Alternative Financing for Buy & Hold Real Estate Investors


by Gary Pinkerton, a Think Realty Resident Expert

you have thousands of dollars of equi- ty stuck in that house that can’t be utilized elsewhere. Fortunately, there’s another way that doesn’t tie up your cash, that pays you 4-5 percent without tax on your money while it’s parked and allows you to control the loan on your terms—not the lender’s. Sound too good to be true? It’s not. It’s called Infinite Banking. As I mentioned in my earlier post, infinite banking is a strategy that uses a uniquely designed cash val- ue whole life insurance policy that essentially allows you to become your own banker. Your dollars earn uninterrupted compound interest in a private, tax-advantaged account earning well above bank rates. REALWORLD EXAMPLES Let’s assume you pur - chase a $100,000 property with a $20,000 down payment (disre - garding closing costs). The down

percent, they are dead equity. Most investors would choose zero down deals if they could figure out how to structure them. The good news is: it is not hard – read on! Shouldn’t there be a better way for disciplined real estate investors to keep their money working for them all the time—not just when they’ve exited an investment? There is. It’s all about using other people’s money (OPM)—not your own—to finance your real estate investments. First let’s think about how you buy single family rental properties, for instance. You work hard to save a bunch of money in your bank account. That money is liquid, but unfortunate- ly, it’s earning essentially nothing in today’s low-rate environment. This creates some serious opportunity costs as your dollars won’t even keep up with inflation over time. So, you use that money to make a big down payment on the property and you lever the rest. Congrats, you own the cash flowing property. Unfortunately,

hether you are looking to acquire single family or mul-


tifamily residential, or a commer- cial property, real estate prices are soaring across all zip codes and price ranges. However, with today’s low-interest rates driving lofty valua- tions, patient buy-and-hold investors like you can quickly find yourself with tons of money stuck in properties you cannot easily access. Others have large amounts of capital sitting for months in checking accounts at near-zero growth waiting for the property prices and building materi- als inventory to return to normal. Dead equity in properties is expen- sive. Sure, you have tons of equity built up, but what does all that equity earn? That’s right, Zero! A solid property may have a 10-20 percent annual return yet it would do that without your down-payment funds, say if you could convince a family member or friend to lend you the down-payment for free; the person- al funds are therefore earning zero

64 | think realty magazine :: september 2021

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