Did you know you can use whole life insurance to buy real estate? Not only can you, but there are a lot of benefits for doing so.
Having access to cash is a huge deal when investing in real estate. When you have access to cash, opportunity will seek you out.
You know you’ll need cash for at least the down payment if not the whole property. But where are the best places to storehouse your money?
You need somewhere that has control, fast liquidity, safety, tax benefits, and a competitive rate of return.
Investors use their mattresses, suitcases, bank accounts, money market accounts, retirement accounts, or credit unions among other things to hold their money. Some have their benefits over the other, but they all come with risks.
There’s a reason why smart investors use whole life insurance to buy real estate. And you’re about to discover why.
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How to Use Whole Life Insurance to Buy Real Estate: Your Personal Banking System
Building Your Financial Foundation
Leverage the Living Benefits of Whole Life Insurance to Buy Real Estate
- Liquidity: You’re able to access the cash value of the policy, with no compounding interruptions, whenever there is equity in the policy. May be deposited into checking account in 48-72 hours
- Safety: Not tied to the stock market swings
- Tax benefits: Tax free growth/distribution
- Rate of Return: 3 to 5%, depending on company, base growth
- Dividends: Non-guaranteed but have been paid for over 150 years (Several dividend receipt options)
- Self-Completing upon disability or death
- No market timing concerns.
- Trust available.
- Guaranteed face amount of life insurance
- Non-forfeiture provisions of line of credit against the cash value accumulation
- Creditor protection of some or all of cash value (depending upon state residency)
How to Access Your Cash to Use Whole Life Insurance for Real Estate Investing
Use Whole Life Insurance to Buy Real Estate vs. Traditional Financing
- You set the repayment schedule.
- You can make interest-only payments if needed.
- You can vary payment amounts based on your cash flow.
- There are no prepayment penalties.
- If you miss payments, it doesn’t affect your credit score.
- Fixed qualification requirements based on income and credit.
- Rigid loan terms and payment schedules.
- Potential for rejection if you already have multiple mortgages.
- Lengthy approval processes.
- Interest that builds wealth for the bank, not you.
- Complete control over when and how you use your money.
- The ability to move quickly on time-sensitive deals.
- Interest payments that ultimately benefit your policy’s growth.
- No need to qualify for each individual investment.
- Privacy in your financial affairs.
Creating Your Opportunity Fund
Your whole life policy can function as your “opportunity fund.” This is cash you have ready to deploy when the right real estate deal presents itself.
Having liquid capital available puts you in a position of strength when negotiating.
- You can make cash offers, often at a discount.
- You can close quickly, giving you preference with motivated sellers.
- You can purchase properties that don’t qualify for traditional financing.
- You can act during market downturns when others can’t get loans.
- You can fund rehab costs without separate construction loans.
A whole life policy opportunity fund gives you liquidity while still earning a competitive return on your money until you need it.
Case Study of Using Whole Life Insurance to Buy Real Estate
Long-Term Benefits of Using Whole Life Insurance to Buy Real Estate
As your real estate portfolio grows, your insurance policy continues providing benefits:
- A growing cash value that can be used for more investments.
- Tax-advantaged growth within the policy.
- Protection from creditors in many states.
- A death benefit that can help with estate planning and wealth transfer.
- A source of retirement income through policy loans.
Using whole life insurance to buy real estate isn’t just about today’s investments. It’s about creating a sustainable system for building wealth over time.
Strategies Enabled When You Use Whole Life Insurance to Buy Real Estate
- Charitable remainder income trusts for highly appreciated assets with no capital gains tax due, a tax deduction, and income for the rest of life
- Paydown (sinking fund) / capital transfer strategies
- Lump sum distributions of qualified plan assets with offsetting tax reduction strategies
- Redirection of rental income to insurance contract provisions
- Activation of real estate ownership equity for income streams to investor
Implementation Strategy to Use Whole Life Insurance to Buy Real Estate
To effectively use whole life insurance to buy real estate:
- Start by establishing a properly structured, optimally funded whole life policy.
- Choose a mutual insurance company with a long history of dividend payments.
- Work with a specialist who understands how to maximize cash value growth.
- Fund your policy consistently and substantially.
- Allow your cash value to build to a level that provides meaningful investment capital.
- Use policy loans strategically when real estate opportunities meet your investment criteria.
- Establish a disciplined approach to loan repayment.
The key to using whole life insurance to buy real estate is having your policy properly structured from the beginning. This maximizes cash value growth while minimizing the time it takes to access your money.
The use of one of these policies and the strategies that follow are extremely powerful but need to be set up the right way.
If you’re an investor who would like to discuss these strategies further, schedule a Discovery Call now. You need to be sure to work with someone who specializes in these strategies or you may get hurt financially.