REAL ESTATE INVESTORS
Infinite Banking is a great fit for Real Estate Investors. They need to store cash, need to be in control of their money, need easy and quick access to their money, and already feel they pay too much tax. They want maximum flexibility on their deposits and repayment terms, and they realize their best investment is going to be another property. They can’t have there money become stuck, they need to be able to deploy when they find the right real estate deal.
Real Estate investors understand the importance of their money doing more than one job. If we look at typical financial planning where you invest in stocks, bonds, and mutual funds, your money hopefully does one job – appreciates. Thats it, only one!
Now let’s look at Real Estate investment and the various jobs your money can do for you.
1. Equity – By purchasing right or having great negotiating skills you can purchase below market value and have equity in a property on day one you get the keys. When was the last time you were able to buy stock below market value?
2. Leverage – The bank lends you the money to buy the real estate for an interest charge, but you get to keep all the other benefits. This can magnify the investment return you receive. Because real estate is a tangible asset and one that can serve as collateral, financing is readily available.
3. Cash flow – Many real estate investors agree that the cash flow generated from their investments is the most beneficial aspect of real estate investing. After you cover your expenses, anything above is positive cash flow. This means it can help supplement or even replace your income using your rental properties.
4. Principal Reduction – Your tenants are the ones paying down your mortgage balance every month helping you build equity. Equity is an asset that is part of your net worth. As you build equity, you now have the leverage to acquire additional rental properties and increase your cash flow.
5. Tax Advantages – This is a major reason why many choose to invest in real estate. Real estate allows you to deduct direct expenses like property tax, insurance, maintenance, repairs, and advertising to name a few. Also, when you sell a property for more than you originally purchased it for, the profit will be taxed as capital gains, which is typically a lower tax rate than ordinary earned income.
6. Appreciation – While the stock market can have its up and downs, housing values generally rise over the long term. Although there are certain periods when the market value goes down, over the long term, real estate, in general, appreciates and goes up in value. This makes real estate an attractive investment as it can be a safe store of wealth.
7. Refinance – Many investors choose to refinance existing properties in order to buy more properties. One of the easiest ways to grow a large portfolio is to access existing equity to buy more property. Refinancing if done to invest wisely, it can produce more cash flow as well.
8. Improvements – Real estate investments are directly under your control. Though you can’t control demographics, or acts of God, you can control many things relating to the physical property and tenants. With good management of your overall real estate portfolio, you can tangibly improve the value of your investment and build wealth.
9. Inflation Hedge – Real estate, in general, is a good hedge against inflation, rental properties that are re-rented every year are especially effective since monthly rents can be adjusted upward in inflationary periods. For this reason alone, real estate is one of the best ways to hedge an investment portfolio against inflation.
10. Portfolio Diversification – Real estate is a tangible asset that can be monitored through renting or residing in it, regardless of financial market conditions. This makes it far more resilient against asset market swings compared to traditional stock, bonds, and mutual funds.
You can see why real estate investing has created so many millionaires. Even if the real estate market suffers from a bad year, you still have several ways to earn a profit. Now let’s combine this strategy with Infinite Banking. What happens if you put your cash inside an infinite banking concept policy first, and then borrow it to use for real estate?
Your Money Is Doing More Than One Job
1. Uninterrupted Compound Growth – Compounding is a simple investment strategy in which you put your money in an investment that pays interest. At the end of the year, you take the interest you earned and reinvest it with your original amount. Now your interest earns a return, as well. The next year, you’ll get a bigger interest payment. Then, you’ll reinvest that payment, and so on… This happens regardless if you make policy loans.
2. Death Benefits – While it may not be the primary focus of infinite banking, but if you die early, your family with get a tax free payout. With other finance options like TFSA or RRSP’s, you do not get a payout in case of death. And you do not even have to wait for a certain period; you will have that right from the day one of the policy.
3. Tax Free Wealth Transfer – It’s not just taxes that can deplete a legacy, legal fees, probate fees, greedy hands, and the costs associated with delays can reduce your legacy. Proper wealth transfer planning can ensure a much larger legacy with minimal delays, problems, and legal battles. The efficient transfer of wealth should be part of a properly planned estate. Because this is an insurance product it can transfer to your beneficiaries tax free and help avoid these problems.
4. Unstructured Policy Loans – When you borrow using your policy, you’re borrowing money against your life insurance policy. Since you’re lending yourself money, you don’t have to stick to a structured repayment schedule. You have the ability to make payments how you want, when you want or potentially not at all.
5. Creditor Protected – Traditionally, life insurance products have been given special protection against the claims of creditors under provincial legislation. The legislation, which is fairly consistent across Canada, is intended to protect the rights of the beneficiaries under the contracts. Your money can be protected regardless of what happens in your life if set up correctly.
6. Terminal Illness Protection – This benefit gives you access to some of your life insurance proceeds when you have been diagnosed with a shortened life expectancy. The accelerated death benefit rider is a common policy add-on and is often included in your policy at no extra cost. This money can be used toward medical expenses and can alleviate any financial burden on loved ones during your final years.
When you deposit money into your Infinite Banking plan and then borrow the money to buy real estate, you can have uninterrupted compounding for the rest of your life.
Albert Einstein is said to have called “the power of compounding numbers the most powerful force in the universe.”
Now you have the perfect place to store money so you never have to pay tax on growth. You are operating as your own bank, and you are in control. Additionally, the death benefit attached to this plan may enable you to leave all your real estate holdings to your family, because you will receive a very large tax free check right at the same time you receive a very large tax bill on the real estate growth at death.
Infinite Banking is the perfect tool to complement Real Estate investors, which is why some very large policies are sold in Canada to real estate investors and their families.
Using infinite banking as part of a real estate wealth building strategy is an excellent way to protect your hard earned money. It also provides an excellent tax advantaged vehicle and true compound growth with guarantees that typical savings accounts lack.
