EP20: The Power Of Combining Infinite Banking And Real Estate Syndication

I have created not only from expenses which is supposed to just go out and you know, that money out, no future expenses. I created that from 100k. I created that 175k. The compounding interest, the interest. The snowball is happening inside my policy. The student loan is getting covered. So now I have created one single dollar working at three different places.

Are you frustrated watching your hard earned money ride the knee jerking Wall street roller coaster? Are you looking to diversify into alternate investments and set them on autopilot to achieve financial freedom? It's time to learn the ways of the wealthy. It's time to Think Outside the Stocks with your host Madhvi Jain, an immigrant from India and ex IT professional who will bring you industry experts to illustrate a passive and and holistic financial approach to build not just passive income, but also your generational wealth. Madvi is on a mission to change the financial trajectory of one family at a time. And a thousand more to go. Are you going to be part of this vision? And now without further ado, here is the host of Think Outside the Stocks, Madhvi Jain.

Hey, hey, hey. Welcome back to Think Outside the Stocks. I'm your host Madhvi Jain from Think Outside the Stocks and I am here to kind of put this wrap around and tell you what we have been learning so far in terms of real estate syndications, the passive investments, the infinite banking strategy. And I'm here in today's episode just to talk about how I'm doing it, how I am personally putting this all together in my personal strategy because I know it's kind of a lot of moving parts here and there, right when we are thinking about our own financial structure. And I'm sure that the thought process has started for you to kind of think about, okay, how do I apply this to my financial strategies? Madhvi has been talking about it in her several episodes. She talked about the real estate syndications, the passive investments, investing money outside of that stock market. She has been talking about the infinite banking structure, how to create it, what to do, what not to do and how to utilize it. What but how do I put it together in my financial structure? Right? So in this episode I am here to just wrap around the strategy that I have used and I'm doing so that it can be little helpful for you to put that structure in your own finances. Right? So again, this is not an investment advice. This podcast is for educational and information purpose only. If you want, please do, do, do consult your advisors, your tax planning, your legal advisor, your financial advisors, Whoever you want to consult so that you can implement some of the strategies. So in today's episode we are going to talk about all these things and putting it together. How did I do it in my family's financial structure? Now, going back, we have talked about how I got into this field, right? How I started my journey with think outside the stocks. Before I was doing this actively, I completely passive investor, right? So when I left my corporate job in 2015 and I was thinking of creating that financial freedom in reverse order, I was looking at different opportunities that I can put around in my financial structure so my family could benefit from it. I started doing the rental real estate. We have talked about that in rental real estate. I got burned by some of these experiences which led me to the line of syndicated real estate. What I really liked about syndicated real estate, that it was first of all completely passive. When I was afraid of jumping into and seeing this massive amount of people rushing for the same opportunities, kind of wholesaling it, sometimes their expertise in terms of the real estate tax, liens, foreclosure fix and flip. I was thinking that I cannot match my experience to what they have been doing. At the same time, I was afraid that if I put my money in there and I haven't been doing that right thing, if I don't do the right thing, I might lose my money. That risk of losing your capital was bearing down on me. And at the same time, when I was trying to learn about these things, trying to know what can I do and how can I do it. There were just so many coaching programs out there. I went to one of this coaching program which sounded free or maybe about $99 as an entry fee for a weekend full of activity and education. When I went in there and few hours just into the program, they'd ask about, hey, this is how you can maximize your credit. You know, you can implement the strategy, call your credit card company, increase your credit limit and you can pay for this 30, $40,000 coaching program which can help you one on one education, etc. To help you invest into real estate. And I'm thinking back in my seat that If I have 30, $40,000 to invest in a coaching program right now, why would I not invest into real estate itself right directly? Now don't get me wrong, there are some coaching programs which are really, really great out there, but there are some coaching programs and then unfortunately, tremendous number of them, they're ready to take that money and mastermind after mastermind, program after program, you will be thousands of Dollars, hundreds of thousands of dollars at times, which will be negative in your portfolio, which you could have invested somewhere. Right? So that was the position that I got into. And at the same time I came across, during a meetup opportunity, I came across the syndicated real estate. So really I got into syndicated real estate as a passive first. And just by surrounding myself with the right people. They say that if you are the smartest person in the room, well, you are in the wrong room. And that's exactly what happened with me. Because when I was in the right room, people around me with tremendous expertise, with tremendous different areas that they were investing into, I came across, lo and behold, about an expert who was an infinite banking expert. And that was the first time I heard about this concept itself. So infinite banking, a kind of a mysterious world. And as I dig deeper into it and it turned out to be a life insurance product, I was so reluctant. We all have had that life insurance agent in our life where we see it around the corner and we want to turn around and kind of run away, avoid that person, avoid meeting that person to start that life insurance conversation again, right? And there is a reason behind it. There's just life insurance industry is driven by maybe that commission structure, sometimes even the MLM concepts where there is business growth opportunities which just get presented to us that, okay, this is how you grow and this is how you make money and help others make money. Well, the reason I got my life insurance license, the reason I started implementing the infinite banking structure and is to create that strategy very very structured way and very, very specifically based on what people really want to do with it, what their financial status is currently, where do they want to go, if they want to invest in real estate or any other investments, whether they want to put away the education money for kids or put away retirement income for themselves. Right? And that is the purpose who I was once super skeptical about this system, got into and learned the way not only to implement, but to also educate people and folks so that you, people like you can understand the logistics behind it, making it simple instead of being that complex structure around it so that I can help understand one person at a time, one family at a time. So let me just start telling you how I have implemented in my financial structure. So first of all, when I came across the infinite banking strategy, we already had a life insurance policy, which was a whole life policy. And trust me, this was put in place by a very nice agent who knew what she was doing and she had created an excellent product for us. So in terms of the life insurance, which essentially has two things which are pretty much guaranteed is that the premium is not going to grow and the death benefit, no matter when you die, you're going to get that guaranteed death benefit as a life insurance. So this policy was created in a very structured way for us, right? So we had that life insurance, we had that stable premium, it was never going up, so about 6,7000, that's yearly outgo. And it was building that $1 million death benefit no matter when that death occurs, right. As a characteristic it was building the cash value. The first year there was absolutely no cash value. It started building the cash value from year two onwards and slowly and steadily. The break even point for this cash value was around 15, 16 years. So that means that whatever money we contributed to it maybe around $109,000 or so at that point. And that's how much cash value was supposed to be there after those many years. Now we were into this policy just couple of years and I came across the infinite banking structure. Now many people do ask me that, hey, I have a whole life policy, can I turn it and make it an infin banking strategy? And now it's almost like you going to an architecture asking him to build a three bedroom and two bathroom plan for your house. And while you're starting to building it, you realize that I need five bedrooms and three bathrooms instead. You cannot put that plan of creating five bedrooms in a three bedroom plan. Right, that's exactly what it is. If your life insurance is, is structured in a certain way, and if it is not an infinite banking structure, it cannot be utilized at infinity banking. And that's essentially what I had to do. And what we have in real estate, it's called 1031, which we kind of purchase another house from the capital gain of the property that we are currently selling so that the tax consequences can be avoided. We have 1035 in the insurance world. So what you can do is you can move one policy and create another policy from it. It's called 1035 exchange. And when you're doing that, your basis, that is how much premium that you have contributed to it, you can carry with you. So when in future, when you're trying to take the money out, you can actually treat that as a basis, as a tax free kind of a cash withdrawal from it. And now you can build another policy with a proper structure based on the infinite banking concepts. That's exactly what we did. We created another policy with a mutual company dividend paying had tremendous history. It's this company is about 170 years old, by the way. And with that history of consistent dividend year after year, even through Great Depression, even through, you know, a couple of years back when the interest environment was 1% or less than that in our traditional banks, this company was providing 5.75% as a dividend even at that environment. So we moved over at that policy over there. And you know, when you are at a particular age, you kind of have to pick up the pace per se. If you are in your 20s, what you can do it with putting 10,000, 12,000 a year, in your 30s, if you want to put it about 20,000, 30,000 a year in your 40s, you have to do it around, you know, maybe 40,000 a year. The intention is that to get to you at at least that million dol cash value when you retire. So if you want to and if you desire, you can start taking that retirement income. So that's exactly what we did. And we started building that policy, kind of consistently adding money to it year after year. And now our intention was education. That was really, really the top priority, my daughter's education. And she's in a school, by the way now. So what we started doing with that policy is now we wanted to think about creating that and asset now. And asset is not just a concept where you can utilize the same dollar at two different places to invest from it. But even for your expenses, you can harness your expenses and harness the growth of that expenses. It might be a very tricky word for you to harness the growth of expenses. And you might be thinking that. What do you really mean, Madhavi, by that? Okay, let me step back and explain it to you. When you have college tuitions, say about 50,000 a year, or maybe 25,000, let's just go by 50,000 a year, say in two years, you put in that 100K. Typically our tendency is that give that money to college and kind of create that expenses out of our savings account or whatever, wherever we are paying that money from. Right. Once you pay that to college, it is not just an expense of 50,000, but you have taken the future capability of that 50,000 of compounding over and over again, and you have slashed it and you have kind of diminished that growth of that money from your expenses. So now you have to think about harnessing the growth of your expenses. That's exactly what we did. Now remember, think outside the stocks. It's just not the outside the stocks, investment opportunities or kind of thinking, but it's also out of the box. Thinking so we have to think about our expenses in a little bit out of the box ways, Right? That's exactly what I did. And so this is what we ended up doing. We took the leverage instead of paying that off to the college, we took the leverage loan from this policy which has built enough amount of money so that we can pay to the college directly. But we did not use it for the college tuitions directly. Though the plan was for the education money. We did not do that. Instead, I asked my daughter to go get a loan for the college. So she went in, you know, one of this standard kind of loan lenders for the student loan. So she got the loan while she's in the college. All she has to do it, that she has to pay the interest only portion of it, right. So every year when the loan gets added on, she actually is working towards paying her own interest. So that's building a habit and a discipline. And she understanding that how that money is moving for her, she's taking that responsibility. So she's paying for that interest while she's in college. The principal will not become due unless she graduates. And I think she gets about six months period after that. So now the same dollar, because I have that as a collateral available in the infinite banking system and it's there, I know I can rely on it, I can pay for that college loan anytime I want. I'm okay with her taking that loan. So now she took that loan. So again, going back to the concept of taking leverage, you do not have to take the leverage from the insurance company itself or third party lender. You can just get that loan wherever you want. Whoever is giving you, in this case we created from that lender. So she's paying that interest only payment. Now I wanted to think about possibly growing this money so that when I'm paying that loan back, maybe I have created even better growth for this money. So now I had an investment opportunity which was giving me a cash on cash, about 24%. Now this 24% might just look a tremendous number, right? But this opportunity, opportunity did not, you know, does not have a equity at the end or the principal coming at the end, but that 24% for seven years, you're gonna get that and that money is gonna just stop. So that's the opportunity that I had. So I say take for example, took out that 100k, put it into that investment, which is, which started giving me after three months of a stabilization period, 2,000 every month, you know, that month in month, the cash flow that's gonna last me for about seven years. Now that 100k that I borrowed, now I put that into this investment option giving me about 24%, 25% cash on cash every year. It's going to go for seven years. So total of 175,000 coming out as this opportunity. Now I have that loan that I have to repay back in terms of the student loan that I have, right? So, so once this starts creating that 2,000 cash flow, I will slowly start paying off that loan. One loan that's going to the student loan. And also now I have a loan sitting in here for my policy, right? So now I have two loans. So now the same dollar stay with me here. The same dollar is empowering me to do three things at a time. Not one, not two, not three. If this was my savings account and I simply took the money out to four fund the college, that would have just gone, no future growth, nothing in return, right? So now I am growing this money inside the infinite banking system. Mind you, the dollar never came out. I took the loan from the insurance company to put it into the investment which is the second use of that money. And the third use of money is that educational loan. Now I do have two loans, but now if I have an exit of an investment coming out which maybe will give me, you know, $100,000 or something else, I will pay off the policy loan first. The monthly income that I'm getting that will pay, you know, start slowly paying that student loan as it's coming back in. So once both the loan gets paid. Now I have created not only from expenses which is supposed to just go out and you know, that money out, no future expenses. I created that from 100k. I created that 175k. The compounding interest, the interest. The snowball is happening inside my policy. The student loan is getting covered. So now I have created one single dollar working at three different places. So this is how I utilize my infinite banking system. Now going back to the investments, right? The real estate investment with the syndication. Now one can utilize this. Say for example, you have a nine month old baby or you know, you have a five, six year old kids and you want to start slowly thinking about their education. What can you do about it? When I have clients around that they come to me and I kind of start looking at, thinking out their, their structure and like okay, how can we utilize this policy, right? Typically when you put the money in the 529 plan per se, you kind of start growing in there tax free. You can withdraw that money for education purpose only. And if it doesn't get utilized for education, you have that, you know, penalties, you have the taxes that you have to pay on that. So now in that situation, here is what we can do. We can create the infinite banking system which starts storing your emergency funds. Once the emergency funds kind of taken care of, say 20,000, 30,000, whatever your comfort level is and it starts growing up, say to $80,000. Now you have 50,000 chunk sitting in there. That's your opportunity money. That's the money that now you can invest into something. Now if you were tied to a 529 plan, your options on where you can invest that money are limited. But now you can take this money and invest into something which is risk managed real estate being a great asset class, the multifamily syndications or syndication in terms of industrial self storages, wherever you have this all weighted opportunities, we think outside the stocks to invest in. You can do your due diligence and you invest in something which can give you about say 15%, 20% annualized returns, right? So now you know that you are going to utilize it for educational purpose. You're investing it when you are getting ready maybe 10 years down the line. Your kids are young, they don't need that education money right now. So now the compounding is happening inside. You're investing that opportunity dollar. You're paying maybe 5, 6% to insurance company as interest and you're creating maybe about 10, 12% extra on top of it. And that investment is growing year after year. So say four, five years, the syndication investment that exists that gives you say almost double the money. If you invested 50,000 in it, you, you know, kind of turned it around to say 100K. And you have to maybe over that period pay in about 20,000 or so in the interest to the insurance company. So you still have significant amount that you achieved. Now you can either refund it back to the policy loan, kind of close that account with your principal, you still have that extra delta and you can reinvest it to somewhere else. Or now you can take that 80,000 together, take another loan from the policy. Now you can invest that 80,000 into the next syndication or next investment opportunity which is risk managed, giving you higher returns than what stock markets can give, providing you that tax benefits and creating that completely passive income for you. So this is how even I kind of keep on creating rinse and repeat and rinse and repeat and invest into the next opportunity. And once you start creating that path for you, for your Investment for your financial structure. When 50,000 becomes 100,000, 100,000 becomes 200, 200 becomes 400. Now you can start creating that passive income path for you and slowly and steadily that steady set of passive income. So you can start becoming financially free, first part time and then full time and take it from there. So that's essentially wrapping your head around on how you can utilize the infinite banking system. Now mind you, when you are utilizing it for investing, till your kids are ready for the education and use that money, you can have them again create the same similar path that I create or you know, just talk to anybody. You may be your financial advisors that how you can optimize this kind of a triangle, create that efficient investing, efficient expenses also for you and whatever doesn't get utilized. So for example, when college is asked on fafsa and if you don't know what about FAFSA is, FAFSA is essentially a form of your assets and incomes and you know what potentially you have based on what you get a number assigned that you know, that's how much money that as a tuition your college kids will pay. So it's based on your assets definitely and life insurance. Because this money, the cash value that's sitting inside it is a life insurance cash value. It's not like your assets sitting into a liquid bank account or brokerage account, etc, though this money is accessible to you, it's highly liquid for you, it does not get counted in fafsa. So if they received some grants, they received some scholarships, and this money does not get utilized for college. Now you can take that money and do something else, whatever you want, right? You can utilize it for any purpose, any reason, at any rate age, if you want to start taking retirement income from it, you can start doing that even if you are at age 55, for example. So now you have created one structure, utilize it for multiple times, multiple purposes without any kind of restrictions on it, or restrictions on age or purpose on it, and whatever doesn't get used, you can create a retirement income from it. And at the pass of a generation, on your death, you pass this hassle free income tax free to the next generation. It does have the federal limits of estate taxes, federal exemption limits on it, but this does not get added as an income to the heirs. So that's essentially the beauty of it. I started learning about infinite banking system and I started learning about real estate syndications. There were people who were doing these two things independently and the one part did not understand the other part. And this is why what my passion is, I try to utilize and help you guys with both of these things in the parallel path and also merging it together so you can start utilizing and creating that velocity of money for yourself. Keep that money moving, don't get lazy and get stagnant for you. So that's essentially I will leave that thought for you. If you need help in creating the structure either with Infinity Banking system or understand the passive investments in syndication world of the real estate, get in touch with me. Think Outside the stocks dot com. That's my website. You have, you know, seen all the resources that have put it out for you. If you want to create a structure for infinite banking that's bit Lee infinite call or you just get in touch with me, schedule that 15 minute session and see if it is a strategy that's right fit for you. If your goals could be around it. Whether it's infinite banking, whether it's real estate syndication or whether it's both of them putting together, I'm here to help. I'm here to educate. Educate is my true, true passion. Driven by that Go Giver philosophy. I'm here to change the financial trajectory of one family at a time and thousands more to go. If you want to be part of that vision, please reach out to me and I'm happy to help and walk you through of this strategies and start making that 2 degrees change in your flight path. So when right now we add that 2 degree change in future your flight path, your destination could be completely different. And let me help you with that again. This is Think Outside the Stocks Madhvi. I am also starting Passive Investor Power Hour. It's going to be live education, it's going to be live webinars, live meetups where you can meet like minded people. We come together, I will answer those questions that you have in mind and we will bring experts. We will have more visual presentation style of education that you can benefit from and learn from. So keep on moving forward with your passive investing journey with your education journey with Think Outside this Talks and thank you so much for listening. I am so grateful to have you on this journey with me. Thank you so much for being there, listening to this and adding to your educational journey. One step at a time. Thank you so much.

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