IBC with Real Estate Part 2

Key Takeaways

Buying a property with money you’ve saved up seems admirable—but it’s not the smartest use of your cash.

There’s a better option for storing your “safe dollars” in a tax-deferred manner that earns well above bank rates.

Infinite Banking provides you with a guaranteed financing arm in which you control the terms and protect your family if you pass away prematurely.

From single family to multifamily and everything in between, real estate prices are soaring across all zip codes and price ranges. But, even with today’s low-interest rates and lofty valuations, even patient buy-and-hold investors like you can find they have tons of money stuck in property they cannot easily access.

Sure, you have tons of equity built up, but what does all that equity earn? That’s right. Zero!

Shouldn’t there be a better way for disciplined real estate investors to keep their money working for them all the time—not just when they’ve exited an investment?

There is. It’s all about using other people’s money (OPM)—not your own—to finance your real estate investments.

First let’s think about how you buy single family rental properties, for instance. You work hard to save a bunch of money in your bank account. That money is liquid, but unfortunately, it’s earning essentially nothing in today’s low-rate environment. This creates some serious opportunity costs as your dollars won’t even keep up with inflation over time.  So, you use that money to make a big down payment on the property and you lever the rest. Congrats. You own the property. Unfortunately, you have thousands of dollars of equity stuck in that house that can’t be utilized elsewhere.

Fortunately, there’s another way that doesn’t tie up your cash, that pays you 4% to 5% on your money while it’s parked and allows you to control the loan on your terms—not the lender’s.

Sound too good to be true? It’s not. It’s called the Infinite Banking.

As I mentioned in my earlier post, “Be Your Own Banker While Creating Generational Wealth With Real Estate”,  Infinite Banking is a strategy that uses uniquely designed cash value whole life insurance policy that essentially allows you to become your own banker. Your dollars earn uninterrupted compound interest in a private, tax-advantaged account earning well above bank rates.

You’re also guaranteed to be able to use the life insurance company’s money as a loan with terms and payback schedules that you dictate—not the banker. There is no application process to manage and no credit score to check.  And since IBC is life insurance, you get the added benefit of a tax-free death benefit to support your family and/or business in case of your untimely death.

Infinite Banking is NOT whole life insurance, by the way. Infinite Banking is a process and strategy to optimize how you finance everything in life.  Given the guarantees within these types of policies, your cash value only goes in one direction…up.  Meanwhile, you have a built-in line of credit that collateralizes your cash value that is accessible whenever you need it with terms you control.

Benefits of IBC for long-term buy and hold rental properties

By utilizing Infinite Banking for your investment purchases the investment performance of your cash will go up substantially. It’s not uncommon to see returns in the 9% to 20% range. You also face less risk since you have less true equity in the property at risk of lawsuits. Also, there are substantial tax-free dollars available to help pay for any outstanding debts in the case of a premature death. Finally, Infinite Banking allows you to avoid the opportunity cost of using your own cash.


Real world example

Let’s assume you purchase a $100,000 property with a $20,000 down payment (disregarding closing costs). The down payment could be either in a 1% savings account or in a 4.5% whole life policy that grows tax-free. After obtaining a conventional Fannie Mae loan for 80% of the purchase price, you borrow the down payment from the insurance company in the form of a completely unstructured loan. There is no qualification process. There are no repayment requirements. It takes just a few minutes to complete the process.

By doing so, you have increased the “velocity” of your money since your capital is performing several vital jobs at once:


  1. It serves as collateral for a loan on a rental property that provides passive income and a host of other benefits;


  1. It grows tax-free with the annual crediting of guaranteed interest and dividends;


  1. It provides a death benefit (insurance) that ensures your family can pay off the real estate bank loans if necessary if you pass away prematurely.


And since very little of your own money has been invested in the property, you are substantially reducing your risk of being sued (in most states), while freeing up your money for other high-return investments. Putting substantial personal equity into any asset–especially one used by other people when you are not present–is not only inefficient, but it makes your asset a target for fraudulent lawsuits.

Additionally, assume that a conservative $107 net cash flow is used to either refill your savings account after it is emptied to make the down payment, or it is used to pay off the policy loan over 30 years (you can do it over any timeframe you choose).

After 30 years, your savings account has grown back to $43,000, yet the scenario in which a policy loan was used and the $20,000 remained, it grows tax free inside the policy. That money has paid off the loan and the original $20,000 has grown to $77,000 over the same period. In this example, it was a $34,000 mistake to use cash.

The house is sold at the end of 30 years without the use of a beneficial 1031 tax-deferred exchange. As a result, all taxes are already removed from the profits shown (capital gains and recaptured depreciation). I highly recommend making use of a tax-deferred exchange but used this approach to go from all cash at the beginning to again all cash at 30 years.


As a savvy and disciplined real estate investor, IBC can provide a better option for storing your “safe dollars” in a tax-deferred manner earning well above bank rates. It also provides you with a guaranteed financing arm in which you have flexibility to control the terms and provides additional resources tax-free in the case of a premature death to provide for your family, pay off debt, and allow for your businesses to continue operating.