A presentation (YouTube video transcript) showing a case study of 'Rich Sharp', a 48-year-old who saves $50,000/year and compares traditional mortgage financing versus using a dividend-paying whole life insurance policy (becoming your own banker) to fund a down payment for a $300,000 rental property. The speaker argues that redirecting premiums into a whole life policy increases cash-on-cash returns and preserves/develops death benefit collateral while maintaining control over loan repayment.
After two years of savings, he found a great rental property that was going to be a good fit for him. Who pays all of the expenses associated with investment real estate. Rich's objectives actually didn't change. See, we're not doing a whole dramatic change here. We're doing all the same things that we're already doing financially today. What changed is the process he used to achieve the objective.
We want you to meet Rich Sharp, young fella here. Let's take a look at what it is that Rich wanted to create. What are his objectives? So Rich is a 48 year old professional who decided to begin saving $50,000 per year. Now again, I just want to point out if the number is 5,000 per year or your number is 100,000 per year or a million a year, it doesn't matter because the process is exactly the same. All that changes is the numbers you get started where you get started. Okay. This individual decided because of how he was structured that he wanted to save 50,000 DOL dollars per year. And one of his wealth accumulation objectives was going to be purchasing investment real estate. So Rich can save his money in someone else's bank or as we've established, Rich can create his own warehouse of wealth, his own private banking system. So let's help Rich decide which option is preferable. Okay, let's just see. I already know which one I'm going to take, but let's see how it works out. Alright, so after two years of saving, so again, we want to think long range. We have to be patient. He's saving up money in someone else's bank or capitalizing his him. After two years of savings, he found a great rental property that was going to be a good fit for him. Who pays all of the expenses associated with investment real estate? It's his tenants. So he knows they are going to get this property. I'm going to get a nice young family in there and the tenants are going to pay for the expenses. So he has options. So let's go ahead and walk through some of these options with Rich. Okay. Rich can use his own cash. Keep in mind that's his own cash that he was saving in someone else's bank as the down payment for the mortgage. And then he can mortgage the balance of the mortgage or he can implement the process of becoming your own banker. Let's take a look at the traditional sort of financing arrangement for purchasing investment real estate using cash down. So the purchase of this property happened to be 300,000. He clearly wasn't in Ontario because I Don't think you can get a bucket in Ontario for 300,000 bucks these days. But real estate prices are going up all over the place. But the $300,000 in this case he has 60,000 is going to be the down payment. So the mortgage leftover is going to be 240,000. And the rent, the gross rent at this point is $2,500. So the mortgage payment is just over $1,000. So the annual income from the rent is going to be 17,007, 48. Now, if we work out those numbers, we get a 29.58, almost 29.6% a gross cash on cash return. Now, becoming your own banker, let's take a look at the steps that we need to use to implement the process. So we know that he's been depositing $50,000 into his dividend paying whole life policy for two years now. And his cash value at that time is $84,147 and growing daily. And then we have a starting death benefit or death benefit at that time was 913,000. So we know that that death benefit is there. God forbid, becomes an angel. Any kind of mortgage debt left over will be extinguished. Now, policy loan available at this time is 75,732, which is more than what we need for the down payment in the property. For the property, we have a $60,000 down payment. And the interest rate on the policy loan, simple interest rate at the time was 6.2% annual SIMPLE interest. So the total interest that would be accruing for the entire year, assuming that that loan balance is not coming down, would be $3,720. The death benefit is collateralized. The death benefit will collateralize the policy loan, not the property. Okay, that's important to know. So again, if he becomes an angel, that death benefit is going to wipe out that policy loan. Rich controls the repayment schedule on the policy loan. And his $84,147 continues to grow daily. Uninterrupted, $240,000 is the mortgage balance. Same exact attributes or stats that we showed earlier. But the difference now, because of that daily cash growth and because all he did was change the process, he took his cash on cash return from 29% and he blew it up to almost 500%. 480% nearly was the cash on cash return. And all that he really changed was the process. The total cash value in year three is up to 140,155. And that's up 56,000. So.
Where else can Rich access more capital? He can access it directly from his system if other opportunities track him down. Now he also keep in mind every single year that goes by, that death benefit is also expanding. So it went up from the 913 that it was beyond $1 million. So he's got almost $91,000 of addition additional death benefits. So increasing his legacy and even further protecting additional assets as he expands his wealth and his real estate portfolio. So Rich's objectives actually didn't change. See, we're not doing a whole dramatic change here. We're doing all the same things that we're already doing financially today. What changed is the process he used to achieve the objective where the money is flowing. He just took that 50,000 per year that he was saving in someone else's bank and redirected it as premium. And who the money is being put to work for? What do we mean by that? Well, if he's depositing the money in someone else's bank, it's being put to work at that bank. If he deposits his money into the mutual insurance company that he co owns, it's being put to work every day inside his policy system and at a company that he co owns, pumping money into the system in the right direction. Now is there any downside to Rich becoming his own banker? No. If you've been with me here for the last seven or so minutes, absolutely not. There are no drawbacks to becoming your own banker. So that's just one more example that shows anything that you want to do financially today is dramatically enhanced by implementing the process of becoming your own banker and simply changing the way that we go about financing things.
