When it comes to real estate investment, one of the most valuable commodities to have is liquidity – an easily accessible flow of cash that you can use to invest in the best real estate bargains.
In recent years, real estate investors across the country have been discovering the benefits and financial advantages that a cash value life insurance policy has to offer, for its relative liquidity, among its many other investment benefits.
Since the ‘cash value’ aspect of a life insurance policy can be accessed while the policyholder is still living, this has lead many smart and successful real estate investors to make use of it as their own personal savings account, as it offers a number of unique benefits that a conventional bank account doesn’t.
So, how can a cash value life insurance policy aid you as a real estate investor?
Typically, the interest earned with cash value is higher than the interest earned from a bank.
When it comes to the real estate game, having more money to play with is always a plus, and cash value life insurance policies typically offer higher interest rates on the funds stored in the cash value portion of your policy.
Compared to a traditional bank account – where you might earn 1% interest on the money you save – the cash value portion of your life insurance policy (which can be used as your own private bank) earns an interest of 4-6%, allowing you make your money go further – and grow faster – when you deposit it into your cash value life insurance policy.
The funds in your ‘cash value’ can be accessed without having to pay tax.
In addition to earning more interest than if it were sitting in a conventional bank account, the cash value – or ‘living benefit’ – is allowed to grow tax-free.
Then, if you want to access the funds and transfer them to your business account, all you need to do is ask; after that, the funds are transferred tax free.
Cash value life insurance policies make loans easier to obtain.
Since liquidity is one of the most important things to a real estate investor, being able to acquire a loan quickly and easily is a valuable commodity.
Loans taken out against your cash value life insurance policy are the most convenient and quick to acquire as, since the policy can be used as collateral (and the policy provider is typically also the provider of the loan) the loan doesn’t require credit checks like a conventional bank loan. This makes the application and acceptance process much quicker, allowing a real estate investor to close in quickly on a property.
Moreover, any loans you take out on against your policy won’t appear on your credit records, so it won’t affect your credit score, or your ability to take out a separate loan from the bank.
There’s no limit as to how much you can pour into your policy.
Compared to retirement plans – which, as mandated by the CRA, have an annual savings limit. Cash value life insurance policies allow the policyholder to contribute as much as they want to the policy, so your ‘cash value’ kitty can expand without restriction.
This also means that – in the future – if a desirous, yet expensive, property comes onto the market that you aren’t quite able to come up with the funds to purchase, you have a (potentially) massive lump of savings, which you can easily access and use to quickly snatch the property up.
More than this, the unrestricted, uncapped nature of the cash value life insurance policy means that the high interest rate is even more valuable; the sky is the limit when it comes to the interest you can earn on your ‘cash value’ savings.
You be able to leverage real estate to pay for the life insurance policy.
As an investor in real estate, your wealth might be tied up in assets, limiting the liquidity you have on hand to be able to pay the premium for a cash value life insurance policy each month.
However, you can use the real estate you own to finance your policy so that instead of you paying the life insurance premium each month, the bank pays for it instead.
So, if you’re a real estate investor – and you want to be able to access funds more quickly and easily in order to snatch up the very best properties – consider investing in a cash value life insurance policy, to make use of a high-interest, tax-protected savings account, that offers maximum liquidity and cash flow..