Today’s episode is about REAL ESTATE & INFINITE BANKING. Learn why Infinite Banking is ideal for real estate investors. We also go over Ten Ways Real Estate & Infinite Banking are Similar.
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Thanks for watching!
Hey Cash Flow Maximizers. Much of this
channel is dedicated to the infinite
banking concept, or bank on yourself, or
family banking. Whatever you want to call
it, it’s the use of specially designed,
high cash value life insurance. And the
reason we look to life insurance
companies for this, it’s not because we
have any special affinity for these
companies, necessarily. They just have a
really great product for what we’re
trying to do.
Not only that, but life
insurance companies are stronger ,more
highly rated, and they’ve been around longer
than any bank in our country. So, when we
look to these specially designed, high
cash value policies, we do that because
we expect a lot out of them. And they
have a lot of guarantees that we just
don’t get with anything else.
In today’s video, I’m talking to the real
estate investors and I’m going over why
an infinite banking policy fits very
well with what they’re trying to do and
the concepts should be very familiar
to them. I’m gonna give you ten ways
the infinite banking concept is similar
to real estate, in use and function.
Let’s get into it!
Oregon Cash Flow Pro
offers free money management advice to
help you take control of your finances
and now here’s your host, personal
finance enthusiast and licensed
insurance broker, James Barber.
infinite banking policy is a financial
tool and as many real estate investors
know, this is not a choice between do you
get an infinite banking policy or do you
invest in your real estate. You’re not
making an either/or choice here. You can
do both and you can do both very
effectively. So it’s not real estate or
life insurance it’s real estate and life
There’s so many real estate
investors out there that already realize
the value in the infinite banking policy,
due to the liquidity that you have,
during life, to utilize the cash value
that you build up in the policy. And
they’re actively using their policies to
buy, build, and protect real estate.
Oftentimes the idea is, take the profits
off your real estate, use those for
premium payments in your infinite
banking policy, then borrow against that
cash value that that generated, to buy
more real estate. To keep the process
This is all about the velocity of
money we want to run money through the
life insurance policy and keep that
This allows you to have one dollar doing
multiple jobs. Because most
of the time you have one dollar and it
does one job. That one dollar is sitting
there for an emergency that one dollar
might be buying a product that you need
or paying for a service that you need,
and when it does that it’s expended. It’s
gone. But as you know, with real estate
and with life insurance, you can have
those dollars doing multiple jobs.
With real estate you have a dollar that is
invested in the real estate and that
it’s growing, but it’s also generating
revenue – if you have rental income coming
in. It can be appreciating. So it can be
gaining in value. It can be offering you
tax credits or depreciation. It can also
provide a nest egg as well as access to
it for other purposes.
You’ll find all of
these qualities within the infinite
banking policy. So let’s go over the ten
ways that your infinite banking policy
is like real estate.
1. What welove about real estate and our
infinite banking policies is that it grows
You buy a piece of property or
you start your infinite banking policy
and while both of those grow in value
you do not have to pay any taxes on
those funds. Quite a bit different from
the stock market, where, when it kicks off
dividends or it gains in value you might
have capital gains taxes or other types
of taxes that you end up having to pay
2. Your premium
acts like a mortgage, in that each
payment grows equity in your asset.
With each payment
you make towards real estate, your loan
balance goes down, your equity goes up,
whether you’re making the payment or you
have a tenant making the payment. It
doesn’t matter. It functions the same way.
With your life insurance, every premium
payment you make, you’re growing cash value
within that policy.
3. We can generally expect equity to grow
between four and six percent per year.
real estate, you have the opportunity to
get a lot more growth, but you do also
have some risk of loss at some point.
Though it’s fairly rare when real estate
prices go down. But, in any particular
property, it could drop in value. But over
the long haul, you tend to see
approximately four to six percent growth
and it’s the same thing with our high
cash value, infinite banking policies.
When you first start them out, our
expenses are a little bit higher than
what we’ve paid in premiums, but we
quickly make that up over the course of
a few years, where pretty soon it’s
kicking off dividends. And over a 30-year
period, you’re gonna earn four to six
Something to keep in mind, this
doesn’t carry the risks that real estate
does you’re not going to randomly lose
value. You don’t have to worry about
repairs and maintenance, or other types
of emergencies, that may cause it to lose
4. You can access the
equity tax-free, through loans.
much easier to do this with a life
insurance policy than it is with real
estate. Now, as you know, to get a loan
from real estate you have to go to a
bank. You need to have good credit. You
have to have income. You have to be able
to prove to them that you’re going to be
able to pay it back. You also have to
have a certain amount of equity
available. They may or may not give you
as much as you have that’s available in
your property. A lot of that depends on
the financial situation of the bank that
you’re talking to. So, there’s a lot of
different factors involved when you need
to access that equity in real estate.
We have none of those problems within
your infinite banking policy. You’re
contractually guaranteed to be able to
borrow against it. You don’t have to go
through a credit check. You don’t have
to get approval from anybody.
You just tell the insurance
company that you want to take a loan
against your policy and they give you a
loan. There’s no payback period. There’s
no minimum payments due, because
eventually the loan is gonna get paid
off at some point. Worst case scenario
it gets paid off
when you pass away and it gets deducted
from the death benefit, before it goes to
your heirs. So it’s pretty neat and it’s
one of the highlights of why we use life
insurance for doing our infinite banking.
It makes your cash very liquid, while
also providing a solid asset for growth.
In real estate,
we know that we have regular maintenance
that we have to do to keep up, on our
buildings or our houses, so that they
will continue to appreciate in value.
Life insurance is fairly similar, in that
the ongoing cost of the actual life
insurance is like the maintenance. Because
every payment you make, it
ensures that it’s going up in value. Now,
you’re not going to have the maintenance
costs that you do with real estate, in
that, you won’t have an unexpected roof
to replace. You won’t have plumbing to
worry about. You don’t have electricity
to worry about. You know ,when you sign
up for the policy, exactly what your
maintenance costs will be. And you also
have the added benefit of being able to
turn off those maintenance costs. You can
turn off the cost of the life insurance
in your infinite banking policy, if you
need to. A little bit more flexibility,
but it does operate very similar to how
you would maintain your real estate.
6. You can rent it out.
what a lot of our real estate investors
do is, they rent out their property. The
tenant ends up making the payments for
the loan. With a life insurance policy, you
don’t have a building that you can rent
out, but you can rent out your money –
otherwise known as giving loans. So you
can be the banker in this case. You lend
out your money and then they pay it back
to you with interest. And
what goes above and beyond what you get
charged for interest for making that
loan, and use that to grow your policy.
And you’re certainly welcome to put any
arbitrage that you get on interest back
into your policy.
7. The equity that you access reduces
the net value of your asset.
So if you have a house that’s
worth $300,000 and you take a loan out
for $200,000 on that house, you have
$100,000 net equity in that asset. It
works the same way with life insurance.
If you have a $300,000 cash value in
your policy, you take out a $200,000 loan,
you still have a hundred thousand
dollars in equity that you can access.
Now with your house, when you pass away,
that loan is going to get paid off. But
what your heirs get will be reduced by
the amount of the loan. So, if we have
that $300,000 house,
you have a $200,000
loan, the heirs will get a hundred
thousand dollars. With the life insurance,
you have $300,000
in cash value, you have a $200,000 loan,
you have a hundred
thousand in cash value, but your death
benefit is probably a million dollars or
a million and a half whatever it ends up
being. Your heir is gonna actually get
the full death benefit, minus the loan. So
instead of just the three hundred
thousand dollars in cash value that
you’ve generated, they might get 1.5
million, minus the two hundred thousand
dollar loan. So they would end up with
1.3 million. So, pretty neat, but it does
function the same way when we think
about how loans against our assets will
reduce their net value.
8. Your real estate steps up in basis
upon your death.
So, one of the things that a lot of
real estate investors do is they do
something called buy, borrow, and die. You
buy the property. You borrow against the
property tax free so that you can access
that equity. And you continue to do so
until you pass away. Because, as long as
you do it that way you have access to
that growth in value tax-free. If you
were to sell that property though,
you would now have capital gains that
you’d have to pay taxes on. However, if
you hold on to that property until you
pass away, your heirs they inherit that
property with a stepped-up basis. So, on
the day that you pass away, whatever that
property is valued at, is what they
inherited it at. So, it does away with all
if the gains that you made in that
property throughout your lifetime. Life
insurance works the same way, in that,
your death benefit is tax-free to your
heirs. So, while you’re growing your
policy and you put money into it and it
has growth beyond the basis, meaning it
gains in value more than what you’ve
paid in in premiums. If you were to
withdraw all of that cash value out of
your policy, or if you were to sell your
policy, and have a gain above what you
paid in premiums, you would owe taxes on
it. So, it’s tax deferred in this case, but
you can access that cash tax-free,
through loans, just like the real estate,
and when you pass away, your death
benefit goes tax-free to your heirs. So
it’s just like it steps up in basis to
the full death benefit when you pass
9. Like Kind Exchange.
In real estate you have
a 1031 exchange that you can do, so that
you can rollover any profits that you
had from one property into another
property. It’s called a like-kind
exchange. Life insurance has a similar
feature and it’s called a 1035 exchange.
And it functions almost the same way,
except you don’t have the same
challenges that you do with real estate.
With real estate you have certain time
periods and you have a lot of rules in
place to do a 1031 exchange. With a 1035
exchange, you’ve already identified the
new policy that you want to move into
and that all happens simultaneously.
You just don’t have the concerns of
violating the rules around the 1035
exchange. Of course it’s not often that
you’re going to do a 1035 exchange, if
you are in a good product.
The only time we look at doing the 1035
exchange is typically when you just made a
bad decision. You went with an agent who
designed a policy poorly, or you’re in a
company that you just don’t want to work
with anymore. So, we can do a 1035
exchange. We can get you out of it.
Oftentimes we’ll do 1035 exchanges to
get out of Universal Life products and
get into whole life products. So that you
don’t have unexpected expenses later on
in life that you’re not going to be able
to afford and your life insurance is
suddenly no longer available as you get
10. You can sell it.
with real estate you can sell it at any
point in time. There’s fees associated
with that, whether it’s through your
realtor or a buyer’s agent, you end up
having some type of costs associated
with that as well as your closing costs.
Life insurance works
very much the same way. You own this. It’s
an asset just like your deed, and the
courts have ruled that you can sell it
as well. Those are called life
settlements and for whatever reason, if
you have the need of getting rid of your
policy there may be somebody out there
that is willing to buy it.
You have the ability to sell it, just
like real estate.
So, that wraps up our
ten ways that life insurance is like
real estate. I’m sure there’s more out
there. If you can think of some that I
didn’t list, tell me about them in the
comment section below, I’d love to hear
from you. And if you found value in
today’s video, please like and subscribe
to the channel so that we can continue
together on our financial journey.
for watching! Be sure to check out this
video on infinite banking, because
there’s so much more to these products.