Borrowing Against Your Life Insurance Policy : EXPLAINED!

In this video, I'm going to share a visual of how and why people use life insurance policies to buy real estate. So this is a general example so they can understand how the concept works. I like to show people things in simple and easy ways to understand. Now, of course, there's more details involved with this and plans have to be customized for you, but you can look at this and understand how the strategy works in general. So let's say a person has $100 of cash built up inside of their life insurance policy. Now you can add a few zeros to that and say 100,000 or however many zeros you want to add to it. This is just for an example so you can see it visually. Let's say a person has $100 of cash built up in a policy and they need $50 to buy a real estate property or put towards a real estate property. Maybe they're going to go into a deal with some other investors, things like that. They can leverage the policy, which means borrow against it, use this $100 as collateral for this $50 loan. So to get a loan against their policy, now let's say their policy, the cash in a policy is earning 5%. So that would be $5 in interest is earning that year. And let's say they also charge 5% on a loan. The loan could be different. It could be making 7% and a loan could be 4%. But we'll just use this for the example. So let's say they're paying 5% of interest on this. That would be $2.50. So let's follow that now. Earning 5%, $5 in this scenario, paying 5%, $2.50. So their net profit on that alone is $2.50 in that scenario. So now they buy a real estate deal. And let's say between the appreciation and the cash flow from the real estate deal, they make $5 from that. Well, they've now created an increased their profit because they leverage the life insurance policy to buy an income producing asset that produced some cash flow for them. And let's say to keep this up for a few years and they decide to sell this property for $60. They bought it for 50, sell it for 60, gotten cash flow from it throughout. And let's say they then sell it for 60, pay off the loan on a policy and are left with a $10 profit. All during that time, their money in a policy continue to accumulate interest, earn interest and dividends. Now, this same scenario can be applied to flipping properties. Let's say a person just wants to buy a property and flip it. Three months later, they sell it for a profit. So they leverage their policy, buy this property for $50, fix it up and sell it for 60. And it made a $10 profit over there after they paid off the loan. So you see it can be used in many different ways. Sometimes people lend money, use the life insurance policies to lend money to people who are flipping properties. So they have money here to become a private lender, they leverage it and they lend it to somebody who's going to buy this real estate. And then that person fixes it up, flips it, maybe the person pays them $5, maybe the person pays them $10, depending on what interest rate they negotiate. But they effectively are using their life insurance policy like their own bank. They're storing money inside of the policy, earning interest and leveraging it to then put towards other assets. So that's one of the ways that people use the life insurance policies for these things. Of course, the life insurance policy also has a death benefit. So the person died along the way, the death benefit also provides a lump sum to their beneficiaries in the event that person passed. And the death benefit is generally tax-free. So they get a tax-free lump sum. The person uses the money to buy real estate and they die. That'll help pay off the outstanding loans on the policy and the family still keeps the real estate property. So understanding these strategies allow you to play the game well. This is just one tool. And it's not a tool everybody needs to use, but financial tools should be understood if you want to play the financial game well. So to the degree that you can understand these strategies and implement them correctly is the degree that you can be successful using them. So if you have any questions or need any help and want to understand these concepts better, feel free to connect with us, send us a message, leave a comment, and we'll be happy to give you more information on how these strategies work and how you can implement them for yourself.