Fire Your Real Estate Banker!

By Mark Willis, CFP
Lake Growth Financial Services

“A banker is a fellow who will lend you his umbrella when the sun is shining, but wants it back the minute it begins to rain.” — Mark Twain

Ain’t that the truth? As we look ten years back on the Great Recession, we can see how much has changed, and how much more has stayed pretty much the same. Home values are up again to 2007 levels. Unemployment is down to pre-crisis levels. The stock market is hitting record highs as I write these words. And yet, not much has changed since 2008 or since Mr. Twain wrote those humorous words – bankers control the money supply, and just when you need the money most, they are there holding all the umbrellas.

I have no problem with bankers, personally. Some of my best friends are bankers!

In fact, as investors we’ve been taught to use “other people’s money” (also known as OPM) as leverage to help us gain traction in real estate or to get ahead in our business. Other solutions include getting a business line of credit to buy new equipment, or securing a mortgage on an investment property to renovate and flip a property. These are the standby solutions used by many Americans.

But ask yourself – who are the “other people” when OPM is your strategy for leverage? (Remember, leverage can work both ways – for andagainst you!) And what do other people want so badly that they’re willing to part with their money and hand it to you? Were you just handed an umbrella on a sunny day?

When banks control the environment where your money lives, they win every time. When you control the financial environment in which your money lives, you win.

34% of all American income goes to servicing debt. If time is money, as the old saying goes, that means a full one-third of the day is spent working as slaves to a bank! Think of how many folks you know who are in debt up to their eyeballs and working 60+ hours a week, or stressing over non-paying tenants, or feverishly rushing from property to property, hoping they can sell a property before the balloon payment comes due.

For many real estate investors, the road to becoming a wealthy landlord turned south toward the highway of serfdom, with their banker holding the upper hand.

Is there any other way? How can someone who has skill and passion for real estate or their business keep control and a sense of sanity amidst a world gone insane? Is there a way to break free of financial slavery to the banks?

Yes, it’s simple.

Fire your banker!

Where is it written that you have to service your debts and pay off a banker before you can enjoy the fruits of your investment? Who says you have to pay interest on your properties, effectively turning all your real estate assets into liabilities? Where did we get the idea that banks were the only ones who could provide the function of banking in our society?

You can be your own source of financing – you can rid your financial portfolio of your banker and provide the function of banking yourself.

How? The answer may shock you. I’m talking about a modernized form of dividend-paying whole life insurance. It works like a source of capital, a bank, to provide a guaranteed pool of money liquid and available for whatever you need. The funds you accumulate in your life insurance grow safely and predictably every year, guaranteed – no matter what’s happening in the stock market. You can use the equity in your policy like a line of credit to yourself – and you have complete control over how, when and if you pay your money back to your policy. You are in complete control of the entire process.

When most people see the words: whole life insurance, their mind turns off. Mine sure did! I was taught to avoid whole life insurance even in my earliest days as a financial planner. Since then, I’ve come to see how useful and valuable a properly structured, dividend-payingwhole life policy can be, when issued from a mutual life insurance company that offers non-direct recognition loans. This vehicle helps my clients overcome the inertia of opportunity cost, accumulate a powerful warchest of capital, and deploy liquid capital for their real estate ventures.

It matters where your money lives. As a CERTIFIED FINANCIAL PLANNER™ I have investigated nearly every financial strategy available to investors. Well over 400+ products are available and tens of thousands of uses of those products have been hocked and sold to folks looking for that golden goose that will just help them sleep better at night. Financial pundits and Wall Street advisors will tell you that whole life insurance is the devil, and while I’m sure I’ll be ostracized by mainstream financial advisors for saying this, I think every person should at least KNOW that becoming your own source of financing through a properly structured whole life policy is an option worth investigating for yourself. Besides, if mainstream financial advice got us into the mess we are in, maybe it’s time for a new way of thinking!

We’ve had two major market crashes since the year 2000. Do you think another one will happen in your lifetime? Do you want your reaction to the next market crash to be the same as the last one? If you’d like to not only protect yourself from the next recession, but actually anticipate and take advantage of it, prepare for it now by doing what the banks do, not doing what they tell you to do. Banks purchase a huge amount of life insurance to run their businesses. Prepare by becoming the banker by using a form of capital that banks themselves take advantage of (Google “Bank Owned Life Insurance” to see what I mean).

Imagine we’re in the middle of another financial calamity. Everyone is seeing their 401(k) values drop and real estate prices are plummeting. Your friends are nervous about losing their jobs.

But instead of fear and instead of begging a banker to lend you his umbrella, you’ve established yourself as your own source of capital, using the cash value in your properly designed life insurance policy. You’re in control. When you see the real estate values crashing, instead of fear, you see opportunity. You borrow from your own policy’s cash, and within 3-5 days your policy’s cash value is direct deposited into your bank account and you’ve got cash at closing. No tax obligations, no government red tape. You are in control.

With this kind of leverage, the kind of leverage you own, you can borrow from your policy and still have it earning interest as if you did not take the loan. You read that right. That’s a rare feature often misunderstood and overlooked by most insurance agents. And when it’s properly implemented into a policy, you overcome the biggest hurdle in the financial universe – opportunity cost, and giving you uninterrupted compound growth – what has been referred to as the 8th Wonder of the World. You can pay your policy back on your own terms, when and if you choose. Do you think that will make you more or less competitive as an investor? Could this help you with more than just investing? How about buying the stuff of life – cars, medical expenses, paying off debt… which financial situation would it NOT make sense to be the banker?

The only thing better than being debt free is to be the banker. Then you’re the one lending the umbrellas!

There’s more to this than just picking up the phone to call your local insurance guy. Most insurance agents (and certainly most Wall Street brokers) have neverheard of this strategy, and you don’t want to put your money with an “I’ll just Google it” advisor. If you’d like to talk to someone who has been specially trained and authorized to specifically design a Bank on Yourself policy as described above, please contact us at hello@lakegrowth.comor call us at 1-800-962-9141.

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