Flipping Houses In Canada

It doesn't take away any of your options. In fact, you're able to scale and grow. And they were able to buy two assets now, one from policy Loan, one from bank heloc while all their cash was still growing in the policy uninterrupted. Imagine the potential in just that. And this is The Unseen on IBC.

I call this a tale of JV partners. So Philip and Manish were two JV partners. Philip is an engineer. He's age 38. They both married. So Philip's wife, she's 39 years young. His daughter is age three. Manish is a project manager. They happen to actually work at the same company. That's how they know each other. Manish is age 39. His wife is age 36. But Manish has a daughter and his son. So just an intro on the two of them investing. They've been investing in real estate since 2012. Most of the properties are joint venture and it's always between the two of them. They have really good income. So they are able to produce income, set aside money and and really buy a lot of properties. The good thing about them as they went through their own education coaching program and then when they met, they were coachable, they were teachable, they wanted to learn more. They weren't suffering with something, as Nelson calls it in his book, called arrival syndrome. Arrival syndrome basically describes an individual who is completely arrived in knowledge and they know everything that there is to know involved. You may actually be knowing someone today who is suffering with stage four arrival syndrome. But Manish and Philip, they didn't suffer with that. They were coachable. Now they discovered IBC in 2016. And again, we want to empower education. Education is key. Investing in yourself to learn anything worth considering. Yes, it's important. No different than how you may have invested your time and energy to learn about real estate investments. It doesn't happen overnight, right? You need a coach, you need education. Now 2016 meeting facts. So they had no life insurance because when as investors and me including when I got started with my own properties, I never focused on this. I just focused on building wealth through real estate. So the focus was never was on life insurance because nobody told me about it. Nobody told me the importance of protecting and the issues that we'll create once we're gone. I don't know about you, but I don't have a lease on life. We all have our best before dates. We just don't know what that date is. You know, financial planning will be so much easier when we know what Our graduation date is, which is a best before date. And didn't we just work backwards to solve for the problem? But the unknown is we don't know when our best before date is. We know that at some point in time to come we are all going to be angels. And we need to solve for that because the last thing we want to do is leave the family behind in more financial issues. So total debt. So they had borrowed money from the bank, about a million dollars to invest into properties. These properties are personally owned. Now Philip's annual income is 120k. Manish is 130k. So great income between the two of them. The passive cash flow from the investment portfolio that they have created so far is about 20,000 per year, which is, which is very, very good. Their ultimate investment goals. So they use some strategies. They flip, they do buy and hold and they do borrow strategy also. But ultimately they want to have enough money coming up, coming out of their assets. They want to build their assets to a point where they can quit the 9 to 5 and work for their assets rather than trading their time. You know we all want to do that. That's, that's one thing that we all want to achieve is financial freedom. Now here is how the IBC journey started. So first thing with family protection. Now they both own $1 million of debt. So bank lend them both money. So if one is gone, they still owe a million dollars to the bank and the other person will, will have what can struggle with that. And bank may call the loan. We don't know. There's so much unknown. So immediately we started protecting assets that they've worked so hard to create for the family. So the first thing that we did is with this, we did a joint venture policy. So basically Philip is going to own a policy on Manish for a million dollars because they have a million dollars in debt and Manish is going to own a policy in Philip for a million dollars. And when we structure that just based on 10 year term insurance because the term insurance premiums are low. And then they may want to keep the relationship together working on Investments for 10 years and after that they may not. So this term insurance for now meets the need. Very inexpensive. You can see Philip owning a policy. The premium is 416 a year. So it's pennies on dollars. God forbid something happens to Philip. Manish owns a policy on Philip. The premium is a little bit less because Philip is in a little bit better health than Manish. They've named each other as beneficiaries so God forbid something happens to Philip, Manish gets the death benefit, Manish will use that death benefit to pay Philip's wife and keep the properties. And properties then Manish can have that from passive income standpoint and grow it furthermore. And then same thing regard with Manish. If something happens to Philip, Manish gets death benefit. Manish will use that death benefit, a portion of that to pay Philip's wife out and the remaining can go to the bank to pay off some indebtedness that they have. So this is just to protect the interim. God forbid something happens prematurely. We create this crisscross arrangement on mostly all joint ventures that we work with. So again we talked about this. If Philip graduates, million dollars is paid to Manish and then Manish will use that to buy Philip's share from his wife and vice versa. The banking system, this is the main reason why they met with us is to create their banking system because they wanted to finance more properties from their system versus relying on banks. And they understood that policies will keep on growing and it's not just going to be used today to finance properties, but the policies can also be used for passive income time in future. So they started policies in 2016. And again, this premium just so happened to be the same premium for rich. But what they're doing is 25,000 of that premium is what Manish is paying into policy and 25,000 of the premium is what Philip is putting into policy. So combined together that's $50,000. Now it doesn't matter what the premium is. Premium is what you want it to be. Premium is based on where we are in a life journey. When I first got started in this process, my premium wasn't what you see on the screen. My first policy was only $5,000 per year. My second policy was $2,400 per year. Over the course of time I've added 16 policies and each policy has different premium. But this is something I created over a course of almost six years. But I started where I could being a real estate investor. When I got started in this journey, I was asset rich and cash poor. So I started where I could. Now I put good chunk of money into it, but I didn't start there. We start where we can. And starting is more important than not being able to start at all. When you have readily available pool of capital or access to capital, opportunities will come find you. And Nelson has said this and he is so absolutely correct. We are seeing opportunities everywhere. Our people who practice infinite banking, they're seeing opportunities. If you have access to cash today. You are seeing those opportunities already. So February 2022. So this year they are flipping a house, a condo in Edmonton. So the property purchased price is $160,000 in Edmonton. Now, the renovation work required on this property, so it needs a little bit of rhino. The amount of work required will be about $20,000. So what they need is about $180,000 of capital from their banking policy to make this happen now. So they need $180,000 plus small closing costs in the property now, estimated fair market value. So once the renovation is done, they can sell the property between $215,000 and $230,000 quite easily, provided they find the perfect buyer. Now, when someone is flipping and if you have flipped properties, you may already be familiar with it, once we're ready to flip the property, it may not flip at that time. You may have to hold the property for a few weeks or even few months to find the perfect deal. But this is what they're estimating based on the underwriting that they've done on the property.

Now, total cash value. So they started policies few years ago. So their total cash values in the policies as of today is about $300,000 now policy loans. So today they can access about $281,000, which is the 90% of the cash value now. Since then, they've actually added few more policies also. It's not just these policies that they have now. Policy loan amount today is $281,000, which is the 90% of the cash value now. Capital required to make this flip project happen is $180,000, $160,000 to buy the property, 20k for the renovation. So you can see there's more than enough money in the policies now to request a policy loan for $180,000 and continue with the project. They don't have to rely on anybody else's financing. They're just doing it from their policies. So this is where Nelson says in his golden rule, think long range, which is his first golden rule, don't be afraid to capitalize. They understood the problem and they weren't afraid to capitalize. And this is what is creating for them in a matter of six or seven years of starting a policy. And everybody can do that right now. Daily cash value growth as of today, this is the daily cash value growth. $54 per day. Again, how do I know that number? I look at the numbers today. I look at the numbers very next day, the difference is $54 per day. And that's just for this year. Next year will be better than that year. After that it'll be better than that. So $54 per day, that's 16, 20 per month in terms of monthly growth. Contrast you guaranteed because cash values and death benefit must match by age 100 in a participating whole life policy, the policy loan. So that initiating $180,000. Now when we initiate a loan amount of 180k, about 50k of that can show up as EFT which is electronic fund transfer. Anything above 50k insurance company will have to send you a check. Now as of today. So if you remember the CAR example that I went over, the interest from insurance company at that time was 7% simple interest analyzed over the year as of today for the same company, the interest rate has gone down to 6.2%. Now daily interest. So when you initiate this loan on a simple interest, it's charged on daily basis 180,000 multiplied by 6.2% divided by 365. This is the formula. You can see this is their daily interest on the loan. Now as compared to the daily growth in the loan. Or they're making way progress. $54 per day in growth and interest is $30. They are able to recapture the interest to the insurance company in the growth of their policy. So this is the daily interest multiplied by one month it's nine, seven. So multiplied by 30 days that's 917amonth charged by the insurance company on the loan. But this daily growth, monthly growth is not interrupted. Now using the policy loan, they own the condo free and clear. Because the policy loan, it doesn't show up on transcending in Equifax, their cash values was used as collateral. The lien is the death benefit, not what they're going to use the money to buy. So technically they own the condo free and clear using insurance companies money. While their money is still growing in the policy every single day uninterrupted, their compounding of their wealth hasn't stopped in the policy while they're still able to go and buy the condo. So they're creating dual compounding in a way they control 100% of repayment terms on the loan, principal and interest. They chose just to service the interest only for now. So the interest per month was just about 900 bucks. Now here are the options. After renovation is complete, they can flip the property. If they find a perfect tenant. So they can flip it between 215 and 230. That was the price range. And then once the property is Flipped, they take that money and backfill the policy loan, principal and interest. The remaining is profitable and once the policy loan is back full, they can go back and re access that money and plus the growth and go buy another flip property if they wanted to. Now they can also use it for short term rentals. In case they don't find the perfect buyer for their property, they may delay flipping it. It's all based on what the market is going to do because the whole project may take anywhere between a month, two months to get the condo ready. What if they're not able to flip it? Let's analyze the short term rental on this property. Now so let's, let's assume that they couldn't flip it. They're going to do a short term rental and let's analyze the short term rental transaction on this property. So remember, they own the condo free and clear and they need to service the interest only to the insurance company because that is all that they want to do. So they rent out the condo. The condo is rented for $1,600 per month. The condo fee and property tax approximately is $300 per month. The interest payment to insurance company every month is $917. So $1,600 comes from rent. So $1,600 minus $300 minus $917. So their net cash flow positive of $383 a month. It's difficult to be cash flow positive in a condo market. I'm not sure which city are you joining in from, but I'm in Edmonton. And unless you get multiple families or you do short term rentals or you do Airbnb, it becomes difficult to own cash flow from a condo. So in their case, just because the debt is structured very differently, it's just interest only. And they chose to pay interest only to the insurance company. They have this positive cash flow about 383amonth, which is still a great thing. So as they find the right buyer for this property, they're still cash flow positive and all the cash in the policy is still growing at the same time. So cash value growth is 1,620 per month. Total increase in monthly net worth 1620 in the policy +383 from this cash flow. So per month the net worth is increasing by $2,000. And I'm not even considering any appreciation in the condo. It's just from the transaction and becoming a banker, that is what they're able to achieve. Now for $1,600 a month. This is what they are receiving as a rent payment from this tenant, the net worth increases by $2,000, not including the condo appreciation. So when you are receiving 1600 bucks a month from your tenant, how much is your net worth increasing every month by. And I'm not talking about property net worth. What I'm talking about liquid net worth. This money is all liquid. They can access this money at any time if they wanted to. Condo is in addition to it. So there's an opportunity to recycle more money if they wanted to. Now, I talked about the unseen. So here's the unseen which is also happening simultaneously as what I just, in addition to what I just described. See, because they own the condo free and clear. And the reason why they were able to do that is because policy alone doesn't show up on TransUnion or Equifax, they can actually go to the bank and register a HELOC on the property.

You'll be surprised. You already know this. Banks love to collateralize a property. Now, there's no indebtedness in the property because the lien is death benefit. They can go to the bank. They've appreciated the fair market value. They bought it at 180. The fair market value is 230. They can actually go to the bank and register a HELOC on the property because they kept the loan private. Can they use the HELOC from the bank to perhaps buy another property if they have another opportunity showed up? The answer is yes. So if they sell the condo, can they use the condo to pay back policy loans immediately without penalty? The answer is yes. Can they re access the policy loans to buy the next investment? The answer is yes. So imagine this, guys. You took a policy loan, they bought a condo, they fix up the condo, they have a tenant in there. It's producing cash flow, the appreciation has gone up. And because it was a policy loan, there's no indebtedness in the property. They could actually register a heloc. So they haven't lost access to potential growth in real estate investment at all. Now they can take bank's money and maybe buy another property. Because if there's an opportunity out there to buy, well, great. You need access to capital. By doing it this way, they haven't lost access to capital. And then going forward, they can actually use policy loans again to pay off the heloc and they can rinse and repeat this whole process again. So by keeping loans private, it doesn't take away any of your options. In fact, you're able to scale and grow. And they were able to buy two assets now, one from policy loan, one from bank heloc while all their cash was still growing in the policy uninterrupted. Imagine the potential in just that. And this is the unseen on ibc. So if you want to scale your investments, this is the best way to do it. One of the best ways to do it and have the full control on your banking function. And in addition to that, God forbid if they died, they have boatload of death benefit to pay everything off. Outstanding policy loans, HELOC and keep these properties in the family and still leave behind additional tax or death benefit to the family. If they live a long life, they're going to do just fine. God forbid they become an angel prematurely, the family is going to do just fine. You win, you live, you die, you still win. So using the process of becoming a banker, they are now able to own two properties, two cash flow. They have tax deductions on interest payments while they're money was still compounding tax free inside the policy. In addition to that, the properties were also appreciating. Now again we talked about if the unlikely happens that occurs, they don't leave any indebtedness behind to either of their JV partners. So to themselves, to their family. And they can use policy in future for retirement. Because while they were doing all this, the policies kept growing. And it's going to produce tax free passive income. Based on the examples that I shared earlier on, using policies for retirement is going to produce tax free passive income in future. And if they have real estate in future which is going to produce taxable income for them, policy loans or loans against the policy is not going to put them in the bigger tax bracket.