Richard Canfield

Welcome to the Real Estate Espresso podcast, your morning shot of what's new in the world of real estate investing. I'm your host, Victor Menashe. This is the Weekend Edition where we interview notable people from the world of real estate investing. Today is no exception. We have a great guest all the way from Chilliwack, British Columbia. You might be wondering where that is. It's just outside Vancouver. Welcome to the show, Richard Canfield.

Victor, pleasure to be with you today. I'm excited about being on the program.

Great to have you here. Now, Richard, you've been at this game for a little while and we're going to be talking about financing of deals in a very specific manner. But before we do, maybe give a little bit of your backstory and how you got to this point in your journey.

Well, I grew up in a family business and I was the heir to the portable toilet kingdom of Camrose, Alberta. So you can use your imagination to determine what that kind of workload was like growing up as a kid. And so I learned about working hard and that led me into an electrical career and realized that I was doing job site seminars for the guys I worked with and that probably wasn't the right place I should be. So I transitioned out of that into real estate and I became a licensed realtor in Alberta, in Edmonton, Alberta for about nine years. And in the process of doing so, shortly thereafter, I discovered through, through coincidence and maybe by fate a little bit, I was introduced to an amazing book that just completely changed and revolutionized my whole life. And that was in 2009. The book is in my hands. It's called becoming your own banker Unlocking the infinite banking concept. And the gent gentleman who wrote the book, R. Nelson Nash, became my, my friend and my mentor and I, I loved him dearly. Unfortunately, he left us in March of 2019. He was 88. Revolutions around the sun is how Nelson would describe it. And I learned more for him from him in, in, in relation to not only his concept but about life and how to think about money, real estate, growth, coaching, mentorship, all the things under the sun than I can possibly fathom. So the an amazing opportunity experience that's really shaped my journey in my life. And there's clearly, Victor, not a single aspect of my entire life financially and I would even go so far as to say emotionally that hasn't been positively impacted by reading that book and getting to know that man, that's awesome.

And for the listeners at home, if you can find a mentor, someone of that depth who can help you with your business. It's just pure gold. I mean, I have a couple of folks in my life of that nature. George Ross is one of them, has been a frequent guest on the show and, you know, at 94 years of age, just one of the wisest people I know. And I'm very conscious of the fact that he's in the fourth quarter and that my time with him is limited. He's healthy, he's sharp, he's awesome. But he's in the fourth quarter. So when you can develop relationships with people of that nature, it is absolute gold. So awesome. I'm glad for you.

You never know what you're going to learn. And people that come before us develop experiences that produce wisdom, and that wisdom has the ability to be downloaded into your noggin. The only thing that's preventing it from happening is asking the question, can I, can I please hear some of your stories?

Absolutely, absolutely. In fact, it's interesting, and I know we're digressing a little bit here, but I was actually holding an event with George in New York City in the very first project that George did with Donald when Donald was 27 years of age. And it's next to a building that my mother designed in Manhattan. And the United Nations General assembly was in session at that time. So as you can imagine, New York traffic was absolute gridlock, especially in that part of midtown Manhattan. And I asked two guys that were with me, Robert Helms and Russell Gray from the Real Estate Guys radio show, if they would be interested in accompanying George home in a limousine. And they said yes. Well, this limousine to get out to what he lives very close to JFK airport, took close to three hours. And that whole time he was telling story after story after story. Oh, this building over here, I did with Saul Goldman. And he had a story and then next block, same thing. It just went on and on and on, and you just can't. There's just no substitute for that level of depth and wisdom. And there's so many powerful lessons in each of those stories. It's, it's amazing.

Well, it's so great to hear you say that and you're 100 accurate. I, I fully believe that. We, we, we are a lot the people we surround ourselves with. And so if you find someone who's got that knowledge base and you can surround yourself with them and it, all it can do is pay out, pay dividends in your life. We associate dividends and things like cash flow with real estate, but you can also associate how Those things show up in your life with the people that you hang around with. And so your show is a great example of that. Interviews with George Ross, the many people that you have on the program, it's all adding value into your life. And speaking of value in your life, something I will share. So thinking about Nelson Nash, he passed away again a few years ago. When Nelson passed away, he was big into real estate and real estate development. He was a forester by nature, so he understood land and the value of land and what you could do with it. And. But the infinite bank accounts really has to do with financing the things that you do in life. It's about recapturing the interest that you're paying to banks and finance companies for the major items that you need during your lifetime or solving for the opportunity cost on your own capital. It's not about investments, about how you finance the things of life, which includes investments. Well, if you're in the real estate game, financing is a big deal. Getting it, finding it, acquiring it, qualifying for it, all those aspects. And the more and more that you can control the financing function as it relates to your needs, whether it's growing your real estate practice, funding deals, flips, development, whatever that is, the more you have control over the flow of money as it goes from your hands to someone else's hands, a third party banker, an investor that you work with, that transactional aspect, if you can control more of the flow of that money and you can harness some of its potential so it can be here to do more for you today and it can cascade to the generations that follow you. So the ability to incorporate a generational thinking aspect to your real estate practice and endeavors by using this concept is really tremendous. It's something, something to behold. And so on that note, what I would share is when Nelson passed away, he had 17 tax free death benefit checks paid to or paid out. That's pretty cool. That was a good chunk of money. Now Nelson would have said, if he was alive, I think he would have said, didn't that cancel out a lot of mistakes I made in life? Right, but, but what's really interesting isn't the 17 checks that paid out. It's that there's 28 additional assets, cash value, daily accumulating pieces of effectively insurance real estate, let's call them, that are still accumulating and growing today that will also pay tax free death benefit checks that have total and complete liquidity that Nelson's family can use to finance all the major things in life that they use their cars Their houses, their mortgages, investment deals, opportunities that come around. He started that and has created a cascade generational impact for every future financing decision for his family's life. It took him time to understand how to do that, and he teaches you that in the book. But the key thing is he's able to make an impact even though he's no longer here. And that's something I think we should all aspire to, try to do. And the only thing preventing us from doing that is, is a little bit of what's between our ears. So the more we get to work on that crazy muscle in between our ears and our brain and we get to feed it the right information and we get to learn new skills and endeavors, the more we're positioned to provide the highest and best financial, emotional and understanding value to the people that follow us.

I love that. So let's break down the infinite banking concept. It's powerful, it has its limitations as well. So why don't we take us through almost an Infinite Banking 101 without going too deep in it, but give us the highlights.

Well, you know, Nelson says on page 85 of the book that if you knew at passive income time you would be getting back every single dollar you put into a system potentially tax free, would you ever object to putting any more money into it? It's a rhetorical question. Obviously the answer is no. When we set up and design an insurance asset, which is an asset class no different than real estate is, the only difference is the real estate has, you know, it has property taxes, it has tenants, there's, there are problems that arise and it has market fluctuations that aren't always within your control. Your knowledge and experience can give you a measure of control, but there are factors outside of your control. The insurance contract itself operates very similar to a long term buy and hold piece of real estate. You have to put the down payment in, plug some money into it. It takes a couple of years for it to get to a point where it has the equivalent of what you fed into the property to acquire and get that property up and running. But then it produces an ongoing cash flow for the rest of your life. And then when you want to go and quote, unquote, sell the real estate, in this case, when you, when you die, you pass away. You're always selling it for the maximum possible appraised value that the real estate has ever achieved in its entire lifespan. There's no reverse gear, so the market fluctuation doesn't impact like it can in a piece of real Estate. So the two things side by side, they have more together, more similar than they have apart. And when you match those two things, you know, kind of almost like partners, when it looks at the growth of your real estate practice, you're able to just do more things with the same dollar than you could otherwise.

So from a mechanic standpoint, what is it that makes Infinite Banking more powerful than just cash?

Yeah, great question. So the key thing is we wrote a book about this called Cash Follows the Leader. And so the fundamental basis of what designs one of these, these dividend paying whole life contracts is that you're participating in a money pool that is, that's with free contract and other free people and the insurance contract. The insurance company is required to grow your cash value, which is an asset to you. It's like equity in a house. They're required to grow that contractually to equal the total death benefit. Age 100 in Canada, age 121 in the United States. And so every single time that you increase the size of that death benefit through this, the way that these, these are designed, you're creating a constantly growing accumulating asset and equity pool. And you have on demand contractual access to that equity. So I can take a, what's called a policy loan from the life insurance company with no questions asked, no credit checks, no, no restrictions, no repayments. We encourage that, it's important. But there's no requirement. So I can access capital that's in that pool like, just like taking a home equity line of credit on a piece of property and then I can go buy another property or I can go do another deal. So I'm able to put the money to work in more than one location. Meanwhile, the insurance contract, nothing actually came out of it. I got my money from the insurance company. I didn't drain my asset. So that asset continues to grow and accumulate. Every single day that I take air into my lungs, the only thing that can stop it is the policy owner not meeting their contractual obligation to fund the minimum premium or somebody dies. Beyond that, that thing's an autopilot. It's just going to continue producing ongoing, slow, steady cash accumulation that you can use to fund deals till the cows come home.

Is it, is it true that when you pull cash out, if it's not repaid at the time of death, you've essentially reduce the value of that policy by that amount?

Very good question. So, so the answer is it's true. And what that really is is the death benefit itself is a future cash flow.

Right?

So the Cash value or the asset portion really is a present value of a future payment. So when you're accessing a policy loan, it's kind of like you're taking an advance, like a credit card advance on your future death benefit. So that's why you're able to have control over it. It's a really powerful way of being. We interviewed a gentleman on our show Bloom. He wrote a book called Confessions of a cpa and he talked about buying a retirement condo for him and his wife from his future dead self. And I mean it's, it's comical, it's funny, and maybe it's a little morbid, but the reality is that's the ability he had so he could enjoy that retirement, could be close to his grandkids, have all the lifestyle aspects and requirements he want, says, well, when do you want to spend the money? Do you want to spend it when you're gone or should we spend some of it now? So you have the ability to effectively live the death benefit of before you go and still be able to pass on something to behind, probably a lot more to the people behind because of the time that you got back. You cannot replace time. And you know what, doesn't matter which way you're leaving this world, you can't take it with you.

Absolutely. I'm sure Steve Jobs were for all of his worth, he would have gladly written a check in the billions for even another six months. Yeah, for sure. So now there's a perception that the infinite banking concept is really best suited to smaller projects that like you said, you might be wanting to buy a condo or something like that for your own future use. But how does it fit for larger scale commercial real estate? Or does it fit?

Yeah, good question. I mean, does it fit is really going to be situational, dependent on the individual. And some of that has to do with mindset less so about capital. But from a general perspective, there's very few instances where it doesn't have an advantage to people. The key thing is how much control over your capital do you want? And I'll give you an example. So if you have, you have a giant commercial project that you're doing, maybe there's business partners in that deal. Well, if you go and access money or you borrow off of one of your other buildings, let's say, and maybe you have some investor capital that comes in and you go and put the deal together, you acquired the deal and now you're trying to go and put the cash flow to work there. All the money from the Investors and your capital that's tied up is tied up in the new piece of property. You have to wait till the equity is high enough or a sale in order to liberate the capital that used into the deal. So if you just added in the middle of that you slid the money through an insurance contract or contracts, depending on the situation, before you went and put the money into the deal, you still have the deal. But now you also have a monstrous level of tax free death benefit. So heaven forbid something happens to you or maybe one of the partners in the project, a boatload of money comes in to solve problems and it also provides an advanced level of security for the investors that you're working with, knowing that even if the market tanks, there's something else in place that could help protect and preserve their capital. So from that vantage point now for the, for the, the real estate investor who's looking at bring on investment capital, they have a whole nother way of explaining and expressing the power of why they are safe or a more appropriate place for their investment capital to live. Because they have a nut, they have other mechanics in place to allow them protection over the project. And that's changing the way that we think about the usage of money and then of course the ability to change how you market the money. So I think that by implementing the strategy in your life, the only positive things can be created. Now the worst thing that can happen to anyone is that we leave this world early. Well, turns out if you have the infinite banking concept working for you, with the right kind of insurance, you're going to do pretty good if you live, you're going to do pretty good if you die. So having it in place doesn't seem like a bad idea.

And I know you're not an accountant, but are there any tax consequences of having that policy in your name versus purchasing that policy through a corporation or some other third entity?

Yeah, very good question. It really depends on, you know, jurisdiction. So. And again, I am not a county professional. In Canada we do specialize and help people understand that there's some advantage that Canadians have called the capital dividend account. So from a corporate realm, there's certain strategic advantages there. In, in the United States, often people will focus on the personal realm. But of course, when you have capital either personally or, or in a, in a structure that you control, you can lend that money to another entity that you control. So the movement of money is really under your power. And that's the key when it comes to who should own the policy. You know, Nelson, would say, you know, my business is a captive Custer of mine, so who should own the policy? He he tend to feel that it should be the individual because you can charge your business to use your own capital to some degree. And the from addition to that, the general protectionary mechanisms and some of the other advantages around maybe some lawsuit and creditor protection that you can receive is always at its highest level, at the you and me level. Once you get into the corporate or LLC realm, you know, that's like its own entity. And so it has its own set of rules. And so although there's good valid reasons to have those, you may not have the same measurement of full protection of the asset class.

Got it. Well, Richard, if folks want to connect, if they want to learn more, what's the best way?

Really simple people that are interested in this, we have a great, simple, easy report that recommends a learning path at seven steps. That's seven steps CA can ease on over there and pick it up at no cost. And it's a great opportunity to learn. And we teach you the best, best path to go about understanding the mechanics of this in your life to determine if it's a fit and if it's not, that's cool. And if it is, that's great too.

Fabulous. Well, love what you're doing and for the listeners at home, definitely connect with Richard and get the white paper at seven steps ca and in the meantime, have an awesome rest of your weekend. Go make some great things happen. I'll talk to you again tomorrow.