🎙 Passive Cash Flow Podcast EP.181 | Rich Person’s Banking Strategy with Roth IRAs
M.C. Laubscher, founder of Producer’s Wealth and host of the Cash Flow Ninja podcast, explains the concept of infinite banking. This financial strategy uses high cash value life insurance policies to create a personal banking system.
• Wealth Building: It allows you to build wealth by using a personal banking system to finance your business and real estate investments.
• Guaranteed Growth: Money in the policy is guaranteed to grow tax-free.
• Leverage: You can borrow against your policy’s cash value with a tax-free line of credit. This allows the money in the policy to continue growing uninterrupted while you invest the borrowed funds for a higher return.
• Legacy: The strategy provides a death benefit, which can create a multiplier effect for future generations.
🧠 Topics Covered:
00:00 – Intro
02:20 – What Is Infinite Banking?
06:00 – Family Bank Strategy
09:40 – How the System Works
14:20 – $1M Example
18:25 – Taxes & Roth IRA Comparison
21:30 – Misconceptions About Life Insurance
24:20 – Borrowing & Collateral Benefits
28:15 – How the Wealthy Use It
31:00 – M.C.’s Firm & Legacy Strategy
34:20 – Wrap Up & Closing
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This is not a solicitation for funds, tax advice, or legal advice. This is not intended to be, and must not be construed to be in any form or manner a solicitation of investment funds or a securities offering. Peoples Capital Group LLC is NOT a United States Securities Dealer or Broker nor U. S. Investment Adviser is a Consultant/service provider and makes no warranties or representations as to the listener or viewer. All due diligence is the responsibility of the investor.
Transcript:
00:00:32:09 – 00:00:51:24
Aaron Fragnito
All right, ladies and gentlemen, welcome back to the Passive Cash Flow podcast. I’m your host, Aaron Frank Nieto, and we have an interesting guest today with over 7 million downloads in the podcast space. Junior Joe Rogan here, practically. We have mic labs. Sure. How are we doing?
00:00:51:24 – 00:00:55:06
M.C. Laubscher
AMC doing fantastic. Great to see you, Aaron.
00:00:55:08 – 00:01:16:23
Aaron Fragnito
Absolutely. You know, I enjoyed coming on the Cash Flow Ninja podcast that you host. Which was years ago. I’ve been on it and, hopefully I can jump on there again. The future great podcast. You guys have some really powerful guests on there and, good, information. The if our listeners here haven’t heard the, the Cash flow Ninja, it’s a it’s a great podcast, I’m sure, on all the major platforms there.
00:01:16:23 – 00:01:17:23
Aaron Fragnito
Right.
00:01:18:00 – 00:01:39:11
M.C. Laubscher
Yeah. No, it’s, it’s been a lot of fun. And, I mean, time flies when you’re having fun. I can’t believe it’s since starting it in, what, 2016? It’s almost been ten years or so. Nine years of doing that show and still cranking out a show a week. So it’s, it’s been a ton of fun just, interviewing the best minds in business and investing and I’ve always been a lifelong learner and love.
00:01:39:13 – 00:01:59:01
M.C. Laubscher
I’m a curious person, so I love to learn. And, there’s just, always something that pops up under the radar that I’d like to learn more about. And we, we we have them on, the guests on to teach us more about it. So it’s been a ton of fun, and I’ve met some great people, such as yourself over the years.
00:01:59:01 – 00:02:01:23
M.C. Laubscher
So it’s it’s it’s been a lot of fun.
00:02:02:00 – 00:02:21:00
Aaron Fragnito
Thank you, my friend. Absolutely. I mean, listen, you’re doing something right with 7 million downloads, you know, that’s, no small feat. So very impressive stuff there, you know? But, Mickey, I want to have you on the show here because, you do something that I really don’t even know what it is. I’ve heard of it before, called infinite banking.
00:02:21:00 – 00:02:44:13
Aaron Fragnito
And that’s one of the many things you teach amongst, different financial strategies and tips. You have a new book out as well. So I wanted to have an infinite banking pro on the show here to kind of explain that. And a by by the way, here, just to our listeners, if you’re if you’re enjoying our content, be sure to like and subscribe and, you can follow us on all the major podcast platforms and YouTube as well.
00:02:44:13 – 00:02:58:15
Aaron Fragnito
And, you know, share this with a friend. And if you’ve never heard of, Infinite Banking, then you’re going to enjoy this episode here. And let’s, learn something new is you like to do yourself. Mic. So how would you describe Infinite Banking?
00:02:58:17 – 00:03:23:17
M.C. Laubscher
Yeah, infinite banking is just basically what you’re what you’re doing is it’s a strategy of how you implement and execute what banks actually do. You just do it with it in your own personal, your business and your investing economy. So if I could take you back, I’ll, I got involved with it. I think this and my story kind of will resonate with a lot of folks of maybe where they’re at.
00:03:23:19 – 00:03:44:10
M.C. Laubscher
So, in 2001, I ended up in the United States, and I just played, in a sports league here. And while I was pursuing a career in athletics, I would just take the money and, I would invest in real estate. And how I came across real estate was Robert Kiyosaki. Purple book, you know, rich dad, poor dad.
00:03:44:10 – 00:03:50:03
M.C. Laubscher
Right. So I read the book. I still read it once a year. Really, for 25 years.
00:03:50:03 – 00:03:51:12
Aaron Fragnito
Wow. Okay.
00:03:51:14 – 00:04:10:22
M.C. Laubscher
Yeah. When when the student is ready, the teacher, you know, appears. Right. And sometimes my philosophy is, you know, you don’t have to read, you know, hundreds of books every year. You could read ten books, the same ten books. If it’s the right books over and over and you’re going to learn something new just from that, that same book.
00:04:10:24 – 00:04:28:02
M.C. Laubscher
So the first time I read it, I was like, oh, cash flow. It’s got to be cash flow. So within six months I bought my first property. I put some tenants in it, I collected the rent, paid all the bills, and boom, there you go. There was money left over at the end of the month. And I’m like, this is amazing.
00:04:28:05 – 00:04:49:11
M.C. Laubscher
Plus tax benefits. You know, obviously managing the property well, you’re going to get appreciation. And I thought to myself, well, how many times can I do this? This is incredible. So cash flow was the main thing. Then I rated I think it was about 2 to 3 years later and I started to see, you know, in that book, there’s a lot of simplified financial statements.
00:04:49:15 – 00:05:16:05
M.C. Laubscher
He did a great job just breaking down like an income statement, a balance sheet, just for the average person in that book. Well, one of the things that you see is, hey, all these liabilities on my balance sheet, like it’s someone else’s assets because it’s just double entry bookkeeping right in the world that we live in. And then I started to look at this and I’m like, whose is this?
00:05:16:07 – 00:05:45:18
M.C. Laubscher
And it’s the banks. It’s literally the banks. It’s all of the banks assets are liabilities on. And I listen, we leverage capital. It’s great. You invest in real estate, you get you get all of the benefits and so forth. But you still see the liability, which is the, the, the debt on your balance sheet. When I looked at this and I’m like, man, all these other things too, because your need for financing and the world that we live in is so important.
00:05:45:20 – 00:06:08:07
M.C. Laubscher
Like you’re going to have to finance and figure out a way to finance things. And you use a bank for everything that you finance. So I looked at that and I’m like how do you become a bank. Like there’s a, there’s a way that you need to like how do we figure this out then of course I came across the book from Nelson Nash Becoming your Banker and then threw my net into my sports network.
00:06:08:07 – 00:06:37:09
M.C. Laubscher
I was introduced to another real estate investor. And I went to lunch, had a couple of beers with this other real estate investor and you know, we sat down and he, you know, he basically was, was asking a lot of questions about me. Then, then we started talking about him. Turns out the three to fourth generation legacy family that he was a part of, his family was one of the biggest real estate investors, multifamily investors in the north side of the city of Chicago back then.
00:06:37:09 – 00:07:06:19
M.C. Laubscher
And we’re like 25 years ago. I didn’t know this when I met up with him. Right. And he was explaining to me, I said, well, so how does how do you guys like, from a wall standpoint, what do you guys do? He goes, oh, we keep it very simple. We have our operating businesses that make money. We take all of that and we put it in our own kind of family bank, which we’ve created, and we leverage that family bank to just buy real estate.
00:07:06:21 – 00:07:33:19
M.C. Laubscher
Just do it over and over. He’s like, if you think about it, the most efficient actually income, how you generate income, is through your business. Then the most actually most efficient way to position capital is through this family bank. And for a banking kind of strategy, which we’ll get to, which involves life insurance contracts. And then the the third part of it is the best way to deploy capital is in real estate.
00:07:33:21 – 00:08:04:19
M.C. Laubscher
I love multifamily real estate. And I would just do it over and over, and it kind of blew my mind. And then I ask them about this family bank. It’s like we have a family office structure, which is just a private wealth management company for my family. And he was explaining to me that they use very specific lease structured life insurance policies to warehouse capital inside this family bank, and they get to leverage those life insurance policies to buy real estate.
00:08:04:21 – 00:08:27:04
M.C. Laubscher
So I asked them to like, you know, you guys do a lot of cash deals, which these guys were doing, like buildings at that stage, 5 to 10 million bucks. Right? Even bigger. Right. So I’m like, well, money just doesn’t grow on trees. Where’s this coming over? And then what blew me away was they actually were shareholders in a bank, like a real bank.
00:08:27:04 – 00:08:45:01
M.C. Laubscher
And I’m like, why don’t you just put your money in the real bank? Yeah, yeah. It’s like, no, that’s where other people put their money. Yeah. When it comes into and this is what Nelson National told me too. He’s like, if you think about a bank, a bank makes money whether you deposit money into it. Whether you spend the money.
00:08:45:03 – 00:09:03:21
M.C. Laubscher
Yeah. Whether you borrow to spend or invest. Bank makes money in every single transaction that I just listed. So you should be doing the exact same thing to And the other thing that he said is you have to be in two businesses at all times in your life. You have to be in the business that you’re in.
00:09:03:21 – 00:09:39:19
M.C. Laubscher
So if you’re a real estate investor or operator, be in the business that you’re in. The second business is the banking business. So that’s what the banking is, is you can create, quote unquote, your own bank and your own banking system. But life insurance contracts, you deposit capital into it, you build up, you build up your equity in the policies that if you need it, you can access the capital through policy loans, like a line of credit, tax free, and then use that to go and invest in buy more real estate.
00:09:39:21 – 00:10:04:18
M.C. Laubscher
Beauty of this is is when you deposit money into these very specifically structured policies. Money is guaranteed. It’s guaranteed to grow tax free. There’s strong mutual life insurance companies. So you earn dividends on it. Just like the cash flow from real estate which is also tax free. And the reason why you use a line of credit and you just don’t draw down your account.
00:10:04:20 – 00:10:28:16
M.C. Laubscher
Because of the line of credit, let’s just say you’re making 6% of your policy in the system and you get a line of credit for 5%. The you never touch the money, two separate transactions. So the money keeps growing uninterrupted compounding the policies tax free. Right. And you get to borrow it at let’s just say 5% invest in something that’s making you 15 to 20%.
00:10:28:18 – 00:11:00:10
M.C. Laubscher
Repay that loan just like you would to a bank in your own banking system. So you keep all the profits that a bank makes. You keep that in your own system. That’s your own banking system. So when I learned that I that moment from the Robert Kiyosaki book Rich Dad Poor Dad and then we ran into Nelson Nash’s becoming banker Saul, one of my friends doing this in real life with his family now for four generations, I started to do it myself.
00:11:00:10 – 00:11:25:02
M.C. Laubscher
I’ve been doing this now for almost two decades myself. Well, my family bank that finances everything my businesses, producers, wealth. It’s financed by my family bank. I don’t go to the bank for a line of credit. I don’t access capital. They’re if you’re an investor and you’re buying properties, all the down payments and managing all the operations, that’s where that money comes from.
00:11:25:04 – 00:11:44:02
M.C. Laubscher
You know, you see you are still going to you’re going to borrow, you know, if you’re buying buildings of, you know, ten, 15, 20, 30 million bucks, you know, the down payment from there. And the rest, you know, the rest. You finance through deleveraging. You want to do that. But yeah, that’s what that’s what infinite banking is. Infinite banking is puts you in control.
00:11:44:02 – 00:12:02:01
M.C. Laubscher
That’s the big thing. Control of your money. Your money is guaranteed. Guaranteed to grow at all times. You can only yeah, you’re guaranteed access to it. And, you know, your businesses in your investment portfolio never runs out of liquidity to borrow from, because you have the system which feeds it.
00:12:02:03 – 00:12:10:07
Aaron Fragnito
Right? Okay. Now I love it now. So it’s also called like a high cash value life insurance policy, said another term for it. Is that right?
00:12:10:13 – 00:12:31:08
M.C. Laubscher
That’s correct. And you know, all the lines of credit, you know, and this is this is the thing when you bring up life insurance, it’s almost like a four letter word. I, I’ve done this with gold. And when I explain to people how I buy gold, I store it in a specific place. I get to borrow against that gold, write it up a line of credit and buy real estate.
00:12:31:08 – 00:12:56:08
M.C. Laubscher
With that, everybody’s jumping up and down and everybody’s excited. And then when I share with them actually the Rockefellers, they all know the strategies. They prefer the life insurance because it also has a death benefit. So there’s a multiplier effect for generations. Right? So yeah, if you max out, let’s just say your first generation, let’s just say you and your wife at 10 million bucks each 20 million goes to the kids.
00:12:56:08 – 00:13:18:04
M.C. Laubscher
The kids max out now, there could be 40 to 50 million on them. That goes to the grandchildren. The grandchildren then turns that into, you know, 100 plus million. And now you have a waterfall for from each generation to the, the other thing with life insurance to is the get the your get you have guaranteed access to it.
00:13:18:06 – 00:13:37:17
M.C. Laubscher
You know he lots of great I’ve done he locks cash out refi same kind of thing on set by the way. Right. Equity line of credit. You get a life insurance line of credit. With the life insurance you have guaranteed access. The he locks not so much they can pull at. I’d mind bull in 2008. Good times.
00:13:37:19 – 00:14:06:02
M.C. Laubscher
The same thing with gold. Silver art. You know, there’s like, investment banks, like JP Morgan. Yeah, they have that kind of like stuff. Or the ultra fluent, you could play smart as collateral. Bitcoin, crypto again. That’s that’s really when you get to get spanked over there because of career goals and a volatile market. You know, of course the famous example is Elon Musk buying Twitter, with borrowing against these Tesla shares.
00:14:06:02 – 00:14:19:02
M.C. Laubscher
So you sure slash shares. And he just leveraged that to buy Twitter. So you’re doing the same thing maintaining control over all of the capital in your personal business and investing economy short term.
00:14:19:03 – 00:14:38:11
Aaron Fragnito
And when you borrow capital against an asset it’s a tax free form of income essentially, you know, now okay, so let’s just kind of give a real world example. So people kind of understand this fully. So, you know, I have a liquidity event or I run a really successful auto parts store. I had a good year and I made $1 million.
00:14:38:11 – 00:15:13:08
Aaron Fragnito
I have $1 million to to invest. Okay. And I instead of going out and plunking down on a piece of real estate and getting a loan and maybe buying a $3 million apartment building, you know, small apartment building, I, I say instead, I’m going to, call up AMC here. I’m going to, get a, high value, life insurance policy, and then I’m going to maybe put the million into it and, pretty quickly be able to borrow a million back out against it, or maybe like 900,000, like just let’s kind of put some numbers on the board in this example and how you would do this.
00:15:13:08 – 00:15:14:07
Aaron Fragnito
Okay.
00:15:14:09 – 00:15:43:15
M.C. Laubscher
Yeah. Yeah, that’s a great question. So, let’s use your example and I’ll give you some more real world examples. So, there’s a lot of folks, selling and having liquidity events right now. So you can, you can take that million bucks and you could put it in the strategy. And within 30 days you’re going to have over 900,000, let’s just say, available to, draw a line of credit from if you’re, you know, I think you said an auto body shop or something like that.
00:15:43:17 – 00:16:13:06
M.C. Laubscher
So years, years. The other thing, you know, especially with business owners, when, when you have some success, you’re going to have financial advisors come into your life and say, hey, you should diversify out of that auto body shop. You’re crushing it like you can’t have everything there. Which, by the way, it’s not terrible advice at all. Because if you think about like big picture 70% of businesses never sell, it really doesn’t have any enterprise value.
00:16:13:08 – 00:16:39:17
M.C. Laubscher
And also not a lot even, get sold to the children or transfer to the children. So sometimes business owners do have everything that they have tied up in an illiquid asset, which they can draw liquidity from. So it’s not a it’s not terrible advice. The terrible advice comes in when somebody then takes that money and puts it in stocks, bonds and mutual funds and provides liquidity to other businesses like Apple, which I don’t have a problem with Apple either.
00:16:39:17 – 00:16:59:02
M.C. Laubscher
I’m on an Apple computer right now, but Apple doesn’t need your money. If you’re an investor, you need your money. If you’re a business owner, you need your money. So how do you how do you diversify then from that business and then get to buy real estate and fund your business? Well, you set up this policy, which is the system for your business.
00:16:59:02 – 00:17:17:24
M.C. Laubscher
So now that million bucks that he took out of his business is no longer stuck in the business. He actually just diversified it that he put it in the policy. Remember, it’s a separate business. He now has the auto body shop and a banking business. So there’s you already diversified. So he he did that.
00:17:17:24 – 00:17:32:21
Aaron Fragnito
But let me just jump in here. So you’re not paying. You’re not doing a partner draw for $1 million and paying a 25% income tax or whatever on it. You’re moving it from one business to another. So it’s essentially pretax money. You’re investing in this policy. Is that correct? Yeah.
00:17:32:21 – 00:17:53:14
M.C. Laubscher
And I mean like again, not too deep dive too deep into the tax. It’s sometimes it makes sense just to do it post-tax. And when you fund the policies that’s all post tax right. So you want you actually want it post tax. And the reason is because once it’s post tax money and it goes into the policy, you don’t pay taxes on that money again.
00:17:53:16 – 00:18:09:02
M.C. Laubscher
So again, the cost when you control it now and how much it is and you can reduce it legally. There strategies where you know in other vehicles for one case are you just you’re just kind of stuck. Okay.
00:18:09:02 – 00:18:26:19
Aaron Fragnito
So it’s kind of like the idea of a Roth IRA versus a traditional IRA. You’re like, you’re kind of better off paying the taxes. Now, ideally, your tax bracket might be lower now than later in your life. And, so, like me, I have a Roth because I expect my tax bracket to be higher. And later in my life, you know, as I acquire more real estate assets.
00:18:26:19 – 00:18:29:01
Aaron Fragnito
So. Okay. All right. Very good. This is been.
00:18:29:01 – 00:18:32:01
M.C. Laubscher
Called the rich person’s Roth, by the way, by a lot of folks.
00:18:32:01 – 00:18:48:15
Aaron Fragnito
I’ve heard that. Yes, that’s right. It’s all coming back to me now. I remember learning about this and, years ago in a past, podcast, but I, I love the strategy. I’ve actually had investors talk to me about this before wanting to do this. I think we do have some investors that actually do this, strategy. It’s it’s it’s really genius.
00:18:48:15 – 00:19:05:01
Aaron Fragnito
I love it. Okay. So back to the example there. So this is post-tax money in this scenario you’re kind of go in the Roth IRA strategy there. So you don’t pay taxes on the growth. You’ve paid your tax, man. You pay your dues. Now you remember all that money in okay, let’s say, you know, after your taxes, you so you have a million bucks.
00:19:05:01 – 00:19:22:01
Aaron Fragnito
Okay. You put it into, I know we’re not supposed to use this. The four letter word here. I’m just going to use it because, it it makes sense to me and maybe our listeners, the high value, high cash value life insurance policy. Right. And then again, we can borrow about 90% back out within 30 days.
00:19:22:07 – 00:19:41:04
Aaron Fragnito
So now you can pull a line of credit of 900,000 against your million dollar policy. And now it’s just so I’ll keep explaining it here in layman’s terms. And then, from what I understand, and you’ll correct me where I’m, where I’m wrong. And in that, that million dollar policy you’ll grow. Is that is that the G word?
00:19:41:04 – 00:19:48:01
Aaron Fragnito
Guaranteed. I heard at 6%. Maybe five, 6%, something like that. Is that what the companies are offering these days?
00:19:48:03 – 00:20:13:05
M.C. Laubscher
So dividends are 6% in the 6% range, which is not guaranteed. But they are they’re flux. They’re they’re around five, six, 7%. You know, to give you an example of how strong these companies are, in 2008, 2009, one of our carriers paid out when the market was down significantly. You know, you had your real estate crash. They still paid 6.34% tax for you that year.
00:20:13:05 – 00:20:34:21
M.C. Laubscher
Okay, so it’s not guaranteed. Your guaranteed rate is usually around about three, but your dividends are six. So you get the six total. You don’t get the three plus the six. Yeah. But also just to finish that example. So number one, you diversified the auto body guy, put the money in the policy. He now has a policy that he, he controls.
00:20:34:21 – 00:21:01:00
M.C. Laubscher
So if the auto body needs money of that 900,000, which he could act as 30 days later, he can at any given point in time, use some of that capital to, in the business to manage cash flow, run payroll, you know, launch a marketing campaign even bringing, you know, I, the other thing is he can also then use that because it’s, it’s a separate business that that policy, he can use that to then invest in real estate.
00:21:01:06 – 00:21:21:18
M.C. Laubscher
And we actually had a client which did this exact same thing and bought the real estate from which they were operating the business. There was three other tenants. They were the anchor tenant right now on the property. They leveraged their own banking system to buy the real estate. So now you have a business, you have you have this banking system and you have real estate.
00:21:21:23 – 00:21:28:17
M.C. Laubscher
You have the same pool of capital, that you control that eventually helped you to acquire and manage three assets.
00:21:28:23 – 00:21:29:13
Aaron Fragnito
Yeah.
00:21:29:15 – 00:21:57:24
M.C. Laubscher
So it’s just a smarter way and more efficient way of controlling capital. Now back to the life insurance two. You know, everything that Dave ran because people said, well, what about Dave Ramsey? Everything that Dave Ramsey says I actually agree with, and all of the, terrible stigma and things that you hear about life insurance is very well deserved, by the way, because like any industry, there’s a lot of nefarious characters out there.
00:21:58:01 – 00:22:22:18
M.C. Laubscher
This however, I would say that Dave talks about our, retail insurance is sold to the average person, and that’s why I said I actually agree with them. What we’re talking about is life insurance structured for the wealthy, the affluent. This is all. They buy it in family offices. It’s it’s it’s the same thing of, you know, everybody’s heard of the uncle that’s lost money in real estate.
00:22:22:20 – 00:22:47:06
M.C. Laubscher
Sure. Why? Because he overpaid for it. He bought it at retail. He had no idea how to manage it or handle tenants or screen the like. Not that’s all. Kind of like the do you do it yourself retail thing, right? But then you look at look at Sam Zell, look at, you know, the the Trump family. Look at all these real estate, you know, billionaires.
00:22:47:08 – 00:23:13:01
M.C. Laubscher
Like how did they become billionaires from real estate. And you know, your uncle lost his socks, you know, of, you know, house by the Jersey shore or something, but invest in. Right. So it’s the same thing with with life insurance. So you have to be very, very careful of it has to be set up with the right company structure correctly set up with, with the right advisor that can also coach you and help you how to use this.
00:23:13:03 – 00:23:29:16
M.C. Laubscher
Because most people don’t know that that million bucks you could take out, put it in to the strategy, which is a lot of moving parts and have, you know, a credit line of over nine, 100,030 days later. Yeah, that’s not public knowledge. So you have to work with someone that know that what they’re doing.
00:23:29:18 – 00:23:52:16
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00:23:57:23 – 00:24:23:24
Aaron Fragnito
Okay. All right. So let’s just finish the scenario here. So everyone so you’re growing that that million dollar investment through a life insurance policy that is now growing let’s say 6% a year. It’s backed by an extremely strong company that’s been around for many years, and now you’re borrowing 900,000 against it at a relatively low interest rate, around like 5 to 6% or out in the same amount of growth you’re getting.
00:24:23:24 – 00:24:24:20
Aaron Fragnito
Is that right?
00:24:24:22 – 00:24:48:21
M.C. Laubscher
Yeah. It’s it’s very low right now. So, that’s the other nice thing. If you look at where he like rates are, for example, one. Yeah. Yeah I just spoke with a banker, the same bank that’s offering rates at 8 or 9%, their life insurance line of credit, their lilac program. Right. And they’re like five, five and a half, you know, so I asked her, I said, why?
00:24:48:21 – 00:25:05:22
M.C. Laubscher
She goes, well, if you think about the collateral of life insurance, you know, it’s versus real estate. Real estate, let’s just say somebody doesn’t pay you. You got to take over the property, right? You got to sell it at a discount. Yeah. I don’t want to be in the property business, but with life insurance.
00:25:05:22 – 00:25:06:15
Aaron Fragnito
You just kill them.
00:25:06:18 – 00:25:10:14
M.C. Laubscher
Yeah, yeah, yeah. Somebody is going to die at some stage, right?
00:25:10:14 – 00:25:22:03
Aaron Fragnito
Oh, you got it. Okay. That’s right. I thought you just kill them and collect the policy, but that that would actually, you couldn’t. I’ve seen enough, murder mystery shows to know if you murder the person, you don’t get the money. You know, it would default the policy.
00:25:22:03 – 00:25:52:08
M.C. Laubscher
Yeah. No, no, it’s. So you you actually have a collateral there that, there’s two pieces that a person has with the life insurance, company. And this is why you get such good rights. Number one, the cash value, the premiums, and number two, the death benefit. Yeah. So the, you know, life insurance companies covered twice. And if you do it through a third party like a bank, which you know what I was sharing, they know that they’re covered twice and they could keep charging you, you know, fees and penalties and interest for nonpayment.
00:25:52:08 – 00:26:07:02
M.C. Laubscher
And eventually they’ll recoup everything. And you know that that that’s owed. Well with real estate they, they don’t really. Yeah. So it’s not a good situation to be in. So it’s great. It’s great collateral. But yeah that was a wild one. I never heard that before.
00:26:07:04 – 00:26:15:04
Aaron Fragnito
So that would be my solution. Yeah. I mean in my investments backed by your life insurance policy, if you don’t pay, we’ll just, you know, mistakenly go missing.
00:26:15:08 – 00:26:16:22
M.C. Laubscher
You got to be careful.
00:26:16:24 – 00:26:35:15
Aaron Fragnito
They can’t go missing. You need a body for the payout to happen. I I’ve seen enough of these Netflix shows. I know how to get paid on these policies. All right, all right, so you borrow 900,000 against essentially the growth of the policy or the dividends to the policy cover the interest cost of that line of credit against the policy.
00:26:35:17 – 00:26:48:23
Aaron Fragnito
And now, you you still have the death benefit. You know, let now on, on a, it would be you’re borrowing 900,000 against $1 million policy. So but the death benefits will be $100,000 or so, you know, and that.
00:26:49:02 – 00:27:09:21
M.C. Laubscher
Well, your debt, your death benefit would be much more on that. But, you know, I would have to run the run the numbers. But let’s just say your death benefit is, you know, two and a half, $3 million. So even if, even if, in that scenario, let’s just say you do pass away and you’ve got an outstanding loan of, you know, 900,000, you would get the 3 million, -900,000.
00:27:10:02 – 00:27:32:12
M.C. Laubscher
Yeah, we would get that tax free. But the big thing is the arbitrage and financing things. Right. So my company in the beginning of this year, we hired folks. And we also did add a new marketing campaign. So I needed some money for that. So let’s just say I borrowed $100,000. We borrowed that from our family bank. So and again, this is a legitimate enterprise that you now have in business.
00:27:32:18 – 00:27:52:23
M.C. Laubscher
So the family bank issues a note to your business. And let’s just say, they charge your business 10% because they could easily do that. It’s still a pretty fair market, right? If you look at all of the other interest rates. So, the family bank got the money at 5% from the insurance company. They charge my business 10%.
00:27:52:23 – 00:28:13:20
M.C. Laubscher
So they made a spread of 5%. The money in the policies which this bank was built on kept growing uninterrupted, tax free, that my business got the money to hire employees and, yeah, invest in a marketing campaign. So it’s just a smarter way of managing money. And this is why they do it in family offices, you know, comical.
00:28:13:22 – 00:28:35:10
M.C. Laubscher
The comical thing for me is, you know, having, a lot of framed friends in, in family offices, people ask me usually Mr.. What are the ultra wealthy do like pull back the curtain. What’s the secret? And when I share this stuff with folks, they’re like, yeah, but it’s life insurance. I’m like, I know you, right? You don’t have to be a Rockefeller to do what the Rockefeller says do.
00:28:35:11 – 00:28:40:15
M.C. Laubscher
You can copy and paste your playbook. And this is just one of the things that they do.
00:28:40:17 – 00:28:58:17
Aaron Fragnito
Right? I mean, you could do this with $100,000, right? I mean, there’s probably a minimum where it starts not makes sense. There are some fees involved, but for the most part, you know, I’d say around $100,000. It starts to make sense. Right. And, then of course, you get the, all the benefits of it. And what I also like about this is it’s a line of credit.
00:28:58:17 – 00:29:17:01
Aaron Fragnito
You know, when we refinance real estate, we get a lump sum payout. You know, you get paid that day, you get the wire in your account, you’re essentially borrowing 100% of the money immediately and you’re paying interest on it. Now, if you want to put that money back into your business for hiring or inventory or even to buy real estate, it might take you six months to find that next real estate deal.
00:29:17:01 – 00:29:31:05
Aaron Fragnito
And it’s sitting in your bank account and you’re paying interest on it. In this case, you basically get a checkbook. So when you find that next asset, it could be six months or 12 months later. Then you write the check, then you’re paying the interest on it. Right? So you’re not paying interest on money. You’re essentially not putting to work.
00:29:31:05 – 00:29:32:05
Aaron Fragnito
Is that correct?
00:29:32:07 – 00:29:51:01
M.C. Laubscher
That’s correct. We actually have a resource where you literally get a checkbook, because a lot of people have said, well, one of the things I don’t like is it takes 2 to 3 days to get access of the money. And I said, well, there is a resource that we know of that you could set up this line of credit with and they give you a checkbook, you have a check that in your hand.
00:29:51:03 – 00:30:15:03
M.C. Laubscher
It doesn’t cost you anything until you write the check and fund the investment. Right. So and I know how deals go, especially depending on the type of business. Right. Sometimes you need it quickly, otherwise the deal’s gone. So it’s perfect for that individual. But from a cash flow management standpoint, it’s a pretty powerful strategy. And you keep everything in the family, you keep in your personal business and invest right to me.
00:30:15:06 – 00:30:41:24
Aaron Fragnito
Right? Right. No, it’s got tons of benefits. I mean, it’s basically like using a Roth IRA or, you know, even traditional if you do pretax money either way and then getting a death benefit on top of it, and then having the cost of the, of the, the debt covered. And in that case, you know, with real estate, if you could part in our scenario, there, $900,000, you go out and you buy, $2.7 million, you know, small apartment building, and now you get cash flow and tax depreciation and so on.
00:30:41:24 – 00:31:00:02
Aaron Fragnito
And then you can refinance out over time and buy another one. And, you know, so yeah, I, I love it. You know, you can also use to build your, your business as you were saying in that case. So very interesting stuff. MC I love what we’re talking about here. It’s something that as I have liquidity events with my assets, we’ll be looking into as well.
00:31:00:02 – 00:31:07:05
Aaron Fragnito
So I may be reaching out to you at some point. Now, do you are you a licensed, producer for this or do you work?
00:31:07:05 – 00:31:35:20
M.C. Laubscher
Yes, yes. So we we actually are licensed in all 50 states and we have been doing this my company produces wealth, has been around for ten years. We have helped over 500 families and United sites set this up. So we are a, insurance brokerage. So we, we know exactly how to set these policies up with the structure correctly, with all of the flexibility that you need for payments, repayments.
00:31:35:22 – 00:31:59:06
M.C. Laubscher
And then, of course, we provide a ton of resources for our clients, to keep on, you know, just managing their policies and help them with a strategy because this is just a vehicle, right? It’s it’s the strategy is the most important thing. Right. So and that’s why you’re going to need ongoing support and just access. And that’s the other thing that we provide to because we’re about firm is you have direct access to us.
00:31:59:08 – 00:32:24:03
M.C. Laubscher
We help you. We you know, we make the introductions also to other resources as you need them. But, you know, it’s it’s a very this strategy, by the way, people say, well, has it stood the test of time? Yeah. By about 170 years. What’s been done in the United States. So the 401 case, which I interviewed Ted Ben on the which created the first one, they’ve only been around since the 1980s.
00:32:24:03 – 00:32:53:13
M.C. Laubscher
Right. Really? So, 100 and 170 years. But, yeah, it’s it’s very simplistic, actually. You know, it’s funny, you know, I’ll just mention this. One of my first mentors he did this was CDs and a bank in the 70s because they were buying like 10%. So he would put 100 K in a CD paying 10%. Yeah, go to the bank, borrow against that CD earning ten, which would give them 8 or 9% because of the collateral they have it.
00:32:53:15 – 00:33:05:05
M.C. Laubscher
And he would go and buy real estate with it and just buy it back. Yeah. You’re the life insurance. Just put steroids on this because yeah, tax free growth. The guaranteed access to death benefit and so forth.
00:33:05:07 – 00:33:10:18
Aaron Fragnito
Sure. No I love it I love it. Right. See. So how can people reach out to you to learn more about this?
00:33:10:20 – 00:33:33:02
M.C. Laubscher
Get wealthy for sure. Dot com that’s my book is called Get Wealthy for sure.com. The number one financial strategy for business owners to multiply, wealth. Predictably. So get wealthy for sure.com. And when you go to that website, you’ll you’ll get access and can request a copy of the book, a paperback just pay for shipping and handling.
00:33:33:02 – 00:33:52:08
M.C. Laubscher
But there is a there’s a PDF there too. We also have a library of videos of case studies of actual clients. And then also, you could schedule a call with my team from that page, get wealthy for sure. Dot com. And then just my, my, company website too is producer’s wealth.com.
00:33:52:10 – 00:34:23:09
Aaron Fragnito
Awesome. Amazing. And to our listeners, if you’re gaining value from the Passive Cash Flow podcast here, be sure to subscribe and like and share with a friend, who you think might want to learn more about this really cool infinite banking stuff. Really an incredible strategy, incredible wealth strategy here. You know, we have guests on the show of all different types tax specialist, real estate investors, business owners, people in the life insurance space as well here like MSI who can help you, just infinitely build your wealth.
00:34:23:11 – 00:34:51:06
Aaron Fragnito
So we come up with a new podcast episode every, every two weeks here on the Passive Cashflow podcast. And, so keep following us there. We have lots of content on YouTube as well, other webinars and masterclasses. And of course, I’m Aaron Fred Nieto, co-founder of People’s Capital Group, and we’ve been helping people build and preserve their wealth in new Jersey, multifamily apartment buildings here for about 11 years, vertically integrated with an in-house property management company.
00:34:51:08 – 00:35:07:14
Aaron Fragnito
And, we’ve, about an 83% investor reinvestment rate. So we like to really do what we say we’re going to do with other people’s money. So if you want to learn more about getting into, some off market apartment buildings here, we’re actually buying a 78 unit right now in Hackensack, new Jersey, next to the number one hospital in new Jersey.
00:35:07:14 – 00:35:23:22
Aaron Fragnito
So, but if you have a good life insurance policy, then, even if you end up at the Meridian Health Center in Hackensack, new Jersey, and it doesn’t turn out well, there will be a large payout to your family. So that’s one of the greatest benefits of life insurance, just to remind ourselves that life is finite. Okay.
00:35:23:24 – 00:35:28:01
Aaron Fragnito
But banking doesn’t have to be. Oh, that’s a good one, right? You’re right. That dynamic. Yeah, that I.
00:35:28:01 – 00:35:29:06
M.C. Laubscher
Like that I can use that one.
00:35:29:10 – 00:35:36:01
Aaron Fragnito
Yeah, that’s a good one. Kind of dark but you know, it is what it is. But, I’m my friend. Thanks for coming on the show. I appreciate your time.
00:35:36:03 – 01:13:40:04
M.C. Laubscher
Thank you so much for having me.
01:13:40:06 – 01:14:03:04
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01:15:33:04 – 01:15:56:02
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At People’s Capital Group, we help you invest in real estate. Build your wealth by owning professionally managed apartment buildings in the northern new Jersey market. We want to show you how owning real estate is attainable. Even for the busy professionals that don’t have the time or experience investing in real estate. Now, we only work with select people who are serious about building wealth.
01:15:56:06 – 01:16:00:06
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