• Stephen Gardner

Real Estate The Life Insurance Way

Just over six years ago I met an incredible client for the first time. She had her head on straight when it came to business and planning for her future. She only had one problem. She had big dreams and little action to move her towards her dreams but her potential was raw and unrealized.


We did all of our meetings over the phone since she lived in another state. This future client was making over $150,000 a year as an executive. Her capacity to save money was high but her actual savings were low. She loved and trusted real estate, but knew she needed a program she could trust her money in when she wasn't doing a real estate project. After a few planning meeting, it became clear to her that she needed an insurance contract. She could save confidently, grow her money consistently and use it down the road for private loans to herself or to cover a real estate project loan if she died.


I helped her get set up with a plan she felt confident placing $40,000 a year in. After placing $240,000 she had access to around $218,000. As she approached her anniversary date, it was time to make another $40,000 contribution. However, she had had some set backs with work and was only going to be able to come up with $20,000. I told her that was fine because she had faithfully overfunded her plan the first 6 years. She hated the idea of not maxing out her plan.


A few months went by and she came to me and said she had not done a real estate deal in several years but she had come across a project she felt she could be profitable on and she liked the contractor she had found. She told me to do the project she would take a hard money loan of around 15% but should be able to finish in 90 days.


I asked her why she would use a hard money loan at 15% when she had access to almost $200,000 of her own money at 5%? She had totally forgotten about the advantages of being her own source of financing. We spent a couple of days catching her up and she called for the policy loan. She borrowed $100,000 to work on the project.


I did not hear from her again for about 6 months (the project took 180 days, not 90). She called to tell me she had completed the project and sold the property. She had made around $25,000 in profit minus $2500 she owed in interest to the insurance company. During that time her plan had continued to grow on the full $218,000 as if it were all there even though she had $100,000 on loan from the company. So after paying on the loan she had $22,500 left over.



Being the sharp lady that she is, she placed the $20,000 in her plan since she had the space from only paying $20,000 six months previously. Here is a great example of not giving up on your future, being creative and finding a way to move forward with the resources you have available to you. Plus, she again got to work on her true passion without having to pony up 15% interest and got to use her plan for one of the main reasons she bought it in the first place. Hopefully she will start working on the next real estate project soon!


I know I harp on the idea of using properly built cash value life insurance for cars, but once you are ready for the next step, real estate can be a very lucrative way to grow your wealth using your plan. There is a major difference in buying assets that go up in value versus assets that go down in value. You'll come out ahead with both using your insurance plan, but you'll really come out ahead with assets that increase.


I have another client that loves real estate but hates getting his hands dirty. He does hard money lending from his policy and makes sure his name is on the lien in case someone defaults, but he has been earning close to 18% returns for over 5 years by using his life insurance money to also lend out on private real estate loans.


These plans are incredible and the money will be available when opportunity knocks. Both of these clients mentioned took the time to get their policy in place and fund it for a few years before accessing the money to earn in two places at once.

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