5.25.21 - Gary MacDermid Interview – Naval Officer, Nuclear Engineer, and Real Estate Investor

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It's time for your Personal bank show with Farance Toth, financial literacy educator and speaker, entrepreneur and chairman of the board of Bank Information. Take charge of your financial future with your personal bank. Now here's Farance Tote.

Welcome to the youe Personal Bank Show. And today we have a special guest with us, Gary McDermott. Gary, thank you for being with us today.

Thank you for having me, Ference.

You're welcome. So, you guys, you're in for a treat today because Gary has a very interesting background. And if those of you that have been listening to the show remember we were doing a people of excellence for a while, then kind of COVID hit and it was hard to get people in studio, as you can well imagine. Thankfully, things are starting to come back and we can bring people back in and interview them. So our last guest was John Burley. And Gary, you're our next one. So again, welcome.

Thank you.

All right, so I guess everybody that's listening to the show knows this, that I bring people in a lot of times. Some folks you've heard of, some maybe haven't heard of, but I've gotten to know them through working with them, becoming a client of mine. We work together, and it's not just a matter of I don't look at it as a client situation. We really get to know each other, don't we?

Absolutely.

Throughout the process. And what I was going to say is the key is when I find people I think have an interesting story to tell or some interesting information to share that'd be helpful for everyone, I like to bring them on. So that's why you're here, Gary.

And.

Well, first of all, you started off right out of high school. I was going to share a little of your background first. You joined the Navy, I understand. And you have quite an interesting story about how that all happened.

Yeah, actually, I did join the Navy. And it was interesting because it was not really something that I'd ever thought that I was going to do until the day that it happened. So I do remember it was January of my senior year. I was only 17 years old, which I guess you're legally allowed to join if your parents sign you away. And I was told that I was woken up one morning and my father told me, son, I have some bad news. Not really sure what to expect. He told me that there's no money for college, but don't worry, I have a plan. And so with that, we got in the car. I remember my mother didn't really want to have anything to do with it. She kind of waited. And my father drove me to the recruiting station right on the border of D.C. northwest border, Silver Spring, Maryland. And here he just opened the door, said, army, Navy, Marines or Air Force. And I recommend Navy, but take your pick. And with that, I guess I chose Navy. He told me that you'd get to see the world and. And the rest is history. Joined the Navy enlisted and then was an electronics technician.

You even became a lieutenant commander, I understand.

Yeah, so that was a story in itself. When I was first couple, I was lucky in a couple different ways. Enlisting at 17. And so one of those, I didn't quite see the luck. So I remember there was a time period where during the summer of. I think it was my first year in the Navy that I was on night shift cleaning toilets and bathrooms Monday through Friday. And it was kind of a low point for me. I was there. And I remember getting yelled at one point for failing to see a booger on the side of a urinal by somebody that was only maybe a year or two older than me.

Right.

And at that point I was kind of a little bit frustrated. So I was able to find a way to apply for a. At that time, they had retired. The ROTC scholarship opportunity for somebody that was already in the Navy, but they had a new program called the Seaman to Admiral program. Seaman to admiral, 21st century. And so I was able to get into that program, and I somehow got accepted. And then the rest is history. I got my electrical engineering degree from the University of Washington in Seattle. Great school. Got to see Pacific Northwest and continued on as a surface warfare officer for many years on ships.

Well, as everyone always says, thank you for your service, obviously.

Thank you.

Yes. And what did you like the most about the Navy?

So I guess my father was right. And I did get to see the world. And because of that, I developed an appreciation for different places, different cultures, different foods. So I would say what I liked the most was just the travel, the experiences with different people, and also the food.

And I guess I have to ask, what did you like the least?

That's pretty much an easy one, I think, you know, cleaning bathrooms was not really fun or painting. But by far the thing that I liked the least or that I. That was the least favorable for me was the fact that I was just sleep deprived the entire time that I was in the Navy. On ships, there's few people to do all of the work. And I just remember you have a week of maybe seven days and three to four of those nights I'm up working and still having to continue working during the normal workday. So that is definitely the thing that hits the most is just I felt like I didn't sleep the entire time I was in the Navy.

So you're glad when you retired after 20 years, I understand.

Oh, yeah, absolutely. And so I made it 11 years active duty and nine more years to hit the 20 to get the reserve retirement. But yes, definitely a breath of fresh air.

And so after you retired from the, well, I guess full time service, then you went into electrical engineering, you mentioned. So you got a job doing what?

Right, so in the Navy I worked in the nuclear power program. And so we operated the nuclear reactors on aircraft carriers. And so because I had an electrical engineering degree from the University of Washington, as I left active duty, I was the perfect fit for a consulting company that did design and analysis for nuclear power plants. So I did quite a bit of that around the country.

Okay, and so then you went to work for the federal government then afterwards, is that right?

Right. So after I, we did quite a bit of work designing nuclear power plants. And you know, one of the reasons that I left active duty was because I was always away from friends and family. And there was a point when I was consulting for nuclear power that I had to do. I remember it, I was working on some spent fuel pool instrumentation designs, so some high level designs for instruments in a plant that we were. After the, the Japanese nuclear power plants had the partial meltdowns, we were part of an effort that was strengthening the United States nuclear plants. And so there was a period of time where I had, I remember having to do four conceptual designs for four different power plants in a span of five days. And so that was. That type of lifestyle was starting to remind me of why I left the Navy. And so I did go into working as a transmission planner and then later on in operations providing support for the nation's bulk electric grid. So that was another continuation of my engineering career.

So in other words, we're sitting here talking to a really smart guy. He's an electrical. Yeah, yeah, Nuclear electrical engineer. Right.

I think burned out guy might, might be the better way to phrase that.

But so you were working hard. So obviously you got into some. Well, I understand you. Then you got into real estate investing. How did that happen?

Yeah, so actually that was the. I mentioned that there were two special things that kind of happened when I was in the Navy. And one of them was the ROTC scholarship, the Seaman Admiral program. And then the second thing was is that I Was lucky enough that in one of my first months of training right after boot camp, I was in my initial A school and there was a master chief there that gave me some advice that I didn't realize would be one of the defining pieces of advice that I'd ever received in my life. And that was buy real estate everywhere that you get stationed. And so joining at such a young age, it took a little bit of time, but at 21, I was able to have finally figured out how to save enough money to do that. And I did continue to try to buy pretty much where I was stationed. I even bought some property overseas. And that was how I got into real estate investing.

Isn't it amazing that as we go through life we hear a piece of ice, like you said, from that master chief and at the time, like you said, had no idea that that would be so life defining?

Yeah. And just looking back at it, no clue at all. Definitely would have done a lot of things differently had I known what I know now.

Right. So do you still have some of those properties that you purchase while you were stationed around the world, literally?

Well, actually, no, I don't have those properties. Not that they were necessarily bad properties. It was just that as I decided to start taking real estate more seriously, when I looked at transitioning from an engineering lifestyle, I found that there were some. There was a learning curve and some things that I really could have improved upon in the way that I was acquiring these properties. And so to make a long story short, I divested myself of those and used some processes like the 1031 exchange to defer the capital gains tax to buy some really aggressive, good high return producing high income producing properties. So basically taking something that was barely producing income, maximizing the return, and now focused on passive income is basically the switches that I've made.

Excellent. And those for those of you that don't know what a 1031 exchange is, it's actually IRS code 1031 and it's a tax. It's a. It's a. The ability to transfer one piece of real estate to another. A like for like is how they call it. Something where it's a value the same or more than what you're divesting of. And you can transfer the ownership of one property to the other without any tax implications. Right, Gary?

Absolutely. One of the greatest inventions that I had heard of, even more so than some of the engineering ones that I'd seen.

Not paying taxes is generally a good thing if you can do it legally.

I think deferring is the word that we're using, right?

Technically, yes, that's correct. Deferring your taxes can often be a good thing, by the way, and many of our listeners hear me talk about this all the time. In the life insurance world, there's something called the 1035 exchange. It does the same thing. If you have cash value in one policy, you can convert it to another without any taxable event and you're really accomplishing the same thing that Gary was just explaining. You're moving from a lower return policy to a high cash value policy like we talk about, you know, through your personal bank show and your personal bank program. And so I do a lot of 1035 exchanges, Gary, with folks helping them do accomplish the same thing you do with real estate, moving from lower return, lower profitability to higher return, higher profitability. It's the same thought process, same tax process. So by the way, if anybody's listening and has a policy maybe and they want to look into how it could increase, how they could increase their returns, by all means contact us at your personal bank.com and be happy to talk to you about it. But right now I'm here to talk about to Gary. And before we go into our next segment, I'm going to really encourage you to say stay tuned because we're going to talk about some more things about how Gary learned about the your personal bank concept, what he initially thought. Folks, it wasn't good. Just a little hint, but if you do real estate investing now and you work with partners and liquidity, I mean financial partners and all that type of stuff. I understand. Is that correct?

Yes, absolutely.

How would they, if somebody was interested in looking into investing in some real estate or maybe even working with you on that, how would they contact you? Gary?

So easiest way would be LinkedIn. I'm on there. Gary McDermid, M A C D E R M I D and also you could call me, text me 602-926-1850 definitely. Always looking to, to help or talk to anybody that's got like minded and has the same interests.

Excellent, excellent. So like I said, I'm going to encourage folks to stay tuned because Gary's going to be sharing some more ideas and thoughts about some of his successes and maybe failures with the real estate investing and with the your personal bank tool also and how the two combine with each other. So again I encourage everybody to stay tuned. And one more time before we have to go, Gary, how do they get in touch with you?

Yeah. So LinkedIn, Gary McDermid or call me, text me 602-926-1850.

Excellent. Stay tuned. Next segment, don't miss it.

For more information on your personal bank, feel free to contact faranceourpersonalbank.com back to the youe Personal bank show with Ference Toth.

Welcome back to the youe Personal bank show. And we have a special guest with us today, Gary McDermott. He's part of our, what we call our people of excellence. I'd like to bring folks on who, well, frankly, I work with a lot of people with your personal bank concept in helping them structure, reduce taxes, increase returns on their money, maximize returns, gain control, but also oftentimes improve their business, give them business ideas because I've got a lot of business background and I get to know folks really well. And not that everybody doesn't impress me. I like everybody, don't get me wrong. But occasionally somebody comes on that really has a story to share that I think is valuable for everybody. So that's why I invited Gary to share some of his story. So welcome again, Gary.

Thanks.

All right, so we were just, if you missed it, Gary's background, real quick, I'm going to tell you, go back to your personal bank.com, go to our website. You can listen to any of the previously recorded shows. But Gary served 20 years in the Navy, Lieutenant commander, retired electrical engineer, worked on nuclear plants. Really smart dude here. And then he got into doing, got tired of that. You got tired of that lifestyle working so hard, right?

Yeah, yeah. I mean, definitely transition from being an engineer.

Decided that maybe passive income might be an interesting idea.

There's nothing wrong with passive income. And if it's, if you can find a way to replace a salary. That was basically what when I was burned out being an engineer, I was able to focus on so that I could get a little bit more breathing room, so to speak.

And then. So you started investing in real estate, I understand. Yeah.

And that was something that, you know, actually I learned from the Navy because the first couple classes I was got some gold from a master chief that gave the advice buy real estate everywhere that you're stationed or everywhere that you can. And that was how I learned it and then just kind of refined it as I, as I grew.

Yeah, that's very interesting advice. And like you said, life defining for you. So that's pretty, that's pretty awesome. But then as you were looking at, like you said, getting more serious about real estate investing, you started working. Well, with one of our previous guests. We've had on a few times on the show. John Burley. John's a great friend of our show and actually on the. We've served on a bank board together. In fact, I've gotten to know John well. I was doing an interview with John. You heard that interview, I understand. And you reached out to me after listening to that interview, I believe is how we first connected.

Yes, that's exactly right. Yeah.

Now, we obviously sparked some interest in the. Your personal bank concept. But when I was first kind of introduced to you, what was your initial reaction, Gary?

Well, initial reaction was my whole life I've always thought of insurance salesmen as a skill scammy and that I never would need such a product, especially those fancy ones that nobody can seem to ever understand, like the universal whole life. The whole life and index this and all that. So that was my initial reaction, was, oh, that's what this is about.

And it can get quite confusing, unfortunately. And that's why one of the things I have always tried to share over the years is I don't look at myself as an insurance agent per se. I'm an entrepreneur myself. Many of you listen to the show, know I've owned several businesses and in the process of working on starting opening a bank even. But, but yeah, I can get, I think, I think the financial industry makes a mistake in making things more complicated than they need to be and then confusing people and get, you know, and get folks, you know, counting on their expertise, quote, unquote, instead of just educating folks, helping them understand how something works. Because, well, frankly, most of us, this stuff's not that complicated. And Gary, you know this about me. I've gotten in trouble with other advisors, have been not happy with me because I, well, what are you doing? You're giving away the secrets. I'd rather you be educated, understand what you're doing. So obviously we met, we talked about the personal bank concept in terms of maximizing cash value, setting up the bank line of credit, accessing the funds and keeping the difference, getting the positive arbitrage. So once you started really looking at it, what did you see?

Well, so me being an engineer by trade, I like to overanalyze things. And so especially coming from the nuclear power field where I have to be a subject matter expert in anything that we do or touch or design, I really picked these things apart. I did a lot of independent verification. I talked to other people that were experienced and had been doing this for a while and, and the more that I learned and understood the way that Ference would be Setting up or sets these things up, I started to appreciate this as a vehicle for cash, for using the cash value to maximize returns in a couple different places. And so with it coinciding with me losing my sgli, as I was retiring from the Navy, I was in need of life insurance. And so it just turned out to be that this was the reason that I looked into it. And then I looked into it, I vetted it. And being somebody that focuses on passive income and providing and maximizing returns on investment portfolios, I was excited that this is actually a pretty unique structure. And so I basically signed up and got a couple of these and we'll probably be doing a little bit more here in the future.

Absolutely, yes. I remember we had a number of conversations over a period of time, and I think it was like you said, it was something, well, I need some insurance. And I said, well, if you could obtain some insurance to take care of the death benefit protections for you and your family and your business, yet at the same time grow cash and create positive arbitrage, would that interest you? And obviously it did, yeah.

You can't beat passive income arbitrage and cash flow.

And that's why, like we were talking even before, where literally you combine the two. A lot of my clients, investor clients, I should say, are real estate investors. And they seem to understand this. They pick it up maybe quicker than anybody because you guys understand money, you understand arbitrage, you understand leverage.

That's right, exactly.

So when. So you're. So now you're a full time real estate investor.

Yes.

So what? And I always say this when I talk to folks, you know, when we talk about real estate investor. Well, gosh, that could mean a whole lot of things. I mean, you could be single family, multifamily, commercial, buy and hold, fix and flip. What is it? What is your niche? What's your specialty?

Yeah, great question. So actually there's, there's two niches that we're involved with primarily for producing passive income. So safe, reliable passive income is what we focus on. And the two niches would be single family residential portfolios. And what we do on this portfolio side is we basically will purchase the real estate, but we'll do it in such a way that we offer it to a family that really wants to own their own home, but doesn't quite have the credit. So we're able to provide the home under a lease option. So that way we can still have cash flow in the rent above the mortgage payment. And so we're focused on providing those portfolios, but also helping people on the road to home ownership. And then the other niche is vacant land. And so what we're doing with vacant land is we're purchasing the land and then we're also offering terms so that somebody that wants to buy land, whether it's for their dream home or retirement place or even recreation, camping, hunting, et cetera, we will provide the financing for that. So if they don't have all the cash, then we'll provide financing since a lot of the banks do not lend on vacant land. And then lastly, we've expanded on this vacant land and as the prices, the home prices are getting very high in urban areas like in Phoenix, we're doing land home packages now where we can have the land, but this time we're able to either get a new, a brand new manufactured or a tiny home to put that on the land as a package so that we can help provide housing for in lower price points to make it more affordable.

Excellent. So if somebody was interested in either investing with you or maybe purchasing land or a property, how would they contact you? Gary?

Right. So the best way would be I'm on LinkedIn. So Gary McDermid, M A C D E R M I D or you can give me a call or a text. 602-926-1850 all right, folks, stay tuned.

Next segment, we're going to talk about this further. We'll let Gary share more of what he does and so don't miss it.

For more information on your personal bank, feel free to contact ferenceourpersonalbank.com Back to the your Personal bank show with Farance Tooth.

Welcome back to the your Personal bank show and we have a special guest with us today, Gary McDermott. So Gary, thank you for joining us.

Thank you for having me.

It's been awesome. So we're having fun. We've been telling, telling a little bit of Gary's story where he came from. Of course, serving in the, serving the Navy for 20 years, electronics technician, worked with you harden nuclear reactors.

I understand we hardened the designs and protections for nuclear power plants after the Fukushima event so that we could be better prepared.

That's excellent and thank you. As an engineer, he corrected me on that. He we got a smart guy here. He does some stuff I would have no idea, wouldn't have the first clue about. Okay. But that's like anything we all learn, we learn. We learn our specialties, our expertise or whatever it is. Right, Gary?

That's right.

Yes, exactly. And then of course, what you Kind of got tired of the engineering lifestyle, as you mentioned the previous segments, and got into real estate investing.

Right, right.

And then you do a lot of that type of stuff now. So you were, you were mentioning your. I found the last segment was kind of interesting where you're talking about, in essence, becoming the private lender for land and properties, like with small houses, is that correct?

Right, yes, that's what we do.

So if someone was interested in, say, purchasing some land or land with, like I said, a tiny house, manufactured home, that type of thing, what's involved with that? What's the process?

Right. So basically, and this is something we just started doing this year, we've been doing land acquisition for quite some time, but when it's getting difficult right now to purchase homes in an affordable price range. And also the price of a lot of the materials is pricing a lot of these new homes out. Right. What we're doing is, is we're taking what we've already done well, which is acquiring land at good prices that we're able to sell on terms to provide the private financing. But then we're, we're partnering with manufacturers of tiny homes and even manufactured homes so that we can put these two together as a package.

I see. So you're stepping in the role of what the banks used to do.

I guess you could say that I don't know too much about the banking side, but I'm starting to learn, yes.

As a private lender, in essence, like you said, trying to. If anybody's looked into purchasing land on terms or building even these days, it's very difficult to find a lender to offer financing for that.

Yeah. And so that's how we do get a lot of our business is somebody would want to buy some land and the banks just typically tell them no.

Right, right. So if somebody was interested in purchasing land and maybe getting financing or whatnot, how would they contact you? Gary?

Yeah, best way would be on LinkedIn. Gary McDermid M A C D E R M I D or just call or text. 602-926-1850 well, this is going out to.

A bunch of folks, so I'm sure hopefully your phone will be ringing and you also, of course, are, you know, have become a client working with the, your personal bank concept. And obviously it kind of fits glove in hand, so to speak, because, well, gives you cash availability and positive arbitrage to be able to fund these, this lending for folks. Is that right?

Yeah, definitely. Some fantastic products that I've learned about that do exactly that.

Yeah. And so one of the things I share with people all the time is, look, somebody like Gary, you could take some money, like you said, lend it out to somebody to get a return, or you can put it into the personal bank policy, access it from the bank line of credit and pick up 2 or 3% positive arbitrage and do the lending that you're doing or the investing or whatever you're doing. And you just increased your rate of return, didn't you?

That's magic.

Yeah, Some people think it's. And in fact, it's gone so well, I guess you've recommended a number of folks to me, haven't you?

Well, you know, when you find something that you really see the value in and you want others to experience that with you, it's a natural occurrence.

Sure. And I guess, Gary, I would ask you, what would you say to somebody like you have the same impression about insurance and insurance agents and things like that, who has that same kind of negative connotation? What would you say to them to maybe make them consider taking a look at this?

Well, I would encourage them to. I could share the research that I've done. And as an engineer, you know that I wouldn't do this without doing an extraordinary amount of research and vetting to make sure that I understood all the intricate details of it. But I'd encourage some of that and then compare notes and then maybe meet Ference. That's what I've been telling everybody else that, that I've. That I know would be a good fit.

And I do appreciate that, Gary. And, and folks, I hope you appreciate, you know, those listening. Getting an engineer, someone with an engineer to really support something like that takes some doing, doesn't it?

Yeah, it took a lot of doing, that's for sure.

It's not something you just jump into blindly.

We went back and forth quite a bit. I definitely, I'd like to think I asked some hard, challenging questions and made you produce some objective evidence.

Well, and folks, that's what I actually enjoy, that kind of thing. I enjoyed our conversations. I don't mind somebody asking questions. In fact, I find it, I enjoy it. Challenging is one thing, but if somebody's asking a question because of genuine desire to learn, that's fun.

I think I remember one time I couldn't reach you and we might have had a run in with one of the compliance folks too.

Well, I'm glad you brought that up because we're gonna have to hit on that on the next segment. So, folks, don't miss it because we're gonna talk about that very thing, and it turned out to be a good story, by the way, so don't miss it.

For more information on your personal bank, feel free to contact ferenceourpersonalbank.com back to the your personal bank show with Ference Toph.

Welcome back to the your personal bank show. And we're wrapping this up with a very special guest of ours, Gary McDermott. So welcome again to the show, Gary.

Thank you again for having me.

It's been fun. We've been having fun doing this and doing a great job. I think this is one of your first radio interviews you've ever done, is that right?

That would be the first one ever, but yes.

Yeah. Okay, so folks, he's done great. He was a little nervous at first, but, you know, it's, It's. It's been fun. So Gary brought up an interesting topic, so we're going to just kind of dive right into it. And those of you that have been listening to the show before know that I've talked about compliance and various things before. And like, I was just sharing with Gary, I have no issue with that because my approach is, again, I don't look at things as from a sales or insurance agent standpoint. I've been a serial entrepreneur my whole life, so I was a business owner when I was first introduced to these personal bank concept and everything. And so that's how I've always looked at and approached things. Right. So when you mentioned compliance, so we had an interesting. So Gary was as well as an engineer with an engineering background. Of course, first looking at this, you had a very negative impression initially about insurance and all that, right? Yeah.

Oh, yeah. Negative.

And then what got you to look into it a little further? Right.

Well, I mean, the biggest need for me was that I was retiring from the Navy and my life insurance policy would terminate. So that was the entering reason to go look for a life insurance policy. And just meeting Ferenc and learning about the different ways that these could be used. I did some extensive research on some of these advanced policies that could be used for cash to maximize the cash value. And that's basically what I ended up pursuing. Right.

And like what Gary's referring to, there's a lot of, you know, there's Iuls, there's whole life, there's index products, there's all types of different things. And as I talk about in the show and if you go to our website or anything, a lot is a lot of people have a misconception about what insurance can do, or I should say a limited perception of what insurance can do, because most people think of it as like terminal, like death benefit protection only. Or they'll see these policies that take, frankly, 10 years, 15 years to really build any cash value in them. And so a lot of people look at it as not a very good place to invest your money. Okay. That's very common. That's probably the number one thing that I have to help people realize. I tell people this all the time, Gary. I've shared this with Gary. You think of in terms of a teeter totter, you put the cash value on one side and death benefit on the other. And what we're doing is we're adjusting the teeter totter heavily towards the cash side. In fact, as much as the tax laws allow, the MEC rules, the modified endowment contract rules allow, makes a dramatic difference in the amount of cash you have available day one and every year. But we had, like you mentioned, Gary, kind of a compliance issue. Sort of came up through some questions when you were vetting this out. So you mind sharing that little bit of that story?

Right. And so life insurance, all the different acronyms that you just heard Feren say get really complicated, especially when you look at tax code and laws and what defines some of these. And as we got pretty far along the path of one of these policies, and for whatever reason, I had thought I had already completely understood exactly the type of policy that I was getting. And then right at the last minute, I second guessed myself mostly as I was sanity checking this with five to 10 to 20 other people just to make sure that Ferenc was guiding me correctly and he wasn't around to answer some of the questions that everybody else had had. And I couldn't quite remember the answer.

Well, I think it was my birthday, wasn't it?

Yeah, it coincided to be his birthday, so I could understand why he did not take my frantic calls and texts and emails. But long story short, I didn't know who else to call. And so I may have, you know, called the insurance carrier and kind of asked the question in a certain way that they did reassure me. But it was just an interesting story because I'm sure because of that he got a friendly call from the compliance department.

Yes. So he called the other side of it. They called me, they said, you have a new client here. I was asking some questions about a MEC or a non MEC and what he had. And I said, yeah, I've already talked by this point. I'd Already talked to you and we cleared things up. The difference folks really were the, the, the misconception, I guess maybe that might have happened is what a lot of people don't realize is you can set these policies up either what we call a front load, that's the term I like to use because I think it's more descriptive. MEC and non MEC means nothing to most people. That's, that's industry jargon, you know, I mean, I'd be no different than Gary starting to talk to me about nuclear reactors. I would quickly be lost within seconds. So I. We use the term front load or multi premium. So if you fund, if you front load a policy where you put most, pretty much most of all, not, not all the money pretty much up front, that's considered obviously front load and you dribble in a little bit later, but you put all the money up front. It's from the MEC rules, it's taxed, it's handled taxed one way versus funding it over time, say over seven, 10 years plus whatever. So Gary did a front load MEC policy and those grow, both grow tax deferred. But depending on how you access them from the different types is how one's tax free. The gains are taxable. But if we access the funds through the bank line of credit, of course when you access them from a bank line, those funds are not taxable. So you get into a situation where if you set up correctly, I just put it this way without getting into a ton of detail, if we set it up correctly, we can set it up so you can grow your money on a tax favored basis, access it on a tax favor basis, and pass it on on a tax favor basis. So fortunately, we got everything straightened out.

Yes, we did, fortunately.

And again, there's a lot of information out there. And one of those things I tell you all the time, you can go online and research about insurance, you can research about all these different things and understand the way we structure these is very, very different to how most people do most people, most policies. And I'm talking about in my career now, 98, 99% of the policies I look at are structured to primarily generate death benefit protection. We're focused primarily on generating cash. And that's what you use well right now, primarily for your real estate business, right?

Yeah, exactly, right. Definitely buying the insurance. What was interesting was when I was looking at buying life insurance, I didn't realize that I could actually buy cash with the collateral benefit of life insurance. So that was a unique thing. And I'm glad that I learned about this tool.

Yeah. So as I tell people all the time, you have a choice. You can take your money and invest it or spend it or do whatever it is you do, or you can put it in the policy, access it through the bank line of credit and invest it or spend it and pick up some positive arbitrage.

Definitely can't beat that if you're in between deals and you need a place to park some cash until you need it again. This is basically what made this an attractive tool.

Yeah. In fact, I talk about this all the time too. As you can imagine, Gary and I were talking. I prior to Covid, I used to speak around the country to a number of investor groups about this very topic. And you can imagine with a number of people that I've spoke to, I get approached about investment deals all the time. And I tell people up front I'm one of the hardest people to convince. I'm one of the worst because, well, frankly, if I do nothing with my money. If you just let your money sit, you're making 5, 75 dividends right now. Right.

I don't even want to know. I try to get rid of most of those and put them in better vehicles.

Right. But my point is, if you do Nothing, you're making 575 guaranteed and tax free.

Oh, right. With the new policy.

Yeah.

Yeah. So prior to that I thought it was like 0.575 or something.

Yeah, yeah. So one of the challenges a lot of business entrepreneurs have, real estate investors and such, when you're in between projects, in between deals, your money's sitting there doing nothing.

Right, right. I think we're at 6.1 though. I think on the ones that were.

Yeah, yeah. So. So my point is, rather than just sitting there doing nothing, might as well make 5 or 6% dividends.

Right, exactly. So that's basically what I learned is just in line with my personal bank. I mean, that's essentially what it is. I'm able to put something in my personal bank, make the higher returns, and then just use it like I would a bank without having to suffer from point, whatever it is, returns.

And I run into that all the time where I see people sitting on chunks of money or cash or emergency funds or whatever, which, you know, look, we all need emergency funds, obviously, but nobody ever said it had to sit in a bank or earning no interest.

That's true.

It just emergency funds, basically. Gary, as you've heard me say all the time, they need to be safe and they need to be liquid. That's it.

And I did like how easy it was, how liquid it was. I mean, got my own checkbook and everything. So really all the bank features are right there.

Exactly. And I'm glad you brought that up, Gary, because I get asked that all the time, is how easy is it to access my money? You're setting up a bank line of credit. Have you ever worked with a bank account? Like you said, you have a checkbook if you want, it's literally that easy. Or pay bills online or whatever. But you're working with an FDIC insured bank.

Right, Right. Very, very easy.

Yeah, super easy. And qualifying for these loans, super easy.

Yeah, that was easy too.

Yeah. Matter of days and the paperwork is very minimal. All that kind of good stuff. So I guess the last thing I really want to touch on before we run out of time, Gary has an interesting thing coming up. He has a charitable event or charitable project coming up. Mind sharing with us a little bit about that?

Yeah, certainly. So like we talked about before and the missions on our real estate investing is we're trying to provide opportunities for homeownership to those in need. And one of the things we're looking at doing with my partner, that is a manufactured home dealer, is we're looking at finding a way to donate one of these homes to a charity or nonprofit organization in the near future.

Neat. Neat. So do you have some needs in that area that you're looking for to be able to accomplish this?

Exactly. So what we'd like to do is to find and work with some charities or nonprofits in the Phoenix area that are housing based that might be interested in working with us to create a fundraiser and also donate one of these homes to somebody that has sort of been as a part of that nonprofit organization that would be a good fit.

So bottom line is you're willing to donate a house to somebody in need.

Exactly. That's the best way to put it.

There you go. So folks, if you are involved with a charity like Gary's mentioning, that's involved home related, I guess, or know of somebody, how would they reach you? Gary?

Yeah. So easy way would be on LinkedIn. Gary McDermid, M A C D E R M I D or just call or text 602-926-1850.

Excellent. And I understand you even have a goal of doing this ongoing, like even quarterly, I think you said.

Right. So it's definitely in line with our mission. We have not yet done it. So I'm hoping that we can do this fairly soon. And then if everything works out great, then I would like to do this on a quarterly basis or as often as we can.

Excellent. Well, folks, seriously out there, reach out to either contact me at your personalbank.com or reach out to Gary because if we do this, we'll bring Gary back on, we'll advertise it on the radio and, and we'll have event and hey folks, let's see if we can give a house, give away a house to somebody in need. That'd be a pretty cool thing, don't you think? That'd be a lot of fun. Well, again, we're kind of running out of time here. It's been an awesome interview today. I really appreciate you joining us, Gary. I love your stories from the Navy and the engineering stuff you've done and real estate and how you've kind of evolved and grown over time and learned new things. That's really awesome. Any last thoughts that you might want to share with somebody who again, maybe an engineer background, somebody you know, engineering background or that kind of thing in terms of any recommendations you would give them?

Well, I guess, you know, my story was a little bit different in that I kind of just enlisted at 17 and was pretty much just following orders my whole life. And me becoming an engineer was sort of just a byproduct of being an electronics technician and then doing the nuclear design was because I worked in nuclear reactors. But as far as advice or just things in general, maybe it's just best to just recommend any listeners that might relate to just being sort of trapped following orders. I was recently in an Amazon prime show called Speak up where I basically kind of tell the story about how I the topic of the show is the speech that I do is set your goals or someone else will. And really what that is is my whole life I was following goals that were set by commanders in the Navy or vice presidents that were engineers. And so with that, it's on Amazon Prime. Just search Speak Up Season three Episode four and that would be my advice to help people to set their goals.

Awesome. Gary, thank you for joining us again. And as always, stay tuned to the youe Personal Bank Show.

Thanks Ference.

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