Access Wealth Strategies

A few weeks ago I interviewed Korbett Roberts from Benefit Concepts on the subject of life insurance.

Now life insurance may not be an exciting topic at first glance. However, getting a life insurance policy is one of the most important decisions you will ever make, which can greatly impact the lives of your loved ones far beyond your lifetime.

With the myriad of choices on the market today and conflicting advice from salespeople, it can be very difficult to identify what kind of life insurance you really need to properly protect your life’s work and your family’s lifestyle.

Korbett and his team at Benefit Concepts are experts in using life insurance as a strategic asset to serve a variety of purposes including estate planning, business succession, retirement cash flow, etc. for their clients, most of whom are affluent business owners with over $10 million in net worth.

Click to listen below to this informative 2-part interview which covers a surprising array of creative uses of life insurance that you may not know about.

Part 1 of this interview (28 min.) covers:

• Life insurance in a nutshell
• Some examples of the benefits of owning a life insurance policy
• What kind of protection is there from law suits and creditors?
• Term vs. permanent
• What kind of tax benefits are there?
• Getting cash flow via a policy loan
• How can a business benefit from purchasing life insurance?
• How does life insurance fit into estate planning and keep your estate out of costly and public probate?
• Why you should be concerned about your state’s estate taxes
• What are the disadvantages of buying and owning life insurance?

Part 2 of this interview (24 min.) covers:

• How to choose the right life insurance agent for you
• What questions should you ask an agent before working with him or her
• What are the most common mistakes people make when purchasing life insurance?
• What is the most important thing to get right when purchasing a policy?
• What is life insurance portfolio analysis and why is it critically important especially if you have purchased a policy in the last 3-4 years?
• How Benefit Concepts helped a client turn an unneeded policy from a $250,000 annual expense to a $2 million gain
• What does it mean to “leverage” life insurance?
• What are some ways to fund a life insurance policy without using current cash flow?
• How to compare a life insurance policy performance to other investment vehicles to know you’re putting your money in the right place?

To learn more about this topic or ask follow up questions, contact Korbett Roberts at Benefit Concepts.

Please comment below and tell us how you liked this interview and how we can make it better.

Do trillions of dollars of failed loans and losses lead to great lending times?

With the recent collapse of the credit markets, the economy, real estate prices, and the stock market, lenders around the world will take massive losses on their loan portfolios. Large lenders such as Washington Mututal, Indymac, and related entities have already failed.

The write downs on collateral and loan values could make most (if not all) lenders insolvent. So doesn’t it seem strange then that lending on real estate assets could deliver both a high yield AND safety (low risk)?

As strange as it sounds, hard money lenders are well positioned in this market cycle to generate the highest income with the most security. Let’s look at why.

Why Are Hard Money Lenders Needed In Today’s Market

In today’s market with a huge inventory of distressed properties such as foreclosed homes and even commercial real estate, investors and “flippers” are buying these properties at a huge discount.

There’s only one problem: These distressed deals usually require a quick close (sometimes as little as 1 day at a trustee sale auction).

Most traditional lenders would not be much help in these scenarios – not that they are willing or able to lend money on real estate purchases these days. Even if they were, it would take too long (45-60 days) and require perfect credit from the borrower.

Of course, deep-pocket buyers could pay all cash to buy the distressed properties all day long if they wanted. But what if they want to buy but don’t have enough cash of their own? Or, they do have the cash to buy one property but want to buy multiple properties at the same time?

For some experienced flippers, the number of properties they can buy at one time can make a huge difference in their bottom line profit.

Enter the hard money lender, who can fund deals quickly and is willing to overlook the borrower’s less than stellar personal credit, as long as the property meets their deal criteria.

Typical Hard Money Loan Terms

• Short term: 6 to 18 months
• Application or due diligence fee around $500 to $1000
• Origination points 0% to 5%
• Interest rates 10% to 18%
• Prepayment fee (if the loan is paid off earlier than expected)
• Recorded first trust deed (lender has first lien on the property)
• LTV of 60% to 80%

Why would hard money lenders fund deals that traditional lenders reject? We’ll discuss the 2 main reasons in Part 2. Meanwhile, please add your comments and questions below.

You may remember my recent post “Should You Own a Laundromat?” where I briefly mentioned the merits of owning a coin laundry business.

If you are intrigued by the prospect of owning a cash flow business like a coin-operated laundromat, you might want to listen to this recorded interview of Brian Brunckhorst, a friend of mine who owns several laundromats and has developed a system for acquiring, operating, and optimizing the performance of a coin laundry business.

Click below to listen to my interview of Brian Brunckhorst on the in’s and out’s of the coin laundry business and why you might consider it as a “wealth vehicle”.

Note: the interview is about 45-min. long.

For more information on how to acquire, operate and optimize a laundromat to create income and wealth, please visit: www.LaundromatSecrets.com.

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In Part 2 of this series on achieving a 10% or more consistent cash flow on invested capital, we established that this type of cash flow is difficult to achieve passively – i.e. with the investor outsourcing the selection and management of the underlying asset, whether it’s a business venture, real estate or something more “unique”.

At the end of my last post, I outlined a few things that investors could do “semi-passively” to get closer to the dream.

The good news is, if you are willing to “front-end” the work of asset selection and management, and learn to identify and hire good asset managers, you could be living the investor’s dream in a few years.

Here are some examples.

Franchises

Franchises have a very high success rate of over 90% and the return on investment is typically double digit. However, a franchisee probably needs to take an active role in the business in the first 2-5 years to build up the business, implement the systems, and hire and train the right staff. Later on, the franchisee can pull back and enjoy the passive cash flow from his business while periodically checking on his management team.

Distressed Assets

A big opportunity in today’s economy is to identify and buy distressed assets at a significant discount to their current market value.  This typically requires access to a channel (deal flow) for buying these assets at a big discount.  The investor then needs to assemble a management team capable of “improving” the asset and realize its full retail value (or close to it).

We are seeing more and more businesses specializing in distressed real estate (foreclosures, short sales, REO’s) in certain markets and taking investor capital to turn these assets multiple times a year.

Alternatively, some “long term” investors are holding these distressed properties after they are “fixed up” to rent them out while waiting for the rebound in valuation.  In this case, they get break-even cash flow or better while they wait for what is hopefully a significant capital gain.

You can do the same thing to distressed businesses (brick-and-mortar or online), though it would probably require even more work and expertise.

Self-Renewing Assets

I have heard of someone buying land in the California central valley and planting a pistachio orchard. While it requires about 5 years of start-up time with no income and only expenses (water, maintenance, mortgage etc.), eventually it will become a self-renewing passive income source for quite a number of years.

The investing principal here works for orchards, fruit trees, forests, etc.  Once the trees or plants mature, it takes much less maintenance to keep up and you could literally “eat the fruits and reinvest the seeds“.

Laddering and Annuities

You’ve undoubtedly heard of CD or bond laddering - the practice of buying a pool of assets with different “maturity dates” (when you get paid back principal plus interest or gain) so that eventually you will have regular (say, monthly) maturity events, simulating “cash flow”.  Note that this strategy also requires a start-up period with no cash flow while you build up your income ladder.

Most investors use this laddering strategy with mainstream products like CDs or corporate bonds that pay low interest rates (3-4% at best).  Similarly, you can pay a lump sum to an insurance company and get an annuity (cash flow) yielding about the same amount. Obviously this is far below the desired double-digit return of 10% or more.

You could apply the same laddering principal, however, to higher-yielding assets such as private notes secured by some underlying business or real estate (see “Hard Money Lending” section below).

Hard Money Lending

Instead of buying publicly traded bonds or bond funds, you can create your own bonds by lending to private parties (usually businesses) who use your capital to generate a return exceeding the interest rate you charge as the lender.

In some markets today, private lenders are able to get double digit interest rates and the note is secured by some hard asset like real estate or equipment.

As a hard money lender your primary concern is the safety of your principal. The key to protecting against loss of principal is to make sure the collateral value far exceeds the amount you’re lending. The lower the LTV (loan-to-value ratio) the safer it is for the lender, who has the option to foreclose and own the underlying collateral should the borrower default on interest or principal payments.

When done well, hard money lending can be a win-win deal for both the lender and the borrower.  You can even structure your hard money lending deals to include back-end profit participation in addition to regular interest payments.  For example, this arrangement can work in distressed real estate flipping deals.

Of course, there are countless other ways to achieve good cash flow by investing a bit of sweat equity up front, limited only by your imagination.  Can you come up with some more examples?  Please comment and let us know.

Note: please do not advertise your investments or solicit investors in your comments – all such comments will be removed.