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

So where could I storehouse my cash for the greatest and best use for that dollar? One of the best places you could store money is probably one of the last places you will think about. Participating whole life insurance. This product is one of the most misunderstood financial products in America, and one of the oldest. Even older than the United States. This type policy is not just for death, but for life. When you own one of these policies you need to understand the living benefits it provides you as a real estate investor. It allows you to store cash in a place that you have easy access to. It also unlocks illiquid assets for your use and enjoyment today. In a participating whole life policy, you have your death benefit and your cash value. Your cash value is where you would storehouse your cash. Dolf De Roos is a famous real estate investor. He has said that permanent life insurance with high cash value is the ideal vehicle for real estate investors. That is because it is the most similar product to real estate. Only a few people in the country specialize in properly applying modifications to the policy to enhance the cash value, without negative impacts. Where my team shows how to have cash as early as the first year, when you work with a traditional advisor you won’t see cash until the 15-16th year.

Building Your Financial Foundation

Properly structured, optimally funded whole life insurance serves as an excellent foundation for real estate investors. By storing your money in a whole life policy, you create a personal banking system. This allows you to access capital whenever real estate opportunities arise. Unlike traditional banking where you must qualify for each loan, your personal banking system gives you control over your capital. Once your policy is established and funded, you decide when and how to use your money. This is done without credit checks, loan applications, or bank approval. This is why smart investors use whole life insurance to buy real estate.

Leverage the Living Benefits of Whole Life Insurance to Buy Real Estate

The death benefit of your policy is what’s paid out to your heirs upon your death. Living benefits are those you can access while you’re alive. Some of the living benefits of whole life insurance for real estate investors include but are not limited to:
  • 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

By using whole life insurance for real estate investing you are able to recapture many areas of lost opportunity costs and expenses. You are able to access the cash through withdrawal, surrender of policy, or loan against the policy. The most advantageous strategy for real estate investors is to loan against the policy so there is no interruption in growth of cash. When borrowing against your policy, you’re not actually removing money from your policy. Instead, you’re using your cash value as collateral for a loan from the insurance company. This creates the remarkable benefit of uninterrupted compounding. This means your cash value continues to grow as if you hadn’t borrowed against it at all. For real estate investors, this means you can use your money to purchase properties while still earning dividends and interest on the full value of your policy. It’s like using the same dollar in two places at once.

Use Whole Life Insurance to Buy Real Estate vs. Traditional Financing

Another significant advantage for real estate investors is the flexibility in loan repayment. When you borrow against your policy:
  1. You set the repayment schedule.
  2. You can make interest-only payments if needed.
  3. You can vary payment amounts based on your cash flow.
  4. There are no prepayment penalties.
  5. If you miss payments, it doesn’t affect your credit score.
This flexibility is invaluable when using whole life insurance to buy real estate. It allows you to adjust your financial strategy based on property performance, market conditions, or unexpected expenses. Traditional bank financing for real estate typically restricts your options. It comes with:
  1. Fixed qualification requirements based on income and credit.
  2. Rigid loan terms and payment schedules.
  3. Potential for rejection if you already have multiple mortgages.
  4. Lengthy approval processes.
  5. Interest that builds wealth for the bank, not you.
Using whole life insurance to buy real estate gives you:
  1. Complete control over when and how you use your money.
  2. The ability to move quickly on time-sensitive deals.
  3. Interest payments that ultimately benefit your policy’s growth.
  4. No need to qualify for each individual investment.
  5. 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.

  1. You can make cash offers, often at a discount.
  2. You can close quickly, giving you preference with motivated sellers.
  3. You can purchase properties that don’t qualify for traditional financing.
  4. You can act during market downturns when others can’t get loans.
  5. 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

Consider a real estate investor who funds a whole life policy with $50,000 annually. After five years, the policy has accumulated over $275,000 in cash value. The investor identifies a multi-family property priced at $1 million and takes a $200,000 loan against their policy for the down payment. The property generates enough cash flow to cover the interest payments on the policy loan while also providing positive monthly income. Meanwhile, the entire $275,000 cash value continues growing uninterrupted within the policy. After holding the property for seven years, the investor sells it for $1.4 million, repays the policy loan, and now has both the increased cash value in their policy and the profits from the real estate sale.

Long-Term Benefits of Using Whole Life Insurance to Buy Real Estate

As your real estate portfolio grows, your insurance policy continues providing benefits:

  1. A growing cash value that can be used for more investments.
  2. Tax-advantaged growth within the policy.
  3. Protection from creditors in many states.
  4. A death benefit that can help with estate planning and wealth transfer.
  5. 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

Once you are older and your estate has grown to a large size, the same need for the life insurance is probably not there. Your life insurance will then become asset insurance. By having a 1/1.5-to-1 ratio of asset insurance to assets, you are able to open up strategies for retirement and death. This contractual guarantee will allow you to activate income streams from assets that previously remained dormant due to excessive taxes, or illiquidity. The following possible strategies become available risk-free to the real estate investor and the beneficiaries of the strategies:
  • 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:

  1. Start by establishing a properly structured, optimally funded whole life policy.
  2. Choose a mutual insurance company with a long history of dividend payments.
  3. Work with a specialist who understands how to maximize cash value growth.
  4. Fund your policy consistently and substantially.
  5. Allow your cash value to build to a level that provides meaningful investment capital.
  6. Use policy loans strategically when real estate opportunities meet your investment criteria.
  7. 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.