In today’s episode of The Entrepreneur DNA, Chris Miles shares his journey to financial freedom and retirement before the age of 40. He emphasizes the importance of understanding how money works and using it wisely. Chris discusses the pitfalls of traditional financial advice and shares his own strategies for achieving financial independence. He highlights the need to get lean, get liquid, and get out of debt. Chris also introduces the concept of infinite banking and explains how it can be a powerful tool for real estate investors. In this conversation, Chris Miles discusses his experience with infinite banking and how it can benefit real estate investors. He shares his personal story of being misled by an insurance agent and explains how he took matters into his own hands to create a better strategy. Chris highlights the importance of having cash available from day one in an infinite banking policy and the advantages it offers in terms of liquidity, tax benefits, and collateral for loans. He also emphasizes the power of leveraging life insurance policies to fund real estate investments and the potential for double-dipping on interest. Overall, Chris provides valuable insights into how real estate investors can optimize their financial strategies using infinite banking.

 

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Justin: Yo, The Science of Flipping podcast listeners, what is happening. I am back with an incredible guest today. This is a long time real estate investor, someone who understands how to raise money, understands how money works, and how to properly invest their money and your money. Mr. Chris Miles is in the house. What’s up, brother?

Chris: What’s up Justin? Good to be back on well, back with you again on a different show.

Justin: That’s right. And so you’ve retired twice since so far in your life, and you did that all before you were the age of 40. Let’s quickly talk about that journey so people understand, like you can retire, if you understand how money works, if you use money the right way, if you have the right business model, but then also, you know, what are you going to do after you retire? Right? So talk a little bit about that journey.

Justin: Yeah, when I was raised by my parents, I mean, I even spent five years in a trailer park, you know, like, I was raised by very middle class parents, but they’re always felt like they were broke. We can’t afford this. What do you think of money is, you know, like, we think I have made of money. Money doesn’t grow on trees. My favorite one was my dad when he said, You know what, Chris, like, I want to have kids. Or, you know, I want to have kids. And because I prioritize that I gave I got rid of that dream of a Corvette, you know, I was like, well, that’s awesome. Thanks for, you know, I’m gonna be talking to some hypnotherapist about that when I get older, you know. But so anyways, you know, like, money was always a scarce thing, and so I thought I never wanted to be that way. And so even when I went to college, I realized that it was like the entrepreneur. It wasn’t the entrepreneur way to do it. It was more of an employee mindset. And so I actually dropped out of college with just one class before I got my bachelor’s, looking for some career to do, some kind of business to start. And the first one I got into was being a financial advisor. Not knowing it was so easy to get in is because all you have to do is pass a test not be a criminal, right? Like, that’s all it takes to be a financial advisor (Great!) expert in people’s lives, (Right). Well, as as time went on, I remember sitting down with my dad, and I remember for the first time seeing his finances, and he’d paid off all of his debt. I mean, this guy was like, Dave Ramsey’s older brother, that Dave Ramsey looked up to said, I should teach this guy, you know. So he paid off all of his debt, including his house. In 18 years, he ended up like, you know, stuffing money in his 401K everything, good boys and good girls should be doing, right? Well, as I looked at his money, I said, Dad, you’re 61 years old. If you want to retire today, you better hope you die in five years, because that’s when you’re gonna run out of money. Okay. Well, what do I do? Chris, like, I can’t do this anymore. He’d already had, by the way, he already had, like, heart attacks by his 50s. He had strokes in his 40s. I mean, this guy was on his way out and so I’m like, I don’t know, I don’t know what to do, because you did everything right from my teachers, financial advisor. And of course, when the students really the teacher appears. A few weeks later, I called up one of my friends who left my business. I actually trained him of a financial advisor, but he left to go do something crazy called real estate investing. And I’m talking to him, he’s like, so Chris, tell me, how many of your clients are actually financially free, where they don’t worry about money? I was like, well, they all worry about money, even the ones that retired still worry about running out of money in retirement. So none, none are that free. Okay, Chris, well, how about this? If anybody’s got this, right, it should be you guys. So how many of you guys as financial advisors are financially free, not off the commissions you’re earning, but actually doing these mutual fund investments? As I was really honest with myself, and I knew a lot of advisors, I said none. I thought maybe one guy was but I found out later, once he got fired from that company, he was scrambling trying to find him work again. He was just, he was just all is they say in Texas, all hat and no cattle, right? (Yeah). And so, I found out pretty quickly. I’m like, Well, none of these guys are free. Like, there’s your problem, Chris. I said, All right, I’m open, but you know, what should I do? And he’s like, Chris, you just got an argument with me that stocks were better than real estate. You’re you’re not open. I’m like, No, honestly. Like, you’ve got me here. You’ve got me to admit I’m wrong. Give me something. He’s like, all right, Chris, if you’re serious, if you’re serious, go get this book called “Who took my money?” by Robert Kiyosaki. It’s a lesser known Rich Dad, Poor Dad book, which, if I sum up the three hour audio book for you, mutual funds suck. Okay, (Got it). Yeah, you read the book. (Yeah). And then, and then he says, Now listen to this AM talk radio show, because this pre podcast, or this is, like, 2005, 2006 he’s like, go listen to this. This, this radio show with these two real estate investors. And so I started listening to it, and what shocked me is they didn’t even have time talk about real estate. They talked about, like, Founding Fathers and principles, and, you know, principles of wealth, thing creation, all that kind of stuff, right? And I’m like, Okay, I’m mean I’m up. Well, I finally, I went to a seminar that one of these real estate guys put on, and they start ripping to shreds the financial advisor right to the point where by the end of that night, I said, I gotta quit. I’m out. No more financial advising for me. I’m just gonna go teach ballroom dancing and do mortgages, because and mortgages was an easy business in 2006 and and I was also a ballroom dancer at that time, so I thought maybe I would just teach that at the local university. (Yeah). Well, any case. But the thing that drove me nuts, even though I quit doing that, I just knew that there’s guys in their 20s and 30s that these guys are, like, real estate flippers that were like, making killer money. (Yeah). I’m like, I gotta know how these guys are doing it, because it seems like whatever they’re doing is magical, right? Because my little financial advisor brain, you know, even after four years of doing that business, was like, Oh no, you accumulate a bunch of money and then you live off it, like a little starving squirrel, right? (Yeah). You just snip up those nuts, and then you live off of them, hopefully, till, hopefully the winter you outlive the winter, or whatever you know. Well, that was the problem is that I couldn’t fathom. But when they start telling me about, like, hard money lending, you know, and you could get paid now that’s either some guys paying like, two or 3% a month. It was insanely rich the hard money of lending back then. (Yeah, yeah). Needless to say, it wasn’t hard to get out of the rat race when you’re getting paid, you know, two or 3% a month on your hard money, you know, that you’re lending out to investors and whatnot.

Justin: So, you started lending. That was kind of your intro. It was gentle. And, by the way, guess who always wins the banks so that that was you, like, started with the cream of the crop, but that was your kind of softer way of entering versus dealing with contractors and rehabs and in all that other noise.

Chris: That’s right, yeah. Like, I took my first, my very first starter home, and I turned that into a rental. Funny enough, it was like my first official flip that I then got back again. So I ended up selling it to an investor at full appraised value, stripped out all my equity, and then turned around and leased it from the owner, the investor, and then subleased it out to a renter. And so that was…

Justin: I love that creative. That was way before people were thinking about creative financing. I love how you think, bro.

Chris: Yeah, that was my first deal. Funny enough, other than buying my own house, right? (Yeah), so I couldn’t, I couldn’t start easy, but, uh, (No) but, you know, like, I thought was fun. I even started doing stuff that now people would refer to as wholesaling. I started doing that with friends and stuff. I’m like, Hey, you could sell this property off, getting it, you know, get a credit partner, you know. And then, of course, go and get all the equity out and rent it back, you know, the house that they’re living in. So we’re doing things like that, a little bit creative finance stuff. But then, of course, you know, I got to that point where eventually, between those, those things and and other streams of income I’m getting in, I’m like, I don’t have to work anymore, right? I only need 3,500 a month to live. Because I only had two kids. Now, I have eight between a blended family, between two marriages. We’re like the Brady Bunch, but we had to fire Alice because there’s no room for (There you go). So anyways, so yeah, so we so basically, I was at the point where I was out of the rat race. I was 28 years old, not sure what to do with my life, you know. But I’ll tell you, like, one thing that’s interesting is that, you know, I I got to the point where, of course, the recession kicked my butt. I seriously went from millionaire, upside down, millionaire to the next recession because I got lazy. You know, I was, I was so drunk on all the money coming in, I was like, well, I’ll buy my little, big mansion. I’ll go and I’ll throw money at this or that. I started a brand new business trying to teach people how to get out of the rat race. We’re teaching flippers actually, how to get themselves out of the rat race. (Yeah). And, funny enough, they all went broke in 2007 so our whole business model was like, just going down the tube fast, (Sure) to the point where I was I went like, I said I was like, free, financially free to all sudden, now over a million dollars in debt, with no money, no credit. I didn’t have any confidence that borrow money from anybody anymore, because I’d already lost some of my family and friends’ money at this point. So I was I was kind of in a hard place, and I took a little pivot in my business. I eventually actually started teaching people how to get out of the rat race. Not they really got out of the rat race, per se. But instead of doing it with investing, do it by freeing up cash flow, like being a wiser steward of your money. So things like, how do you actually start tracking your money and being wise toward with that? How are creative? What are creative ways to pay debt? Because that’s what I was doing. A lot of people ask me, like, How’d you pay off over a million dollars debt when you were flat broke? Because I didn’t go bankrupt, so I didn’t wipe it out. I said, Well, I use, like, this strategy called cash flow index that I created, which is basically what’s the highest ROI loan that I could pay off, right? Like, which one, if I invest X amount of dollars to pay off that loan will give me X amount of dollars of cash flow with the highest ROI, right? I was looking at from that standpoint, versus interest rates and stuff. (That’s right). So anyways, I mean, I mean, I know that’s not the whole focus of this, this episode, but long story short, I was able to eventually dig out of the debt hole. I actually built a whole business model. Even companies like Wolf factory started using my stuff, you know, that I let them use after I launched and did money ripples, you know. And it was awesome, like I got to myself to the point where I was able to get out of the rat race the second time, by the end of 2016 it was actually December of 2016 I was like, I did the math. I’m like, I’m out. I have enough passing.

Justin: When you now find out. And this is one thing I think all of you out there, real estate investors, you have to understand, when your monthly expenses are covered by your passive income, you no longer have to work,right? And you found a way to do that twice effectively. Now economic things happened where you got caught right? And you had to go back into the game, and then you were able to recreate it. And so I think that’s a very common thing, by the way, for most entrepreneurs, if you’re out there, is there are seasons, and you are king of the mountain during one season, and then you are, you know, just a commoner trying to fight your fight each and every day, and that is normal. Anyone who I’ve ever seen at any level, anyone I’ve interviewed here on these podcasts that have you know extreme success has gone through those peaks and valleys. So that’s common for all of you out there listening to it. So you’ve been able to, now twice, be able to create enough passive income to effectively choose to work or not?

Chris: That’s right, exactly like I don’t have to do I honestly like, even though I have the company money ripples, I could shut it down today. My whole team knows it, yeah, just know that I’m passionate enough that I got to do something, because I can’t just sit around and do nothing, right? Especially because I feel like I was given this God given opportunity to actually do something with better, with my life, to help others too, and create that ripple effect through people’s lives. Hence the name Money Ripples.

Justin: Money Ripples. And that’s a podcast that everyone should be going and listening to. Money Ripples on Apple, moneyripples.com everyone should be going and seeing money ripples, checking it out, listening to more. Chris, keep going, brother

Chris: That’s right, you know. And this kind of is a bonus for you guys. If, if there’s anything I learned from going broke and getting out of the rat race twice, you know? I’ll tell you this is that if I were to start over again, one thing I would do is I would remember these, these three things is get lean, get liquid and get out, right? Get Lean is just like, you know, and I saw a lot of guys in the real estate space, especially because I, I mean, masterminds, a lot of flippers and wholesalers and such, and the ones that were really living a little fat and happy, both personally and in their business too, they’re the ones that had to pivot the most, and pretty much were out of business as well. So, I mean, so get lean. Don’t have to be cheap. You don’t have to live on rice and beans, cut out your latte, all that stuff. You can still enjoy life, but just be a wise steward of your money. Make sure you’re tracking it and watching it like every week, business and personal.

Justin: I would know that. I mean as as an investor yourself, and then being in these masterminds with myself and others like you know they’re not doing that. You know, 99% of these investors flipping homes, wholesaling, they are not tracking their money, probably even quarterly, let alone every single week. What? Let’s just talk about that. Let’s pivot the conversation a little bit. What do you advise all those, you know, wholesalers, fixing flippers, that are creating a bunch of this active income, they they potentially are living high on the hog or not, whatever? What’s some advice that you can give these individuals that’s helped you create enough passive income? Right? The idea is, I want everyone to realize fixing, flipping and wholesaling is great. I love it. I still do it today. It’s active income, though. But I also have bought three different apartments so far this year. I bought, you know, 28 single family doors like I’m doing both. What I want to hear from you is, what do you recommend to everyone out there that is actively flipping and wholesaling, creating the academic income? How can they think more like you?

Chris: Yeah, you gotta, you gotta think like, can I survive, even if this business is shut down today, right? If all sudden, like, the government comes out and says, You know what, you can’t do your business anymore. You’re done. Like, can you quit today? If not, then you gotta start building towards that. That’s why you got to get lean, right? You got to start tracking your money. If something does change, you need to know exactly what your burn rate is? How, what are your expenses like, every single week? You got to know that kind of stuff, right? You got to know how much money is actually coming in. We’re supposed to be coming in. You know, watch it. It’s like it’s, it’s really a natural law of the of the universe, if you really think about it, right? It’s that law of attention. Whatever you put your attention towards will expand and grow. Well, whatever you ignore will leave you. That’s like the law to atrophy, right? Because, for example, if I don’t brush my teeth, if I ignore my teeth, I won’t have teeth anymore. If I ignore my spouse, I won’t have a spouse anymore. You ignore your kids, you probably won’t have kids anymore, right? And if you ignore your money, it won’t be there either. It’ll leave you just like everything else will. And so you got to make sure you’re watching it. And that kind of goes along with that get liquid. That’s essential. The one problem in the financial world that they teach you to lock your money up in prison. Lock it up in IRAs and 401KS, you know, even if it’s Roths and stuff like that, they tell you to lock up in your house equity, you know. And I’m not opposed to people if they want to pay off their house, if that’s the case, awesome. But I would not do that unless I had so much extra cash that I couldn’t even do anything with it, right? Because the mistake I made in the last recession, in the Great Recession, back in 2008 was I threw in extra money in my house because I was. Mortgage broker. I figured if I ever needed cash, I’ll just get a cash out refi and have it done. But you know what happened? I even throw in more money. I actually finished off a basement in the new McMansion I bought threw a bunch of money into that I had now 150,000 equity. When I went to the bank in July of 2007 they said, Oh, you know what? We just changed some rules. Get your credit score up two points, and then in August you could refi. So I got it up over two points, just like we said August. I said, Here I am. You see the credit score? It’s good. They’re like, it is good job. Well, we just changed some new rules. Now you need to do X, Y and Z, jump through these hoops, and then we’ll give it to you in September. I did all that. I go back in in September, and they said, Sorry, we don’t give any more loans to investors or business owners.

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Chris: Yeah, so when I had that property, that they wouldn’t let me cash out refinance anymore, that money was trapped. And of course, you the rest is history. The markets tanked and all the equity disappeared, which is why eventually I foreclosed in that property. I tried to short sell it. It was owned by Lehman Brothers, and they didn’t want to short sell. So eventually I did get a $300 settlement for, you know, fraudulent mortgage practices from that company. But, you know, that’s the thing. Is, like it was trapped in there, I would have been better off weathering that storm, had I had that cash in hand, not sitting in equity in my business, in my mortgage, right, my house. So that’s the big thing about getting liquid, is get your money out of prison. Get it liquid, get it available to use. And it might be more than you think, especially if you’re in real estate. I mean, I remember talking about this with Steve Trang, if you guys ever, you know, follow his stuff. We were talking on his show before and and I remember he’s like, Well, how much should they have? I was like, well, at least six to 12 months of your expenses. But if you’re in business and you’re paying for marketing and stuff, I mean, if you’re just flipping, that’s one thing. But if you have a business where you do a lot of marketing as well, it might take nine months for that marketing to work, you might need 12 months of expenses just sitting on the sidelines. You might hate, because you feel like it’s not doing anything, but it’s essential. Anybody who’s made a lot of wealth has learned you’ve got to have a good chunk of money on the sidelines that’s not being invested, because you’ve got to have it there, just in case. And the person with that that money is the person that’s going to control the terms, that’s the person that’s going to win, no matter what.

Justin: Do you think they should be like quite literally holding it, or do you think they should be utilizing it, lending it, investing it at higher returns, in a safe way? What do you think they should be doing with that money?

Chris: You         know, most for the most part, holding it, right? I mean, maybe short term stuff can work. But you know, I mean short, even Short Term Lending. If it’s gone for like, six to eight months, it may not come back if it gets caught up in some crap, you know. So I like to keep it liquid, and here’s what I do, right? So, I mean, the last year has been funny, because we’ve had, like, banks, like, Signature Bank and, you know, and whatnot, where they’ve, they’ve had some failures, and then all of a sudden it just stopped, like, oh, you know, there’s been a random few bank failures here and there, but they don’t really talk about it. I don’t trust banks honestly, so you can store money in the bank. And in fact, I was a member. We were at a mastermind group together. This is last year when we’re at this mastermind and we were having a breakout meeting, and someone, someone was asking, is actually one of my clients. He’s like, well, where do we hold off our cash? Because Chase Bank is treating me like crap right now, I’ve got millions with them, and apparently that’s not enough for them to treat me right. (Right). And it’s like I said, Ron like, Listen, you already know the answer to this. You already know because what you’ve already got money sitting over here doing like, you know what we call it, strategy, called Infinite Banking, right? It’s like you already got money sitting over here. Earning better than the bank. It’s tax free, and it’s protected from lawsuits and creditors. You already got money here. Just get your money away from the freaking bank. And so even in my situation, like I have a little bit of money in the bank, course for quick, easy transactions, but I keep the bulk of my savings in a place where it’s tax free, protected from lawsuits and creditors, and I’m making more than point nothing percent, like my bank pays me right now, and I’m I’m making like, five to 6% a year tax free, just letting it sit there.

Justin: And because I have one of these policies,

I would tell all investors, you guys really got to listen up, right if you’re a real estate investors, because you want to have your money work for you while you’re sleeping. Essentially, 5 or 6% may not sound sexy to you. What can be sexy is the opportunity to borrow from it, lend it out, create arbitrage and repay yourself tax free, right? Talk, talk to the investors about that, right? You’re a real estate investor, but you think as a true investor. And what I mean by that is you don’t just think about real estate, just like I don’t, right? I have multiple, I mean, I don’t even want to go through the laundry list of investments I make. But, you know, talk to the real estate investors about this concept, because people will make the argument. And you know this, because this is your whole business, people will make the argument, yeah, but what if I need the money? So let’s talk to that point.

Chris: Exactly, yeah, I’ll tell you. So I first, I first learned about this strategy, specifically, like, right about, actually it was 2006 when I started learning real estate investing. All these real estate investors telling me about this infinite banking thing, right? And as a financial advisor, I’d never heard about it before, and it was pretty new back then. It wasn’t as hot as, like it is on YouTube right now. I mean, heck, I put infinite banking on my in my title, and all of a sudden I get more views on my YouTube video than at my other podcast, right? But I’ll tell you like, I first learned about it, and they referred me to the guy that was doing it for them, and I remember seeing it, and remember I was insurance licensed too, right? I had been, I had been securities licensed. I’ve been insurance licensed. I knew about life insurance, and so they’re showing me this whole life policy that they’re saying, Hey, you can be your own bank. You can pay yourself back, you know the whole Nelson Nash “Be Your Own Banker” book, which is a good, decent read to get an intro to it. But I was like, Okay, I read the book and everything, but I’m looking at how you design this policy. And the first two years I’m throwing money in, I have zero cash in that tax free savings account, like it’s all going to pay for my death benefit. You’re paying, making me pay thousand bucks a month to get, like, a million dollar death benefit. But I have no cash in here, not until year three, and even then, it’s just not much. And I said, Is there any way I can make it better? His answer was “No”. If you try to put even $1 more into this thing, it’ll get it’ll get taxed, like, it’ll, you’ll trigger a bunch of tax and stuff. So don’t do that. Okay, I’ll take your word for it. I trusted the guy. He was a friend. I was like, fine. Well, guess what? 2008 hits, I can’t I’m in the whole $15,000 a month, right? So, I can’t afford to pay 1,000 bucks a month. I called the insurance company like, is there anything I could do? They said, “No”, you got to pay 1,000 a month or you lose this thing. I paid 15,000 grand at this freaking Infinite Banking policy, as they talk about, and it basically got canceled. It was like the most expensive rip off term I could have ever purchased. (Yeah) Usually the kicker, though, about several months later, I’m talking with a friend who also bought a policy from the same guy, and he said, You know what I found out, you can actually have cash from day one in there. I was like, Are you kidding me? I had asked that guy point blank. He told me, “No”. So, I started doing my own research. I started doing my do my own thing, even running my own numbers with other companies, doing it myself. And what I find out, I could have actually had cash from day one.

Justin: So this guy did not know, or did he not, like, you like, why would he just not what was the story there?

Chris: So, I confronted him about it, and we actually had a two hour debate in our office about this thing. In fact, it got so loud and heated that the assistants outside the door could hear us yelling and and I said, he’s like, Well, the death benefits the powerful thing you need to have. I’m like, screw the death benefit. I want cash. You know, I’m an investor, right? And, and so, so finally, like, he’s like, Well, you know, we got to make it apples to apples. So, up the ante a little bit, right? I say, Fine, I’ll make I’ll match your death benefit, but I’m going to do it this way, where I can have cash from day one. And guess what? I beat his numbers. And after I knocked every objection, finally, at the end of that two hours, he said, Chris, I designed it that way because I could not afford to cut my commissions. There.

Justin: There you go. That’s always what for me I need to make commission, so I’m going to do whatever I can make the most commission.

Chris: Oh, yeah and this is the guy that would verbally speak. And again, this guy normally would give you the shirt off his back. I mean, a good you know, always about being a value creator, but right there, it’s like, you are in really a professional insurance agent. You’re You’re not an investor, you’re an insurance agent posing as an investor, right? (Right). And so, I was pissed. I was like, I’m gonna send you a referral again. And that’s where I spent, really, the next 15 years, like finding ways to do it, and I couldn’t find anybody to do it consistently. I mean, even the guys out there, you see these infinite banking videos, you know, I even wanted to refer my clients to them. They wouldn’t consistently do a good job. They wouldn’t do the best job where they minimize those fees as low as you could possibly go, because they don’t want to cut their commissions. And so eventually, like I finally in 2017 I took it under my own roof. I just said, fine we’re gonna do it inside of Money Ripples, because I can’t find anybody else will do it right. In fact, that’s the one thing kind of got me out of retirement. The second time was, was one, because there was a podcast host that was really begging me to do it. But two is because, honestly, like, I couldn’t find somebody to do it right. And I, my business motto is this, or my kind of, my own little personal mantra is that if I can’t be the best in the business, I don’t do that business right? Like so that’s why we only do two things. We do passive income consulting, we do the infinite banking. But I mean, that’s why I was so pissed that the industry allows that to happen. And you’re right. Sometimes the agents don’t know how to do it. That’s the vast majority. But those that teach infinite banking, many of them do know how to do it, but they won’t do it because it will cut their commissions. Or two different insurance companies pay different types of commissions. I mean, there are insurance companies that offer to pay me more money than when I’m getting paid for certain insurance companies because, well, they charge it, they pay more money, but they also charge the client more money too, right? So it’s kind of catch 22 like, yeah, okay, you can pay me a higher percentage, but the problem is that the client doesn’t get it. And so I always tell those same companies, even companies like MassMutual, I’m like, all you have to do is beat these other companies numbers. I’ll write MassMutual. I don’t give a crap, right? Like, you just give me the best dang thing I can get for an investor, where I have more cash from day one. And so when people are worried about Infinite Banking, not having cash available, I know exactly what they’re talking about, because I was in that same problem back in 2006 through 2008, right? Because my money was just going to pay for the really, for their insurance costs, which pay their commissions. So when you see people saying, well, we need, like, a 60/40, blend and stuff like that, it’s like “No”. That’s just a, it’s like a, it’s kind of like a medium point. They’re like, well, it’s still not the best for the client, but at least it’s better than the normal way. So I’m kind of meeting them in the middle. It’s like, that’s still crap. If you do what’s right for somebody, you’ll you’ll make plenty of money.

Justin: Yeah. You know, the the reality is, why this is so powerful for a real estate investor is because you can become you yourself have been a private money lender. You can, you know, lend into your own fix and flip. You can lend into your own earnest money deposits for wholesaling. You can lend to other people, of course. But you know, going back to the the real estate play, like having something like this that keeps your cash liquid and then you can utilize so it’s not actually ripping from your actual bank account, in the sense of, like, using all your money. Talk to us about, like, how a fix and flipper is best going to utilize a policy like this.

Chris: Yeah, the best way. I mean when I said, like, storage of cash. If you need that war chest, just in case. Don’t let it stay in the bank, where you get, you know, you make maybe point nothing percent, you get tax on point nothing percent. And even the high yield savings accounts, they might pay almost the same rate, but you still have to pay taxes on that. Right? I love the fact that I don’t have one more tax form to deal with at the end of the year. I don’t know if you guys are the same way, but I hate that I get tax forms from all different sources, then I got to send all to CPA. I don’t have to worry about taxes. It never gets taxed, right? It’s kind of like a Roth IRA that way. But I can actually access the money whenever I want, even from day one. So that’s one reason I use it. The other way I use it as a real estate investor too, is not just having that word chest, but it can be leveraged in different ways to. One at Walt Disney, right? I mean, obviously we know he created the happiest place on earth, apparently. And you know, there’s no…(Maybe not anymore a secret, maybe not). It’s happiest place on earth when I don’t go with my kids, sometimes I’ll tell you that much. (There you go). But it’s cool with kids, but at the same time, it’s kind of cool being an adult, too. But after he did Disneyland, that was a success. And so, he started looking at the swamplands of Florida, right? You know, this crappy little swampland area. And he was going, he was privately trying to buy it up. And he went to the banks. He said, hey, I want to get a loan so I can go and develop this. I want to create another amusement park the bankers like, you know, we loved you, but let’s be honest, he didn’t do the best, you know? I mean, that’s one time thing. Doing it again on a bigger scale, I’m not so sure about that. And so they gave him the condition to say, if you were to give us some collateral, we’ll give you some money. And so he went in. This is in his documentaries and books and stuff, he did a cash out refi from and got a line of credit against his house, and then he used his life insurance policies, the cash value from his whole life insurance policy, as collateral, so they would give him the loan. And then the rest is history, right? And even other business owners have done it too. I mean, Pampered Chef. Your wife used a Pampered Chef. It was. That was a seed money for starting it was using their life insurance policy, McDonald’s, Ray Kroc, when he bought out the McDonald’s brothers, he was paying the executives from the life insurance policies that he owned, you know? JC Penney’s done the Great Depression, paid their payroll during that period of time, and was able to weather that. Now, they couldn’t beat 2020 that got them, but they did at least make it to the great depression because of it, you know? So it’s not, it’s one of those things that it’s a good pool of money, but, like it says, protected from lawsuits and creditors in most states, 100% you could have millions of dollars sitting in here, and if you have money in the bank, they can get that money right away. If somebody sues you and wins, it doesn’t happen here. The cool thing is, if you got kids, you want to get them to college, guess what? That money doesn’t count as an asset for college. So if you’re trying to get them scholarships and financing that you could have millions in there, and it doesn’t count against you if you had, like, a 529, college savings plan. So many people will use this as a savings plan for that, even for mortgages. I’ll actually use the statement for my life insurance to show that, yes, I’ve got collateral. I’ve got money. Another way you can use it too as collateral.

Justin: Now, is that only the cash basis, or is it the entire policy?

Chris: It’s the cash, not the death benefit. It’s the cash.

Justin: By the ways, let’s also talked about that you actually get death insurance, right? Life insurance, which you know, for those of married and kids, that can be important. So let’s not totally forget there’s an actual asset, which is, if you pass your your family can be taken care of, right? So let’s, let’s not overlook that too far.

Chris: Definitely not. No, I’ve had that, seen that happen time and time again, too, but, uh, but yeah. Like, even, even, actually, the death benefit does work. If you ever get business loans, like, when you do business loans, a lot of times, they’ll ask some insurance policy, like your death benefit, they want to have a claim to that in case you die before you pay off the loan. You can always use that too. So you’re not just, you know, you’re not even using cash. You’re using just the death benefit, which is much higher amount than the cash. Another way it’s kind of a cool strategy with real estate is I had one client where he had like, 300,000 sitting in his cash value of that life insurance account. He’s like, you know, Chris, I think I’m just going to cancel and cash it out. I’m going to cash this money out, and then I’m going to use this to go buy a buy a property for my office building. And he’s like, I’m going to get renters and everything. I said, Hold on, Sparky, let’s slow down here a little bit. Why don’t we go to your local bank, your credit union, whoever you have a relationship with, and let’s just see if they’ll use this as collateral to get a loan. And so he did. He went to the bank. They said, Well, yeah, we got the building, and you got this as collateral. We love it, and we’ll give you extra money for the build out, you know. So they gave him more than what he had in cash, in the in the policy, because, again, it was a real estate property. But here’s the cool thing, the the going rate at the time for a commercial loan was about 6% they gave him a loan at under 4% was like 3.75% so he got this dirt cheap interest rate on the loan, on the mortgage. So his payment was like 1800 bucks a month for 375,000 he went ahead, built it out, got a renter that was more than paying his mortgage payments. So he was basically officing in his office, rent free. A year and a half later, he went back to the bank. He said, Let’s said, Listen, it’s all done. It’s developed. We saw the real estate as collateral. Can we take the lien off my life insurance now? And they said, Yeah, and we’ll leave the terms the same. Now, if he had just cashed out, uses cash, like every other real estate investor, he would been paying probably about 6% on his mortgage. But because he used that as collateral, he was able to negotiate it down to 3.75 and keep it there fixed rate at 3.75 I guarantee he’s not changing that mortgage anytime soon, right?

Justin: So, no. Now this really interests me, because I obviously have this policy and probably even getting more, but he didn’t use his cash or did he use his cash in this scenario?

Chris: No, he just uses collateral. So, they locked it up him in agreement that he wouldn’t use it, right? So, they basically became like the, kind of like a partner in it, in a sense, right? They became like the lien holder on it, so he couldn’t access more cash. Now, if the cash grew above and beyond the amount that they designated, which was like 300,000 he could use the extra amount.

Justin: Which it does ,right at the end of the day, thats doing 4, or 5, 6% in growth.

Chris: Exactly. It’s growing and compounding. So, yeah, you still get access to that extra cash anyways, but, yeah, eventually that 300,000 came back, and he’s able to use it forever he wants. And that’s the next part that’s most confusing for people is, you’ll hear out there, and I actually teach it too, is that you can double dip, right? You can get your money to pay you twice if you use the strategy versus using a savings account. So for example, most people there in real estate space, are in for flipping right? A lot of times you’re if you’re using your own money, you’re using your own cash, you put into the deal, and then as it comes back out, you put the replenish the cash, put it back into your account, even as your point, Justin, like you and I are doing, like we do rentals as well. You know, if we keep for more long term, create more passive income, so we can be free that way. I mean, even then you use that cash flow to kind of rebuild that saving accounts so you can rebuild to a certain point, then you can reinvest it, right? Same thing, but if you use your life insurance, you get an added benefit, because just like before, here’s you can withdraw money from from your life insurance. You can withdraw it just like a savings account. But here’s the problem, when you withdraw money out of a savings account, you lose the ability to earn interest on money. Yes, you should invest it, and you earn money in that investment, but it’s not like the safes accounts are earning interest anymore. If you deplete that save deplete that savings, you’re not earning interest inside the savings account, right? Well, what if you can get a secured line of credit against it? Because you can go to your bank, you can have a savings account your bank, you can go to the bank, say, can I get a secure line of credit against my savings account? Lock up the money in there so that you don’t touch the savings account, but then they give you a line of credit so that you can use that money to invest. Now, Mr. Banks, don’t give you the greatest of terms, but life insurance companies, they do. Life insurance companies, they give you about the same loan rate as about what they’re paying you on that money. Yeah? So if you, so say you have $100,000 sitting in there right now you want to borrow, let’s just say 100,000 even though it’s 95% you can access. Let’s just say it’s 100,000 for easy math, yeah, you borrow $100,000 you go and, you know, use that into each of your flip right? And you’re doing stuff. Here’s the cool thing, when you borrow the money from insurance company, there is no minimum monthly payment. You pay it back. However, whenever you want, the deadline for paying back loans to the insurance company is your death, and they just take it out of your death benefit. But anyways, right? And then pay the rest of your family tax free.

Justin: So if you take, let’s just use an example. You have 100 grand there, you borrow $30,000 (Yeah), for whatever reason, you technically don’t ever have to pay that back. There’s no interest accruing. And if you die, and we all die, so when you die, that’s when the $30,000 comes out of the death benefit, which, let’s just say, if you have a million dollars in death benefit, then you’ll get $970,000 of death benefit. Is that correct?

Chris: That’s correct, except they do charge you interest. So they do charge you interest, but the reason that they don’t really require a payment is because at the same time they’re charging you interest, and that’s growing, you’re also growing and compounding your money and interest over here, right? So usually it’s, it’s secured, collateralized, because they’re kind of both grown together. Now, if you did that, I mean, eventually you really don’t win. So the only way you could win in that situation, this is where there’s a lie out there. People will say, like, you know, there’s guys out there will say, you pay yourself back, right? You pay yourself interest. That’s BS, you do not pay yourself interest. You’re paying the insurance company interest. But the half truth that they try to, you know, weasel you on a little bit, is that, yes, the insurance company’s paying you interest on the cash that’s in that account. Because, like you said, if you have 100,000 you don’t pull any money out. It’s still earning interest on that 100,000 bucks, even if you borrow 30, right?

Justin: So, if you borrow all of it, let’s say you rip out all 100 grand. Are you still earning

interest? Yes, exactly. So you’re still earning interest on 100 grand because you’re just getting a line of credit from the insurance company’s money that they’re giving you. And yes, there are banks that will do it, but right now, the bank get straights aren’t as good as the insurance companies currently. But two years ago, I was getting bank lines of credit at 3% while I’m getting paid almost 6% on my money. I mean, do the math, it’s pretty freaking awesome, and then I’m still investing it and making money on the investment too, right? But even if it’s the same rate, even if it’s like I’m paying I’m earning six and paying six, that’s okay, because if I take the cash flow from that investment, say it’s paying me a thousand bucks a month, I’m using that to pay down that line of credit. It’s charging me less and less in interest, while on the other side, my 100,000 is compounding more and more interest. It’s going like this curve where the interest is going like this. So you can actually there’s, they’re not the same interest. There’s compounding interest and there’s simple interest. Simple Interest is cheaper than compounding interest. If you use the cash flow, start paying now that loan. What happens? You start making a spread. You start making more interest over here in your account, and you’re still earning all that thousand dollars a month on your investment. That’s reading that double dip effect. That’s why, even if somebody says, you know, if they’re a passive investor, they’re like, hey, I can get, I can do a hard money loan and get, you know, pay, and get paid 10% on my money. Well, cool, if you use this strategy, you know, over time, that could be 11, 12, 13% rate of return on your money instead, so you’re able to get money paying you in two places at once.

Justin: Well, right? Why wouldn’t someone just borrow from their let’s just use 100 grand. You borrow 100 grand, you lend it at 10% interest, but then you’re still making 1% interest, even though the money’s gone one 2% interest, right? That’s right, your point, right? You’re making the 10% from the borrower, and you’re making one to 2% from the insurance policy. You replenish it when the borrower pays you back, you have more money than if you wouldn’t have right? Because, you know, instead of 6% you made 10% Yeah, and it’s all tax free, correct?

Chris: That’s right. Everything’s running their tax free. Now, your investment it is still going to get tax. How it gets taxed? But your flipper, your real estate professional, right? You’re basically writing off all that stuff. Anyways, you’re doing that. In fact, if you’re a business starter, the cool thing is, if you use it for business purposes, you’re also writing off the interest that you’re paying the insurance company. So it’s almost like a triple dip in that sense, because now you’re now you’re getting even more leverage on that. Interest that you’ve been paying.

Justin: Are you paying taxes on that 10% that the borrower gave you, or you’re just putting that back into insurance policy?

Chris: Yes. So if it’s just borrow, like, hard money lending, if you get whatever the normal tax taxes are happening, it’s going to happen that way. Yeah. (Okay). Exactly. So. But if I do, like, a real estate deal, and I’m depreciating the asset from the real estate that I bought, right, that, you know, I’m getting all that money with all the tax benefits. So that’s the one reason why, you know, you have people out there saying, oh, put your real estate in IRA. It’s like, screw that. No, like, I lose the tax benefits. I don’t want to do that. I want to get my real estate growing again, all the depreciation, all the tax benefits I can get. 1035 is there 1031 exchange and all that kind of stuff, right? But, yeah, that’s, that’s how it really works, like, and that’s the thing. Like, if you don’t pay back the loans, then yes, it’s compounding against you, right? But if you do that whole cycle of putting the payments in to cycle the money, which is what most people are doing, they’re trying to get the money to go in, build up, reinvest, and do it over again, even short term, it works great. I mean, I did it with a guy recently. He was actually a syndicator. He had a deal that I was in that was basically, he just needed three more months time to get it sold, but he was out of operating capital. So I said, Here, I’ll give you $50,000 loan for three months. He’s gonna pay me 15% interest. I’m like, sweet. So he did, like, you know, three months later, returned my capital after he sold the apartment building, got my money back, and I just go, went and paid back for my life insurance. So I used that life insurance money that 50,000 from there. Yes, I had interest being charged, but he also paid me interest that more than did that, and I was still earning interest on that money. So I’m making again interest in two places at once to still offset that interest. So the reason that flippers like it the most, though, and I’ve noticed especially, is because the one thing they hate is especially if you’re trying to, like, do a project, say you’re, like, doing a renovation with us and everything when you’re flipping it, and maybe it takes six to eight months if you try to use your home equity line of credit, you gotta pay on that even if you haven’t made a dime. Where with this, they charge you interest, but they’re not requiring any monthly payments, so it doesn’t kill your cash flow while you’re trying to work, right? So even if the project goes long, great, it goes long. Yeah, that’s okay.

Justin: I love Listen, Chris, I could literally just sit here and pepper you, but I want the people to get a hold of you, because they’re going to have very specific questions on their business. They’re structuring all that. So, we have https://moneyripples.com/. We have Money Ripples. Podcast, Instagram, is it all Money Ripples? It is everything’s Money Ripples. You guys need to sit down with Chris his team, because obviously what you’re hearing me ask is what you guys should be asking. I’m already sitting here through this podcasting of all the different things that I need to be doing, opening up more policies, etc. Brother, I appreciate you being on The Science of Flipping all real estate investors need to know this and get a hold of his team. Hey, listen to his podcast, but also get a hold of him. I’m sure you respond on Instagram and all those things, and talk about your scenario. A couple big takeaways. I need you guys all to understand. You need to understand where your money’s at, weekly, monthly, quarterly and yearly. But then you also need to think like an investor, a true investor, how is your money working? It should not just be sitting. It needs to be working. And that’s why you want to get a hold of Chris brother, I appreciate you. Thank you for coming on.

Chris: Same here, Justin, thanks so much.

Justin: All right, y’all that’s it for The Science of Flipping this episode. We’ll see you on the next one. Peace.