I was actually one of the founding members of the RAND Club in Houston. Robert Allen had a lot of good ideas in his program,; however, many of them were “slightly” illegal (mortgage fraud) and most bordered on or crossed over into unethical. With due on sale mortgage covenants beginning in 1979, stricter enforcement of “creative” mortgage applications; shakeout in the title industry closing “investor friendly” title companies; and strict consumer fraud legislation 95% if “Nothing Down” is no longer applicable. This is of course NOT the fault of Robert Allen.

Here’s the big but: Despite Robert Allen’s BS to the contrary, he was never successful at investing in real estate. In a rare moment of complete honesty backstage before a forum Robert Allen and I were panelists on in 1981, he told me that he had made only one successful real estate investment in his life! And that had been the result of a lucky purchase in California just before the 1970s price explosion. Shortly thereafter Robert Allen filed bankruptcy, but of course that didn’t stop him from dispensing financial advice.

The point is that Robert Allen could purchase property with nothing down (sometimes), unfortunately he did it by paying way over market value for those purchases, taking on enormous debt at extremely high interest rates, and having to feed large “alligators” (negative cash flows). Granted, the Robert Allen I know was 45 years ago; however he was in no way shape or form qualified to perform a simple financial analysis let alone offer financial advice. He was a marketer, salesman, and huckster. I would fear that his interest is in selling books, not providing good financial advice.

My advice is this; the complicated stuff is disguised as complicated for a reason. Stick to simple; then you’ll have a chance at sustainable investing.
Private Mortgage Financing Partners, LLC
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- Ken M.
  Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes
  8mo
  Quote from @Don Konipol:
  
  Quote from @Matt Neil:
  
  BP Community I could use your help. I recently read the book "Retire in 10 Years or Less" by Ryan D. Lee and Robert G. Allen after listening to an episode of the Ken McElroy Show, where they interviewed Ryan Lee. Most of the topics covered in the book are similar to the principles that I have already learned listening to Bigger Pockets and reading other books. The one thing that differed was utilizing the "Vault" which is a system using a whole life insurance plan as a way to become your own banker. I have seen other post here referring to an "infinite banking" or other similar systems and there seems to be mixed reviews on the use of this system. I have never heard this discussed on the BP podcast.
  
  I also reached out to their team to learn more and they are charging approximately $5,000 initially and $400 a month after that to be a part of their mastermind program. This will get you individual coaching to assist setting up your "vault", someone to work tax strategies, turn key real estate, and personal coaching. I am seriously considering this investment, but would like some advice from this community before spending that kind of money on coaching. Does anyone have any experience with this company or have any experience with similar coaching or information in utilizing whole life policies as savings vehicles? I appreciate your help ahead of time.
  My opinion on these “massaged” insurance/whole life/ borrowing programs is well known here on BP, so in a way I’m biased as I believe the fees negate any very marginal positivity that is gained. And the fees can be enormous when compared to any other in the financial industry. 50 years ago when the insurance industry decided to disguise itself as part of the financial industry (insurance salesman became “wealth advisors; except that their only “advice” was to buy insurance), they’ve been mixing up financial products for which they charge huge sales fees for as well as highest asset management fees in the industry, tax “advantaged” products (which pale in comparison with a Roth IRA or Roth 401k), and some insurance thrown in to pacify the politicians they bought off.
  
  But let’s look at this another way. One of the authors of the book you’ve mentioned is Robert G Allen; a (former) guru from the 1970s who gained fame with his RAND (Robert Allen Nothing Down) seminars, real estate clubs and book(s). I was actually one of the founding members of the RAND Club in Houston. Robert Allen had a lot of good ideas in his program,; however, many of them were “slightly” illegal (mortgage fraud) and most bordered on or crossed over into unethical. With due on sale mortgage covenants beginning in 1979, stricter enforcement of “creative” mortgage applications; shakeout in the title industry closing “investor friendly” title companies; and strict consumer fraud legislation 95% if “Nothing Down” is no longer applicable. This is of course NOT the fault of Robert Allen.
  
  Here’s the big but: Despite Robert Allen’s BS to the contrary, he was never successful at investing in real estate. In a rare moment of complete honesty backstage before a forum Robert Allen and I were panelists on in 1981, he told me that he had made only one successful real estate investment in his life! And that had been the result of a lucky purchase in California just before the 1970s price explosion. Shortly thereafter Robert Allen filed bankruptcy, but of course that didn’t stop him from dispensing financial advice.
  
  The point is that Robert Allen could purchase property with nothing down (sometimes), unfortunately he did it by paying way over market value for those purchases, taking on enormous debt at extremely high interest rates, and having to feed large “alligators” (negative cash flows). Granted, the Robert Allen I know was 45 years ago; however he was in no way shape or form qualified to perform a simple financial analysis let alone offer financial advice. He was a marketer, salesman, and huckster. I would fear that his interest is in selling books, not providing good financial advice.
  
  My advice is this; the complicated stuff is disguised as complicated for a reason. Stick to simple; then you’ll have a chance at sustainable investing.
  I've read Robert Allen’s book "Nothing Down For The 90's (1990)", back when I was starting out. No one that I knew was doing creative finance then. But, I don't recall him mentioning the Due on Sale clause, or that the Judge, any Judge looks at "no money down" with a very skeptical eye to begin with. Things are very different now, getting greater scrutiny.
  
  And things changed dramatically with the debacle of 2008 - 2012. Laws changed, attitudes changed, consequences changed. Now you can go to jail for some of the things he proposes in that book. And yet, some are still out there charging an "entry fee" for joining a "Subto Community" preaching things that are so 1990. It sells. But it's wrong. It's now 2026 This current administration is uncovering a lot of non allowed activity and they are taking action. Subject To is lawful, when done lawfully.
  
  2 Reply
Matt NeilPro Member
OP
Member since 2020 · 4 posts · 2 votes
8mo
I appreciate the feedback that I have received so far. Since I started in real estate, I haven't made a lot of moves and would like to focus on some purchases this year. One thing that I was interested in was looking for some coaching to move me forward in my investing journey. The Wealth Outside Wall Street crew seemed to fit that bill, but my gut was telling me I needed some more input. Thank you again for the help.
1 Reply
Thomas RutkowskiPro Member
Financial Advisor · Boynton Beach, FL · Member since 2015 · 834 posts · 798 votes
8mo
@Matt Neil
You really need to see the numbers for yourself. As I stated in my earlier posts, the naysayers don't truly understand how this works. These are Maximum Over-funded Life Insurance policies. ~85% of the premium goes to the Cash Value and can be leveraged immediately. Loan interest is the cost of money.
Of course life insurance has fees, but those fees don't keep the model from working. You'll still grow wealth faster over time by utilizing this approach.
Your Net Worth does not factor into the equation at all. If you can achieve 40-50% higher returns by putting your money to work in two places at one time, that benefits you if you have $10,000 to invest or $10,000,000 to invest.
Just an example.
A hard money lender making a $100,000 loan for 1-year at 10%. If you use your own money, you'll make $10,000 and probably give $4000 of that to the IRS between state and fed taxes. The net will be $6000 after tax.
If I borrow $100,000 against my cash value which is earning 6% (and still earns 6% while its securing the loan!), and make the same hard money loan my results are much better. The result is still $10,000 of interest. But, the cash value securing the loan made $6000 during that 1-year. And if I net out the policy loan interest (5%), I'm only paying tax on $5000 of income. Assuming the same tax rate, I pay only $2000 to the IRS.
I make a total of $9000 between the dividends on the policy and the interest income net of taxes. That is a 50% higher return.
It's not complicated. It's pretty simply math.

1 Reply
- Don KonipolBusiness Member
  Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
  8mo
  Quote from @Thomas Rutkowski:
  
  @Matt Neil
  You really need to see the numbers for yourself. As I stated in my earlier posts, the naysayers don't truly understand how this works. These are Maximum Over-funded Life Insurance policies. ~85% of the premium goes to the Cash Value and can be leveraged immediately. Loan interest is the cost of money.
  Of course life insurance has fees, but those fees don't keep the model from working. You'll still grow wealth faster over time by utilizing this approach.
  Your Net Worth does not factor into the equation at all. If you can achieve 40-50% higher returns by putting your money to work in two places at one time, that benefits you if you have $10,000 to invest or $10,000,000 to invest.
  Just an example.
  A hard money lender making a $100,000 loan for 1-year at 10%. If you use your own money, you'll make $10,000 and probably give $4000 of that to the IRS between state and fed taxes. The net will be $6000 after tax.
  If I borrow $100,000 against my cash value which is earning 6% (and still earns 6% while its securing the loan!), and make the same hard money loan my results are much better. The result is still $10,000 of interest. But, the cash value securing the loan made $6000 during that 1-year. And if I net out the policy loan interest (5%), I'm only paying tax on $5000 of income. Assuming the same tax rate, I pay only $2000 to the IRS.
  I make a total of $9000 between the dividends on the policy and the interest income net of taxes. That is a 50% higher return.
  It's not complicated. It's pretty simply math.
  
  You are the PERFECT example of who I’m warning against. A life insurance salesman disguising himself as a financial advisor . LOL. You’re selling a product and claiming thru positioning and self appointed title (financial advisor) to deliver an unbiased opinion of the quality, appropriateness, and suitability of the product you’re selling. Deceit is written all over you. Further, your arrogance in stating “naysayers don’t understand how this works” is a broad stroke self serving statement with no real basis. So, is YOUR only training thru insurance sponsored “education” meant to provide just enough “financial” knowledge to make salesman appear to be financially competent or do you have (independent of insurance sponsored_ education in finance (MBA, BS in Finance, CPA, CFA, etc.) and decided to pursue hacking insurance products rather than providing UNBIASED advice?
  
  Private Mortgage Financing Partners, LLC
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- Ken M.
  Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes
  8mo
  Quote from @Thomas Rutkowski:
  
  @Matt Neil
  You really need to see the numbers for yourself. As I stated in my earlier posts, the naysayers don't truly understand how this works. These are Maximum Over-funded Life Insurance policies. ~85% of the premium goes to the Cash Value and can be leveraged immediately. Loan interest is the cost of money.
  Of course life insurance has fees, but those fees don't keep the model from working. You'll still grow wealth faster over time by utilizing this approach.
  Your Net Worth does not factor into the equation at all. If you can achieve 40-50% higher returns by putting your money to work in two places at one time, that benefits you if you have $10,000 to invest or $10,000,000 to invest.
  Just an example.
  A hard money lender making a $100,000 loan for 1-year at 10%. If you use your own money, you'll make $10,000 and probably give $4000 of that to the IRS between state and fed taxes. The net will be $6000 after tax.
  If I borrow $100,000 against my cash value which is earning 6% (and still earns 6% while its securing the loan!), and make the same hard money loan my results are much better. The result is still $10,000 of interest. But, the cash value securing the loan made $6000 during that 1-year. And if I net out the policy loan interest (5%), I'm only paying tax on $5000 of income. Assuming the same tax rate, I pay only $2000 to the IRS.
  I make a total of $9000 between the dividends on the policy and the interest income net of taxes. That is a 50% higher return.
  It's not complicated. It's pretty simply math.
  
  @Thomas Rutkowski: Your comment "A hard money lender making a $100,000 loan for 1-year at 10%" is interesting.
  How much of your money is "at risk"? From what I've read, every hard money lender takes losses. Oh yeah, we like to gloss over the negative, but I deal in the real world.
  
  I think most lending of this sort is in the 2nd position (very risky), if involved in purchases, or is to an overly optimistic "investor" buying a property at full price using a creative finance technique or doesn't anticipate market conditions shifting or . . . on and on. So, a couple of questions for clarification:
  
  1. What happens if the borrower stops paying? An event more frequent than we'd like to admit. A foreclosure happens of course. What is the true cost of a foreclosure? When I was doing foreclosure bailouts, back when it was legal, the banks on average, lost $50,000 per foreclosure. Most lenders don't want to become an "accidental" landlord, or worse yet, own a half finished vacant property.
  
  2. Like most people, I don't know the risk/reward of a whole life policy as some have already explained it. Their word is good enough for me. But I was taught to buy sufficient term life and call it a day. There are virtually none of the commissions to pay for with term life (yes, I know an insurance salesman avoids mentioning that fact). I've been trained to do what I do best, buy properties. I've been taught to Leave insurance alone, use the savings to buy properties. That has work out just fine for me.
  
  Your comment: "Most of the naysayers simply don't understand how life insurance truly works"
  I had lunch with one of the top insurance sales people in California and he told me why he changed from insurance sales to real estate investing. He went from being "well off" selling insurance, to being wealthy buying real estate. He knows the tricks of the trade of both and found real estate gets him to where he wanted to be. Wealthy.
  
  I may be missing something, but by not buying whole life, buying term instead, I'm saving substantial commissions, I'm using that money to buy a property (I buy properties at a discount, not everybody does), but I get a tax write off, I get cash flow, my investment is insurable, my invest is going up in value and so on.
  So, again, how does over spending on whole life get me those things?
  3 Reply
Thomas RutkowskiPro Member
Financial Advisor · Boynton Beach, FL · Member since 2015 · 834 posts · 798 votes
8mo
@Don Konipol
It sounds like you are projecting.
Disprove the math. I'll wait.
1 Reply
Frank PyleBusiness Member
Specialist · USA · Member since 2024 · 280 posts · 130 votes
8mo
I would not pay 5k up front plus 400 a month until you can explain in plain English how the Vault beats just keeping a fat cash reserve and buying more deals, because whole life as a banking system can work for a narrow set of people but it is expensive early and you are mainly buying liquidity and guarantees, not high returns. Quick numbers check you are talking about roughly 9,800 in year one and 4,800 a year after that, so ask yourself what deal or tax move that money could fund instead and what return you need from the policy and coaching to beat that. The actionable move today is to ask them for an in force illustration, a breakdown of all fees and commissions, the expected cash value and loan rate in year 1 3 5 and 10, and a side by side showing the exact scenario where this creates more investable dollars than just stacking reserves and recycling a HELOC or business line. If they get fuzzy or hand wave with big future numbers, I would pass and keep learning from BP and a local CPA and only pay for help when you have a specific deal and tax problem in front of you. What is your goal for the Vault, is it to replace an emergency fund, to fund down payments, or to shelter taxes, and how much cash do you realistically have to commit every month for 5 to 10 years?
[email protected]317-501-3467
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V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
8mo
The only people that will tell you to use these are salesman.

That should tell you all you need to know. Avoid, all the fees are top heavy just ask for their commission disclosure and watch them squirm.

Buy term, invest the difference.
0 Reply
Thomas RutkowskiPro Member
Financial Advisor · Boynton Beach, FL · Member since 2015 · 834 posts · 798 votes
8mo
@Ken M.
@Thomas Rutkowski: Your comment "A hard money lender making a $100,000 loan for 1-year at 10%" is interesting.
How much of your money is "at risk"? From what I've read, every hard money lender takes losses. Oh yeah, we like to gloss over the negative, but I deal in the real world.

I think most lending of this sort is in the 2nd position (very risky), if involved in purchases, or is to an overly optimistic "investor" buying a property at full price using a creative finance technique or doesn't anticipate market conditions shifting or . . . on and on. So, a couple of questions for clarification:

1. What happens if the borrower stops paying? An event more frequent than we'd like to admit. A foreclosure happens of course. What is the true cost of a foreclosure? When I was doing foreclosure bailouts, back when it was legal, the banks on average, lost $50,000 per foreclosure. Most lenders don't want to become an "accidental" landlord, or worse yet, own a half finished vacant property.

You're talking about the nature of real estate investing. An investor or lender is taking that risk anyway. But here's the difference:
When you lose your money in real estate its gone.
You'll still lose if you used the policy loan, but the insurance policy is still there. The death benefit is still there (netted out by the policy loan balance). Policy loans don't require principal repayment, so that loan can sit on the books for 20 or more years. The interest will be offset by the gains on the cash value. A wash.
Not the same.
You're thinking of life insurance as nothing but a death benefit that you can get much cheaper with term. Absolutely. I totally agree. I love term. But were not talking about death benefit.
I'm talking about a tool that lets an investor make more money doing what they were already doing. Nobody sees the commissions (which are very low in an over-funded policy) because they're focused on their bottom line which is growing more rapidly. The DB is just an added bonus.
0 Reply
- Ken M.
  Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes
  8mo
  Quote from @Thomas Rutkowski:
  
  @Ken M.
  @Thomas Rutkowski: Your comment "A hard money lender making a $100,000 loan for 1-year at 10%" is interesting.
  How much of your money is "at risk"? From what I've read, every hard money lender takes losses. Oh yeah, we like to gloss over the negative, but I deal in the real world.
  
  I think most lending of this sort is in the 2nd position (very risky), if involved in purchases, or is to an overly optimistic "investor" buying a property at full price using a creative finance technique or doesn't anticipate market conditions shifting or . . . on and on. So, a couple of questions for clarification:
  
  1. What happens if the borrower stops paying? An event more frequent than we'd like to admit. A foreclosure happens of course. What is the true cost of a foreclosure? When I was doing foreclosure bailouts, back when it was legal, the banks on average, lost $50,000 per foreclosure. Most lenders don't want to become an "accidental" landlord, or worse yet, own a half finished vacant property.
  
  You're talking about the nature of real estate investing. An investor or lender is taking that risk anyway. But here's the difference:
  When you lose your money in real estate its gone.
  You'll still lose if you used the policy loan, but the insurance policy is still there. The death benefit is still there (netted out by the policy loan balance). Policy loans don't require principal repayment, so that loan can sit on the books for 20 or more years. The interest will be offset by the gains on the cash value. A wash.
  Not the same.
  You're thinking of life insurance as nothing but a death benefit that you can get much cheaper with term. Absolutely. I totally agree. I love term. But were not talking about death benefit.
  I'm talking about a tool that lets an investor make more money doing what they were already doing. Nobody sees the commissions (which are very low in an over-funded policy) because they're focused on their bottom line which is growing more rapidly. The DB is just an added bonus.
  Now I'm more confused, you say:
  
  You. "You're talking about the nature of real estate investing. An investor or lender is taking that risk anyway. But here's the difference: When you lose your money in real estate its gone."
  "You'll still lose if you used the policy loan, but the insurance policy is still there."
  
  Q. Are you trying to say the $100,000 you put into the deal from your insurance policy is still yours? Or that they eventual payout would be deducted by the loss?
  Seems to me in a foreclosure you'd lose both the $100,000 and the property and it would be painful to the untrained investor. People making enough to play that game are risk averse, W2 employees. Personally, I won't take risk averse students. It's too risky working with them. And it's a pain. They misunderstand the risk. And I can't imagine an insurance salesman, actually explaining the risk to a client, it'd be self defeating.
  
  Your comment "Nobody sees the commissions" Sounds slight of hand to me ;-)
  Ah, but they are still commissions, aren't they?
  
  0 Reply
- Thomas RutkowskiPro Member
  Financial Advisor · Boynton Beach, FL · Member since 2015 · 834 posts · 798 votes
  8mo
  Quote from @Ken M.:
  
  Quote from @Thomas Rutkowski:
  
  @Ken M.
  @Thomas Rutkowski: Your comment "A hard money lender making a $100,000 loan for 1-year at 10%" is interesting.
  How much of your money is "at risk"? From what I've read, every hard money lender takes losses. Oh yeah, we like to gloss over the negative, but I deal in the real world.
  
  I think most lending of this sort is in the 2nd position (very risky), if involved in purchases, or is to an overly optimistic "investor" buying a property at full price using a creative finance technique or doesn't anticipate market conditions shifting or . . . on and on. So, a couple of questions for clarification:
  
  1. What happens if the borrower stops paying? An event more frequent than we'd like to admit. A foreclosure happens of course. What is the true cost of a foreclosure? When I was doing foreclosure bailouts, back when it was legal, the banks on average, lost $50,000 per foreclosure. Most lenders don't want to become an "accidental" landlord, or worse yet, own a half finished vacant property.
  
  You're talking about the nature of real estate investing. An investor or lender is taking that risk anyway. But here's the difference:
  When you lose your money in real estate its gone.
  You'll still lose if you used the policy loan, but the insurance policy is still there. The death benefit is still there (netted out by the policy loan balance). Policy loans don't require principal repayment, so that loan can sit on the books for 20 or more years. The interest will be offset by the gains on the cash value. A wash.
  Not the same.
  You're thinking of life insurance as nothing but a death benefit that you can get much cheaper with term. Absolutely. I totally agree. I love term. But were not talking about death benefit.
  I'm talking about a tool that lets an investor make more money doing what they were already doing. Nobody sees the commissions (which are very low in an over-funded policy) because they're focused on their bottom line which is growing more rapidly. The DB is just an added bonus.
  Now I'm more confused, you say:
  
  You. "You're talking about the nature of real estate investing. An investor or lender is taking that risk anyway. But here's the difference: When you lose your money in real estate its gone."
  "You'll still lose if you used the policy loan, but the insurance policy is still there."
  
  Q. Are you trying to say the $100,000 you put into the deal from your insurance policy is still yours? Or that they eventual payout would be deducted by the loss?
  Seems to me in a foreclosure you'd lose both the $100,000 and the property and it would be painful to the untrained investor. People making enough to play that game are risk averse, W2 employees. Personally, I won't take risk averse students. It's too risky working with them. And it's a pain. They misunderstand the risk. And I can't imagine an insurance salesman, actually explaining the risk to a client, it'd be self defeating.
  
  Your comment "Nobody sees the commissions" Sounds slight of hand to me ;-)
  Ah, but they are still commissions, aren't they?
  
  Regarding commissions: I repeatedly said that ~85% of the premium goes to the cash value. The insurance company fees and the commissions are in that 15%. Roughly 10% to the insurance company and 5% to the agent.
  
  Regarding the loss: I'm not sure what you are asking. The bottom line is that policy loans are loans against the cash value. So the lien is there forever and so is the cash value.
  
  I won't take everybody either. If they don't understand how it works its going to come back on me. Luckily, most of the people who come to me devour the free content that I have available on my website and youtube. Most come to me just needing clarification on a few technical issues. It's not that complicated.
  1 Reply
Shiloh LundahlPro Member
Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
8mo
@Matt Neil if you are considering coaching, I would encourage you to look into 3 or 4 different people or programs before deciding on paying anyone for coaching. There are a lot of coaches. Make sure that the person you want to coach you has a lot of personal experience in investing in the type of real estate you would like to invest in.

I wouldn't encourage you to start out with using insurance and trying to set up the infinite banking system. Start with the basics, then when you get good at the basics, then you can add more complexity if you would like. I personally don't use the infinite banking system because I do several deals a year and that system would slow me way down and would add way to many restrictions to the movement of money, so it would not be beneficial to me.

Share more details about what type of real estate you are interested in.
480-206-1209 Podcast Guest on Show #287
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Bo SmithPro Member
Hinton, WV · Member since 2026 · 1k+ posts · 375 votes
8mo
The whole life insurance thing is polarizing because it works for some situations but gets oversold. The real test: can you beat the policy's return rate with real estate? If you're hitting 12-15% cash-on-cash, probably not worth it. But if you're already maxing retirement accounts and want forced savings with tax benefits, it has a place. What's your current cash-on-cash return looking like on deals?
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- Thomas RutkowskiPro Member
  Financial Advisor · Boynton Beach, FL · Member since 2015 · 834 posts · 798 votes
  8mo
  Quote from @Bo Smith:
  
  The whole life insurance thing is polarizing because it works for some situations but gets oversold. The real test: can you beat the policy's return rate with real estate? If you're hitting 12-15% cash-on-cash, probably not worth it. But if you're already maxing retirement accounts and want forced savings with tax benefits, it has a place. What's your current cash-on-cash return looking like on deals?
  I'm not sure you understand the benefit of leveraging the cash value of a maximum over-funded life insurance policy. It's not life insurance vs real estate. It's putting your money to work in two places at one time by leveraging the cash value: Cash value growth and real estate growth.
  
  The Cash Value grows at a safe, predictable rate. The cash value never leaves the policy when you take a policy loan. The insurance company is loaning you their money with the cash value as collateral. Now, when you put that loan to work in real estate, your money is working in two places at once.
  0 Reply
Joseph Neri
Investor · Houston, TX · Member since 2019 · 95 posts · 29 votes
7mo
The biggest thing people miss with IBC is that the policy has to be structured right from day one. If the base premium is too high and the PUA rider is too low, you're stuck waiting years before the cash value is actually useful. The sweet spot is minimizing that base premium and maxing out paid-up additions so your cash value grows fast enough to actually deploy into deals. Also worth noting -- the policy loan doesn't reduce your cash value growth. Your money compounds whether you borrow against it or not. That's the part most people skip over when comparing it to just parking cash in a savings account.
1 Reply
Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
1mo
The REAL Math:
Whole life policy investment: $100,000
Less: commission and insurance co fees: 15,000
Cash Value of policy: $85,000
Annual Interest Earned on Cash Value @6%: 5,100
Less interest paid on policy loan @5%: 4,250
NET INTEREST EARNED annually: 850
Annual Interest on private loan investment of $85,000 at10%: 8,500
Total Net interest annually: 9,350
Instead
Buy $100,000 term policy and invest balance in private loan investment
Annual cost of $100,000 term insurance: $200
Balance of $99,800 invested at 10%: 9,980
So comparison shows: the life insurance/borrow method costs 15% of your capital day one and earns $630 less annually.
Private Mortgage Financing Partners, LLC
Website View Page
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- Thomas RutkowskiPro Member
  Financial Advisor · Boynton Beach, FL · Member since 2015 · 834 posts · 798 votes
  1mo
  You're forgetting taxes.
  A lender makes a $100,000 loan at 10% for one year. Interest earned is $10,000, but that is taxable. Assuming 40% tax, the lender makes $6,000.
  $100,000 into a whole life (or IUL) turns into $85,000 cash value that can be leverage immediately if the policy is designed right.
  Lender makes a $85,000 loan at 10% for one year. Interest earned is $8,500. Interest owed on the loan is $4,250. Net is $4,250.
  The cash value in the policy earns a 6.2% dividend (mass mutual's current dividend) = $5,270
  $5,270 plus $4,250 is $9,520. This is 50% more than investing with your own money.
  It quickly makes up for the fees and expenses of the policy.
  Compounding interest is powerful.
  0 Reply
- Don KonipolBusiness Member
  Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
  1mo
  The tax implications are not tax free - it’s tax deferred. Taxes will be owed at the time the cash value of the policy is received or taken out. But that’s for the value increasing inside the policy. For the investments made with a policy loan (outside) the policy like the loan that buys the 10% note, the income is taxed just like any other income the individual earns or receives. So the $9520 is reduced by the tax on the $8500 - using your 40% by $3,400. After tax net now down to $6,120.
  So, for paying $15,000 in fees and now having $15,000 less net worth, I’ve made an additional $120. But even this is overstated as I will eventually have to pay tax at ordinary income rates on the net $1,020 income inside the policy.
  Private Mortgage Financing Partners, LLC
  Website View Page
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- Thomas RutkowskiPro Member
  Financial Advisor · Boynton Beach, FL · Member since 2015 · 834 posts · 798 votes
  1mo
  Yes. I realized too late to edit the post.
  But you're still wrong. It's important to remember that the interest expense reduces the taxable amount by 50%. The tax on the $4,250 at 40% is $1,700 vs $4,000.
  $4,250 minus $1,700 is $2,550.
  The correct math is the policy dividend at $5,270 plus $2,550: $7,820.
  That is $1,820 more than investing with your own money. That is a 30% higher return. And compounded over many years, these far surpasses the wealth accumulation by investing with your own money.
  This is not a get rich quick scheme. It's a way to systematically build more wealth over a lifetime. You may not like it, but it works for thousands of other people who get it.
  0 Reply
Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
1mo
The reason the dividends aren’t taxed is that the IRS considers the dividends to be a refund (or partial refund) of your premium. Each dividend payment reduces your basis in the policy. At the point you receive all your premium back as dividends, all further distributions are taxed at ordinary income rates. So, the net effect is actually a deferral of tax, not tax free, regardless of whether you consider the dividends to be return of capital or a real dividend. Therefore, at 40% tax (assuming tax brackets don’t have future increasing rates) the future tax on the capital left in the policy corresponding to the dividend is $2,108. Plus your $15k “entry fee” is gone forever.
Private Mortgage Financing Partners, LLC
Website View Page
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Cliff H.Pro Member
Rental Property Investor · Nashua, NH · Member since 2014 · 610 posts · 486 votes
6d
@Matt Neil the following article was useful for me when I started looking into UWL a few years back:
https://www.whitecoatinvestor.com/debunking-the-myths-of-whole-life-insurance/
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