If you’ve been in the real estate investing world long enough you may have dabbled with the idea of getting on the other side of the table and being a private money lender. After all, when you started out in the real estate world, chances are you were trying to utilize friends and family’s cash for short-term private money loans for your rehab before you built relationships with good lenders. Or, perhaps you haven’t been interested in wholesaling and rehabbing but have a sum of money and want to jump right into private money lending and help others get started in their business.
As with any endeavor, we always recommend you meet with a lawyer, establish your business, get the required insurance, and learn the ropes. As you explore your options, you see there are limited places to store your cash while it is not loaned out.
Most of us think that savings accounts are the only option. It’s a good starter place to store cash, quickly accessible, and you know right where your money is located. Savings accounts sometimes earn the .05% interest rate while just sitting, but then you receive an insulting 1099-INT at the end of the year and have to pay taxes on that interest! At least you made good money while it was being loaned out. Other high interest yield accounts are also popular, or perhaps qualified accounts (i.e. Self Directed IRA, et al). In each case above, your money is growing on what remains in the account. The money outside is the real money maker.
Have you ever considered Whole Life Insurance as a place to store your money?
Properly structured whole life insurance from a mutual carrier can be substantially advantageous as a place to store your wealth. The single most advantageous benefit (in the context of this conversation) is that when accessed correctly, the money inside your policy is growing uninterrupted even while it is loaned out. Let me say that again. Your cash value grows year over year as if it never left even while it is loaned out to someone else!
For example: If you have $200,000 in cash value stacked up in your policy, and the cash value was projected to grow by $25,000 that year, it would still do so, even if the $200,000 was loaned out the entire year to a real estate investor.
Your cash value grows and you made your gains on the money that was loaned out. The growth in your policy is income tax free… when structured and accessed properly. The cash value grows as if it never left. You have living benefits and a death benefit. And that’s just the start. There is simply no other vehicle in which you can do this.
Every real estate investor should be exploring this option now. Let us help you take advantage of the most secure and profitable place to store your hard-earned money.
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**Jason K Powers is a Multi-Business Owner, Real Estate Investor and Wealth Strategist teaching people how to create financial velocity that can last generations.