Podcast: The Chris Miles Money Show
Social Media: www.facebook.com/moneyripples
[00:01:23] Vee shares about his friend’s company, Qualified Apparel. Each item purchased at this site, Ryan Huff, the founder, will donate enough money to feed 20 meals via Feeding America. Check them out at www.Qualified-Apparel.com
[00:05:21] Chris shares about his main plan before going into real estate.
[00:07:35] Chris met financially free people who were in their 20s and 30s, and that’s what got him interested in real estate.
[00:08:04] Chris retired in 2006 at the age of 28. But shortly after that, the recession hit, and he was upside down.
[00:09:03] Chris shares with us the mistakes he did around the recession period. One of the mistakes was he was counting on appreciation too much.
[00:09:58] Another mistake was that Chris cut off the other income streams he had.
[00:12:23] Chris shares info about the “income trap.”
[00:14:47] How do you get your real estate to pay you twice?
[00:23:01] Chris starts to talk about infinite banking and whole life insurance.
[00:27:06] Example of this infinite banking concept
[00:30:10] What if you never pay back your loan?
[00:41:52] Who is this strategy NOT for?
[00:51:44] Books that Chris had given out the most:
– Think and Grow Rich: The Original, an Official Publication of The Napoleon Hill Foundation: https://amzn.to/2wFutgU
– Rich Dad Poor Dad: https://amzn.to/38RaXMJ
– Killing Sacred Cows: Overcoming the Financial Myths That Are Destroying Your Prosperity: https://amzn.to/38Rq6xB
Chris Miles 0:01
private loan, again, no monthly payment. Now say that I do borrow that $20,000 for that hundred thousand dollar property. Say that that pays me 200 bucks a month right? Now instead of just taking that 200 bucks a month put in savings because if I liquidated my savings to 20 grand out, I’m gonna be putting the 200 bucks a month back in and building that up slowly so I can do another investment which could take forever.
Welcome to the show, you are listening to The Real Estate Lab Podcast. In this lab. we decode the stories, secrets and skills of the most brilliant minds in real estate investing and turn their wisdom into practical advice and knowledge that we can use to boost our income. And now let’s turn it over to our host Vee.
It’s a great day to be alive and to invest in real estate. My name is Vee Khuu and you’re now listening to my show The Real Estate Lab Podcast. How are you doing my friends? I hope you’re having a marvelous time. Thank you so much for tuning in to my show. How do you like the content so far? Do you have any feedback for me? Let’s schedule a call to chat. Yeah, you can do that at www.callwithvee.com. Hey, I’m so excited to share today’s episode with you. But before I do that, though, I wanted to share something special with you.
Recently, I got to know a super cool dude. His name is Ryan Huff. Ryan runs a company called Qualified Apparel. It’s a positive impact brand that feeds families in America by selling merchandise. In fact, for every one item that you purchase on his site, Ryan donates enough money for 20 meals via Feeding America. Now Ryan is not paying me anything to say this, I’m only sharing this with you because it’s so amazing. You can help feed families in America by picking up items on his site such as t shirts, tanks, hoodies, and you can also do custom orders for products for your own private events. Qualified Apparel has already provided over 35,000 meals to date. You can check them out at www.qualified-apparel.com.
Let’s get back to our show. Our guest today is a leading authority in teaching entrepreneurs and professionals how to get their money working for them. Today is an author, a podcast host and he appeared on CNN Money, EO Fire and US News. Our guest today is Chris Miles. Chris is the host of the Chris Miles money show. His company Money Ripples helped his clients increase their cash flow by over $100 million in the last nine years. You can contact Chris by sending an email to firstname.lastname@example.org, and make sure to check out his show the Chris Miles money show. Now let’s dive in to my conversation with Mr. Chris Miles.
Hey, welcome to another edition of The Real Estate Lab Podcast. I have Chris Miles here with us. Thank you for joining us today, Chris.
Chris Miles 3:26
Hey, it’s a pleasure to be on Veee.
Awesome. So something I usually do for the audience, just to build a little bit of a context is to talk about your background a little bit and I don’t just want to talk about your professional background. I want to take it way back to let’s say, you and I, let’s say we’re buddy in high school. We’re having lunch right now. What kind of conversation will we be having right now?
Chris Miles 3:52
Well, I grew up near Portland, Oregon, and we believe you all were all Californians. So if anything, it would be a lot of dude. Dude, you know, it’d be a lot of that right? Um, but I mean, back then I was doing like sports. I love to do things I actually went from like baseball, football eventually a cross country and track and that kind of stuff. But I was always kind of a renaissance man. Like, I mean, even in college, like I had a major in my main major was sociology, right?
Chris Miles 4:24
My minors would have been in psychology, Japanese and ballroom dancing. He had a triple minor or could qualify for triple minor in those things. I just stayed majored in sociology. So I was kind of just the guy that did everything kind of really well and always saw the big picture really well, you know.
So, this is a lab environment. I want to know what exactly got you to think, hey, maybe I need to give up on this triple major in sociology path and just go into real estate and pursue this career that you’re on right now.
Chris Miles 5:00
Yeah, it was interesting because I always had, I don’t know why I always thought differently I just did. My dad was the kind of guy that you always worked hard, you work forever, you know, you get a good job, you get a good education, even though he never got an education. He just told me to go get a good education, and then get a good job and stay at that forever, right.
Chris Miles 5:21
And, and you know, and I remember, like I was my main plan was going to business consulting, so I was planning to work with corporations and whatnot. And I figured, wait, if I’m going to start consulting business owners on their businesses, shouldn’t I have real life business experience, not just books, you know, not just study but real life experience.
Chris Miles 5:29
And so with I actually dropped out, you know, I was planning to go get my masters but I was like, I’m going to drop out and and get a business and I didn’t know what that business is going to be. And the first business opportunity that came up that kind of got me intrigued was becoming a financial advisor. And I didn’t realize at the time I thought it was really hard. I thought about was like boiler room. I thought it was like you had you had to like, you know, it’s cutthroat you had a fight your way in I didn’t realize that hired anybody off the street.
Chris Miles 5:40
And so I became a financial advisor. And and did that for four years. I actually never went back to school I just something about being an entrepreneur controlling my time controlling my destiny and the amount of money I can make. I went the entrepreneur route, right. And did that for four years realized that after those four years when I really ran the numbers, right, when I really looked at evidence, that’s when I realized that it wasn’t working. I was like, wait, there’s no way people can retire based on real life numbers, not on what they say you might earn, but offer real life numbers. It’s impossible to retire off that. So I quit. I vowed never to go back to financial advising again. I would just be a mortgage broker. I would uh, you know, teach ballroom dancing on the side in that kind of thing, right?
Yeah, that’s right. You’re You’re really good at ballroom dancing, right?
Chris Miles 6:58
Yeah. I used to be on the nation’s top amateur ballroom dancers back in the early 2000s.
So top amateur ballroom dancer doesn’t mean you is not as good in the professional realm, but you’re qualified for professional.
Chris Miles 7:14
Well, pretty much the only difference between professional and amateur is that professionals will charge to teach. So when I did I kind of did under the table.
Chris Miles 7:25
The professional space, they were more at the amateur level, but I’m an amateur level goes all the way up to adults as well. So basically, it just depends on whether or not you charge to teach dancing.
Chris Miles 7:35
And so yeah, so that’s, that’s kind of what I was doing. And at that time, that’s when I started me guys are in real estate investing and things like that back in 2006. And, and I said, All right, like I can tell you the evidence here again, I like to look at evidence. I’m like, I can see that these guys are in their 20s and 30s. And they’re financially free. While every financial advisor I know is not, right? Even it doesn’t matter if they had the investment the very investment they have been recommending they weren’t financially free. But these guys in real estate were.
Chris Miles 8:04
And so that’s more the path I took. And I went through the recession, you know, like I actually was able to retire when I was 28 back in about summer of 2006 I was able to retire. But I came out of retirement 2007 start teach people how to get out of the rat race. And at that moment, I was teaching real estate investors. And you can imagine when it happened when all sudden the recession hit just a little while longer, and I cut off my own income streams, which was dumb, right?
Chris Miles 8:29
And I did that. And of course, now I’m stuck. You know, I went from millionaire to upside down millionaire. I was over a million dollars in debt because of my real estate decisions and everything else. I was going more speculative. I wasn’t doing I wasn’t investing for cash flow like I do today. Right. And so I found myself in a hole and and I avoided bankruptcy. But I had to dig and I claw my way back out over several years to pay that debt back. And three years ago, it will retire again.
Could you go into a A little bit deeper about the mistakes that you made the first time around?
Chris Miles 9:03
Yeah. The first the first thing is was, I was just trying to bank on the appreciation. Right? That was the biggest mistake right there. You know, I thought, hey, doesn’t matter what the debt is because if it keeps appreciating, keeps going up, great. And the problem is a lot of us with some of the properties I had, they were negative cash flowing. So they weren’t even paying my mortgage payment. But again, when money’s coming in, and you have your banking on appreciation, you know, you’re making this big lump sum. It’s it’s sexier, right? Like me, it’s much it’s much sexy. When you much sexier when you go to an a, like a real estate investment course. Right? And they say, Hey, I did this, I made 50 grand off of this one deal. Versus, hey, I’m making 300 bucks a month off this deal. And I was guilty of doing the former I was going for the trying to go for the home run, only realizing I was striking out especially when the recession hit. So that was my biggest thing.
Chris Miles 9:58
The other mistake I learned to is like I said, I cut off income streams to I mean, I had other residual income streams through my businesses that I had that I created. And I cut them off because the partners I was working with said, Hey, you should be focused just here. This is our mission, you know, we all kind of came out of retirement to do this. And so he said, okay, cut off those income streams focus on this only, which was dumb that I did that.
Chris Miles 10:20
Because I’ll tell you, even if you have, if you have a nice secure job right now, right, or a nice business, maybe you’re a doctor, or you have a great business that pays you, I will tell you that that money is not guaranteed. You know, it doesn’t matter if you have a business or not, you know, that one of the best ways you can create safety in your situation is creating passive income is actually investing to have multiple streams of income coming in. So if one of those streams of income goes under, you’re still okay, you still have these other streams of income paying and you don’t freak out. And the problem was, I cut off the streams of income. I had one main stream again, right. And then when that wasn’t paying me very well, now isn’t panic mode, because I just purchased a, you know, a $700,000 house. And, you know, and I was, I was, you know, I had a higher lifestyle than what I had before. And now I’m, I’m in the whole $16,000 a month, right? And that’s, I just definitely don’t recommend that. So.
Chris Miles 11:16
So that’s why second time around, I’m like, I’m going to be smarter about it, I’m going to invest for cash flow. I’m not trying to swing for the fences, I’m just gonna go for those basics every time. And the truth is really, when you hit those base hits, you eventually find out that you win the game, right? And you’re doing that, you know, just building multiple streams of income to create safety and security around my situation to the point where now, I mean, I currently work 20, 30 hours a week. Not because I have to, but because I want to because I’m mission driven about teaching people how to do something different to get out of that rat race, you know, and, and that’s where it’s fun because now I only have two active streams of income and I do my podcast and I just enjoy my time and rest time I spend with family taking care of my eight, my eight kids, you know,
Do you have have eight kids?
Chris Miles 12:04
blended? Yeah. So my wife brought two from her previous marriage and I had six from mine. And so we we created the Brady Bunch, basically.
Oh, well, I mean, the good thing with your business now is that you are in control of your time and you can choose to spend time with your family if you if you want and not working, right.
Chris Miles 12:23
Yeah, it’s it’s such a different level of freedom, right? Because, like, I just recorded a podcast here recently about the income trap, you know, and I find this happening with a lot of my clients, especially those that are even those that are doctors or their business owners and they make great money, but deep deep down, that the fears come up of will am I going to do this forever? I’m gonna have to work forever. Is this ever gonna end right?
Chris Miles 12:46
They don’t work. You know, they work and they have a great lifestyle and from the outside, everybody sees them and says, Wow, man, your life must be great. You make such good money. Maybe you’re an IT manager, right? I get a lot of IT managers that follow me or engineers and people Like that, or, or whatnot and, and, and they’re like, yeah, life’s good. But deep down, they know that they’re not free. They know they have to keep working and they wonder how long it’s going to keep going. And you get caught in this income trap where you make, you know, maybe multiple six figures a year, right? But you’re still trapped, you’re not really free. But when you have the streams of income coming in, especially when the residual or their passive streams of income, like when you get from real estate, it’s a totally different life. It’s it’s research to live by choice you work because you want to not because you have to, right you actually get to work and that that money actually becomes a gravy it’s bonus and it only actually what all it does is allow you to create more cash flow because negative all your income, invest it, create more cash flow and you create this income snowball that just gets bigger and bigger as time goes on. And, and again, you get you have that freedom, you have options.
So one of the, I guess, one of the vehicle that allow you to get to where you are today, you know, get out of debt again and enjoy your lifestyle right now is a concept that you are trying to get out to your client and, and teach people. So just exactly. Chris, how do you get your real estate to pay you twice?
Chris Miles 14:17
Yeah. So this is an interesting concept because it’s not new. It’s been around for a few decades. But the problem is that the perspective that you get some of these financial people teaching it from, and they’re usually insurance agents, right? They’re teaching from a place of a saver mentality. And I will tell you that especially because I’ve worked with a ton of like, you know, whether they’re doctors or you know, especially if they’re Asian clients, like my, my Asian clients will save at least sometimes at least 50% of their income, right half of their income, and they save great but they don’t have real cash flow. And, and the problem with that is, is when you come from that saver mentality, you lose, you don’t actually create any freedom and that’s what every financial person out there is teaching. They’re teaching you to save and save and save and save right for someday, some of them will even tell you the gamble at the stock market, you know, with mutual funds and things like that. Problem is the stock market the last 30 years is only produced a seven and a half percent actual return. And that’s all
No it can’t be right. In the last few years so many people makes money from the stock market, right, Chris?
Chris Miles 15:21
Oh, yeah, of course they have because it’s been up, right. It’s just been up. That’s why I never trust financial advisors have been around for like 10 years or 11 years or less, because they’ve never seen a down market. You know, my experience. I’ve seen two of them. I saw y2k. And I saw the Great Recession, right. And the truth is, when you look at the 30 years, when you look at the actual return, like if you were to put a number in a calculator and get the stock, we’re going to come out with the right number. It’s actually right around depending on the day, and when you hear this, it’s right around 7.45 to 7.55% return is the 30 year average, right? Not 10 or 12. Like I used to teach it’s like less, it’s much less.
Chris Miles 16:02
And, and when you start to put that number in a calculator in, by the way, you don’t get seven a half percent even if you have, you know, like the actual ETFs. Like you buy the S&P 500 fund because you think it’s cheap, right? Those index funds do not pay you the full amount, they still take out their administrative costs and everything on top of that. So you’re lucky to net six and a half to 7%. Now if say you did put six and a half percent a calculator and you ran that out with your IRAs or whatever you’ve got right? And you start putting in the amount of money you’re putting in six and a half percent and then you take out taxes is not very impressive.
Chris Miles 16:36
You’ll start to realize that if you want to good hundred thousand dollar your lifestyle and you want to retire in 20 years, you got to start saving now at least, at least 10 grand a month. At least, sometimes a little bit more than that. Most people won’t even say it came to say they came to save that money in their 401k is not even allowed to save that much into a 401k or IRAs. But that’s what you have to do to even have 100 Thousand Year lifestyle when you factor in inflation, taxes and everything else.
Chris Miles 17:05
So, from that standpoint, that’s part of the problem when when we talk about this strategy of double dipping your investment returns, almost every financial person out there is telling you from the saver, you know, false return type of mentality saying, hey, put away for the long haul, save forever, you know, save everything you can right and, and eventually, someday you might be able to retire. And the truth is, it’s not about accumulation.
Chris Miles 17:29
It’s about acceleration. It’s how quickly can you get that money producing results for you and ultimately, creating income. That’s what’s really important, right? It’s gotta create income. That’s the one thing that they all miss. They all are looking for the future someday accumulation of money to then live off the income. But in truth if you if you want acceleration, you start thinking more like the bank, you start thinking hey, how can I leverage my money and my assets in a way that pays me more? And, and, you know, just like with my clients that do real estate, with usually expect at least a 10 to 12%. Minimum, year over year returns, right? At least average on that. So this concept you’re talking about with double, you know, where you’re able to get your money to pay you twice is a concept called infinite banking. And and some of you guys might have even heard of it before, right? I know, I know., Vee. You’ve heard of it from about 10 years ago. Right?
Yeah. You know, back in 08 09, just right. At the beginning of the recession, you know, there was a group that came to Denver in local REA here, and they talked about it, but I haven’t heard anyone else talk about it since.
Chris Miles 18:37
Yeah, it’s it’s a concept that is gaining some steam like I’ve started hearing more about the last few years more people have said, hey, I’ve heard about from this person or that right. But there’s a lot of people saying, Chris, dang, I never, I never heard of this concept before. And this almost sounds too good to be true. Which is not it’s actually just easy numbers.
Chris Miles 18:56
So, so the problem is, again, mostly or insurance agents, right? And they’re just trying to make a livelihood. And they have this debate. So for example, in my situation I remember, because I used to sell insurance, they sell people on indexed universal life and term insurance and things like that. And by the way, these these, those tools are not good for the strategy. We’re talking about the strategy we use, the tool uses whole life insurance. I used to, I used to hate whole life insurance. I didn’t have a good reason. I was just told by other financial advisors, the whole life was bad, right? But when I got out in the real world, and I start talking to real investors, I found out that these investors were leveraging whole life like crazy, and they were putting sometimes hundreds of thousands of dollars a year, if not more than that. And I’m like, Why? Why would you do that?
And I and Chris, but before you dive too deep, can you take a step back and explain whole life insurance versus term life insurance?
Chris Miles 19:50
Yeah, yeah. Term Life is just simple insurance, right? It’s just like your car insurance. You only get paid if you die, and you don’t get paid. Somebody else does right? Death insurance. That’s what term insurance is term insurance also is only for a set period a number of years. So you could have a 10 year term policy where they only cover you for 10 years, it might be 20 or 30 years, but only cover for a period of time. And then after that, if you want to keep it, the numbers become astronomically expensive, right?
Chris Miles 20:20
So what happens is most people cancel it. So the whole by term invest the difference, ironically, came from insurance companies telling you, hey, we make more money off term than anything more profit because term insurance policies rarely ever pay out. Because people will usually there were always taught I even taught as a financial advisor, that once you get your assets to a certain point, cancel your life insurance. When I started to look deeper into that, I found it was the insurance companies telling you to do that because they don’t want to pay out. They want you to cancel your term insurance when you’re most likely to die. So they want the easy cash flow, the money coming in, right? Again, they want cash flow, but they were just they just want all the profits from the term assurance of whatever company you ask almost any company I’ve talked to, they only pay out the term insurance policies only power from anywhere from one half of 1% to 1% of the time, so that every one out of 100 or 200 policies ever pay out. So that’s term insurance, right? It’s the insurance that most people have bought.
Chris Miles 21:18
Whole Life is different, whole life actually does cover you your entire life, it’s kind of the difference between, you know, like term would be the equivalent of renting a house, where whole life is like buying the house. Whole Life actually has a higher premium. That’s the thing that people will say as negative because it has a higher premium than term insurance. But the premium never goes up. It stays the same your whole life, which is why they call it whole life and never go never expires and never goes away. it expires only when you die. The cool thing is, is that on top of it being the same premium, you actually have this this tax free cash savings component that’s growing inside of it too.
Chris Miles 21:55
So you have this cash like growing inside, and you have a death benefit, right? It’s kind of the the alternative to buy term invest the difference. But the differences here is that when you invest wherever money you have inside these policies, they are tax free. And on top of that they’re protected from creditors and lawsuits to, and in most states, it’s 100% protected. I mean, you could have a couple million dollars in there. And if you got sued and leave that person, one, they couldn’t access that money at all. Sadly, you know, other than your 401k, they can get your IRAs, Roth IRAs, 529 plans, they can, if you get sued, and they win, they can access any of those things, savings accounts and get to anything they want. Except for life insurance. So, so that’s kind of what the difference is their whole life, same premium whole life if you do it the traditional way, which I don’t usually recommend, and then term insurance dies at a certain point it ends before you do usually.
So then, just exactly how does whole life insurance play into this infinite, infinite banking concept.
Chris Miles 23:01
Yeah, so the key concept here is that that cash savings, right? They call it cash value. That’s that tax free savings account that’s inside of it. It’s kind of like a Roth IRA, in a sense, where it grows tax free, and it can come out tax free. But the cool thing is, is that you don’t have to wait till you’re 59 and a half to touch the money. You can access the money right away with no penalties or anything, right. And so that’s the key thing. So the infinite banking says, Hey, when we create our own little personal banking system, we’re using real estate as the example right? Say you want to buy a property, say it’s $100,000 rental property you want to buy, you know, you can get bank financing for 80% of it, you know, so you know, you can get an 80,000 loan. Well, you got to come out of pocket $20,000 to pay the down payment on that property. Well, you have a choice, you can either just access it from savings, right and just pay it out of there. Now, when you pull money out of savings, you’ve lost the ability to earn interest on that money but if instead you use life insurance, you have the cash that’s in there. And the way I design it, you have cash in there from day one.
Chris Miles 24:08
So we’re traditional whole life usually go two years before you, or even three years before you have any cash in there, because it’s all going to insurance costs, I found ways to design them to where you can get minimal cost, dumping maximum cash, you can get in there over however many years you want to put the money in.
Chris Miles 24:25
And you can get the best ROI out of it the best rate of return. So what I would do instead is instead of doing that I just borrow, you know, actually can do a line of credit with the insurance company 20,000 bucks. I use that as my down payment. And the cool thing is this is that when I do a line of credit gets my savings on my life insurance. It doesn’t show up on my credit report. It’s not there. Secondly, there’s no minimum monthly payment. So if I were to borrow from my home equity line of credit, I’m going to have a monthly payment right I got to make the payment every month even if I bought that property and it’s not cash flowing yet I stopped to pay that monthly payment on keylock, but on life insurance, there is no minimum monthly payment. And they’ll charge me an interest. Of course, they’ll charge me like 5% per year, right. But so it’s a very low rate, but they’re not going to require me to make any monthly payments, I can pay it. However, whenever I want the deadline to pay it off, if you were to call it a balloon payment, right, the deadline to pay it off is death. And they just take it out of your death benefit, which is kind of cool. But I can pay that back however I want. If If I ever want to pay it off, right, I can just let it compound interest against me. But the way to make it worse, where you can make money twice, is this and I have a video on YouTube that actually explains this much better if you want to get deep into the numbers and how it all works. But here’s the basic concept is that I’m borrowing at 5% private loan, again no monthly payment. Now say that I do borrow that 20,000 for that hundred thousand dollar property. So that that pays me 200 bucks a month right now instead of just taking that 200 bucks a month to put in savings because if I had liquidate my savings took 20 grand out, I’m gonna be putting the 200 bucks a month back in and building that up slowly. So I can do another investment, which could take forever. But the cool thing is, if I borrow from the insurance company, right, I’m getting a line of credit or loan from them, my money is still in there that 20,000 is still in their earning compound, tax free interest.
Chris Miles 26:23
So if I had, you know, if all I had in there was like, $50,000, I borrow 20, instead of having 30,000 left, I actually have 50,000 earning tax free compound interest, and they’re paying me decent returns there. Well, non borrowing an interest rate. But the cool thing is, as I’m taking that 200 bucks a month, I’m now using that to pay towards a line of credit just like you might do with your home equity line of credit, right or mortgage, putting the money back in. I’m just doing that to my life insurance. I’m creating my own bank, my own, you know, my own system, right? And when I do that, even though they’re charging me 5% interest, I’m making more in dividends than they’re charging me. So what ends up happening and I did an example of this with a with actually some some turnkey rentals here recently.
Chris Miles 27:06
You know, I did example where someone took out $95,000 to put as a down payment on two properties. They were cash flowing 1070 bucks a month. And so I said, All right, well, this thousand bucks a month with almost 100 grand here. Let’s see what this does. Well, what happened over time is if I just took that thousand bucks a month or so and put into my savings, after nine years, and making the whoppin point nothing percent interest in my savings account, right? After nine years, I’d have about 128,000 saved back up from that cash flow.
Chris Miles 27:38
Now, doing that same thing with my life insurance policy, I would actually have 178,000 in cash because of how that money compounds faster because I didn’t have to withdraw any of the money. It’s still in there, pay me compound interest. And I’m taking the cash flow putting it back in. So I actually had $50,000 more that’s that’s really like a 50% actually. rate of return on my cash just by using the life insurance instead of a savings account. In fact, even if you get the same return if you want to have a savings account give you the same returns up with a life insurance policy, it would have to pay you at least anywhere from five to 9% a year to even match that.
Okay, now Chris, so I mean, this concept is obviously great. However, if you are someone just new, brand new, and you’re looking to start and you know, going down this path, creating your own bank, going and buying a whole life insurance. Well, how much money you need to put in at the beginning so that you can draw money out day one and borrow against that policy?
Chris Miles 28:45
You know, depends there’s a few factors. I mean, one is your age, and other factors your health, right. It’s kind of cool. I had this as woman she was in Hawaii, she’s she’s born in Korea moved to the US and she was living there and and she was trying to dump it. ton of income and even with her health, she had her thyroid removed. And somehow she still got the top health rating, because there was nothing else around there was just no thyroid, right? So that one, you know, still worked out great in her favor, because the better the healthier in and the younger you are, the less you have to put in to get to get the maximum ROI, as I say the max rate of return, right. But truthfully, I mean, depending on your age and everything else, if you’ve got at least five to 10,000 years that you’ve been saving, whether it’s putting away for doing investments, whether you’ve been dumping 401ks, I’ve had a lot of people have said Why would I put this in a 401k I gotta wait till I’m almost 60 to access this money. I can put this money here actually do real estate investing, create cash flow, I could retire early, right? So I’ve had a lot of people stop consuming the 401k is and using that money to put in these two. So if you’ve got at least five to 10,000 a year of cash that you’d be putting away in savings, you could probably start to create a decent one. But again, it just depends. Everybody’s situation is different. But what I’ve noticed is that you’re younger, at least 5000 year if you’re more my age, if you’re in your 40s or so you probably want to put away at least 10 to 15,000 plus a year into these things.
Okay, and so another questions I have is regarding the example earlier we had, so you borrow that $20,000 for down payment from your policy from the insurance company. Right? What if you never pay it back in your default? What then?
Chris Miles 30:27
Well, the good news is, is that’s pretty hard to default, at least if it’s designed the way I do it. You mentioned like, you know, going out and, and trying to set these up. The truth is that most insurance agents don’t either one, don’t know how to do what I do with this and create this max return, right? Like, for example, someone puts in 20,000 in the first year, right, that’s the max they put in, that’s up to the 20,000 Max, and they’ll usually have at least 15,000 available right away from day one.
Chris Miles 30:55
Most insurance agents you put $20,000 in there, there’s gonna be zero cash in there. It all goes to fees and insurance cost. But again, I found ways to do it to where you can put 20,000 in and you have almost all your cash available. Right? That’s that’s the first key. The second thing is like say you do have a balance on your loan right now for the same reason. Now, I just did. I just quoted a guy recently doing the same thing. 20,000 a year, he’s 40 years old. 20,000 a year, and he would about have about 15,600 cash in the first year. Well, the minimum so that’s a cool thing that I set the max at 20,000, I always reverse engineer, I figured out what’s the maximum we want to put in. And then the minimum, in his cases is just like 4100 bucks a year. So even though the max is 20 grand at anytime, you don’t have to do 20 grand a year, you can do anything between that 4100 and 20 grand right? It’s a kind of proportional depending on your age and everything else, you know, so even if he’s doing 40 grand a year, the minimum is about 8200 bucks a year and so on. Right? Well anyways, with that, so he asked the same questions like well, what if I can’t pay the premium? Well, Cool, well, then you have to ask yourself one, Can I at least pay the minimum 4100 bucks? Well, if I can’t do that, I can borrow from the policy and pay it, right. But the cool thing is the way I designed it after the third from the third year on whatever money you’re putting in, it’s growing by more than what you put in. So same thing here, right? The only way to make these things implode is if you in the first year put in some money, took out a max loan, blew it all, and then you couldn’t make premiums for the rest of your life. Right? That would be the only way that these would probably implode. But if you’re, if I mean, but if you take out a normal loan, though, you know, and you’re still putting in, you know, money adding to it. Even though it’s compounding interest, the thing that’s cool is that the cash you’re putting in is also compounding interest at the same time. So yeah, it might be compounding interest, but you’re also earning interest on that same money anyway. So it’s, it’s really hard, very, very hard to get it to implode. Toriel like you said, like, go into a place where they’ll say, Hey, we need, you put it in a little bit more money. So this interest doesn’t overtake the cash value. It’s the way I designed them. It’s almost impossible to do that.
Okay, and then going back to the the interest, the 5%, that you mentioned earlier, is that something that the insurance company said, Oh, do you set it yourself? Who, who’s getting the benefit of this interest payment?
Chris Miles 33:26
Yeah, so the insurance companies set the interest rate every year, like one of the companies I use, they’ve been at 5% for at least the last 15 years straight, right. So they haven’t adjusted the rate at all. But yeah, like in that case, the insurance company sets the rate, they decide what the rate is. But how you pay it back and when you pay back is entirely up to you. So it’s, like I said, it’s just like a private line of credit. It’s not something that shows up on your credit report. It’s just a contract between you and the insurance company. If you don’t ever pay anything towards it.
Chris Miles 33:57
Well, then they just compound the interest so say for example, you borrow 20,000 bucks, they charge you 5%. That means you mean you have an extra thousand bucks of interest that’s charged that year, let just means it grows to 21,000 as a loan balance, and the same thing happens, they’ll charge 5% on that, and so on, right? So you can pay it however, whenever you want. Again, if you want, the numbers are really seeing to really get you that that that double dip effect where you can get paid twice where you’re earning compound interest, and you’re earning money from your properties. The way to make that work is where you take cash flow, float right back through, you’ll start paying down that that line of credit anyways and freeing up the cash to use again, and by the way, you can have multiple loans out at the same time. Unlike a 401k. We can only do one at a time and you have to pay it off to do another one. With insurance. You can have dozens of loans out and there’s no real limit. So you can do it. The only limit is you can only use up 95% of your cash value. That’s the max they’ll let you borrow
95% what’s the catch? What’s the cash value, is that premium in there. I’m sorry, was that
Chris Miles 35:05
that’s the tax free savings that’s in there. That’s the cash value.
So it’s different than the amount of you pay that you pay every month for premium. So this is different.
Chris Miles 35:16
Yes, a different number. Yeah, exactly. So when you pay the premium in, right, you’re, you’re also buying insurance, there’s a death benefit that’s associated to it. Right? Right. And again, I go for the minimum death benefit necessary to dump in the max cash. So like, in that guy’s case, we’re doing 20,000 a year, his death benefit was about $560,000. So just over a half million. Now, with that, of course, there’s insurance costs that come out, but there’s also a cash savings component. So when I do it, instead of just like term insurance, where everything goes to paying for your insurance costs, and you get no benefit other than a death benefit, right. Right here you got a living benefit. You’ve got the money that’s there in cash. So like in that first year, he would have about 15,600 bucks available of the 20,000 you put in, meaning that about 4400 bucks went to insurance costs. And that’s the most expensive year by the way. insurance costs over time go down and whole life with term insurance. They go up over time. so so yeah, 4400 bucks went to insurance costs that first year. Now the next year, if he puts in another 20 grand, the cool thing is now only about 2000 goes to insurance costs. So 18,000 mortgages and so now he’s got out of the 40,000. He’s put towards his insurance. He’s got like 33,000 and change sitting there in cash, he can use it anytime.
And then they could borrow 95% of that 33,000
Chris Miles 36:38
Exactly, yeah. So you can borrow over 30,000 of that money and invest it however he wants.
Okay, let’s see. So use this as a line of credit and does the insurance company care how you take title at all? Doesn’t matter?
Chris Miles 37:06
Yeah, they don’t. Yeah, they don’t care at all how you use the money. They don’t even ask. I mean, for example, I mean, if someone says, Hey, Chris, I want to borrow 40,000 bucks for my policy. I was like, cool. Let me shoot an email over them. And they’ll ACH into your account within the next week or so. You know, it’s that easy. If it’s over 50,000, then they might say here, sign this form, sign your name to it. So we know it’s you. But that’s about it. It’s very simple. It’s not like you have to go through underwriting like you’re getting a mortgage. Because they know the cash is in there. They just have to say great money’s in there. All right, we’ll send it to your bank account checking account sound good, you know, and they send it over.
Right? Because in a way, this is your own money that you’re borrowing against. Exactly.
Chris Miles 37:49
Yeah, it’s the same thing I did even even before the recession. I remember when I was launching a business with some partners I remember I had I had 25,000 just sitting in my savings account doing nothing right. It was earning att that time, one and a half percent, which was awesome back then right? Or will awesome now compared to back then. But uh, but yeah, I was already one and a half percent on my 25,000 just sitting in savings.
Chris Miles 38:12
And I remember I got the idea. I said, Wait a minute, I could do the same thing I could do with life insurance, can I get a secure line of credit from the bank? So I went to my bank, and I said, Hey, can I get a $25,000 line of credit against the savings? And of course, they said, of course, yes. And they and they would charge. I was earning one and a half percent they were charging, you know, 4%, right. And I thought back then again, because interest rates were higher, I thought, 4% that’s dirt cheap, that’s awesome. And I would have to pay like 220 bucks a month towards that loan, you know? So I thought I got a great deal.
Chris Miles 38:48
The thing I didn’t realize is, wait a minute, I could have done that with the whole life and it would have been way better. Because you know, the thing is with it. The reason that the bank was willing to do is because they knew if I didn’t make my payment, they would just take the money out of my savings right there just say, Great, we’re getting our money back, done, you know, where they could close down a line of credit. And even if I maxed it out, they’ll say, All right, we’re closing it down, we’re taking your savings away. Thanks. And we’re in their secured, right. They have secured money, insurance companies no different. They’re saying, hey, the money’s in here, we’re going to let you you know, withdraw or borrow up to 95% of the cash that’s in here. And no questions asked. There’s not like, unlike the bank, or the bank still had to put me through underwriting. There’s nothing like that within life insurance because there’s no minimum monthly payment, there’s no deadline on it. There’s nothing like that. It’s just purely Alright, we’re charging you 5% simple interest, while at the same time we’re paying you compound tax free interest on that money too, right? By the way, if you’re a business owner, the cool thing is if you are being charged interest on your life insurance loan and you use it for business purposes, now you can write off the interest. So now you’re even getting a bigger advantage. Because now the the net interest is even less and you’re making more of a spread on that money.
Okay, and the interest is fixed or is it arm?
Chris Miles 40:03
it’s variable. Technically, they’ll they’ll update their interest rates once a year. But they change very, very rarely, they change very slowly, depending on the company. There are some companies that like to move the rates around a lot like Northwestern Mutual, that’s one cup I don’t like to use, because they’ll run their dividend rates all over the place and their loan rate, for example, their loan rate on the on the money, as well as few other companies are like, you know, 8% but I know other companies, I can get anywhere from like four and a half to 5% loan rate on the money that I borrow. So I usually use those kind of companies.
So what, right because now what I see could happen potentially is, let’s say you have a loans out for $20,000. And next year, the insurance company decided to adjust the rate to 10%. If they still have That’s right, yeah, if they did
Chris Miles 40:56
That’s pretty rare. you’ll ever see that happen. Like for example, like I I’ve seen you over the over the last 10 years because interest rates have gone down, the dividend rates have gone down a little bit as well. But their their loan rates have gone with them too. So loan rates tend to follow the dividend rates. So if dividend rates go up, the only reason that a loan rate would go up that high is most like if the dividend rates like up over 12% or something, you know, so you would only see that happen if the dividend rates went up higher. That’s so they usually give you a there’s always a spread there, right? So if dividend if the loan rates drop, it’s probably because the dividend rates have dropped. So low rates tend to follow dividend rates.
Okay, got it. So can you share what are some of the pitfalls of using this strategy or the cons of using this strategy?
Chris Miles 41:45
Yeah, I mean, at least the way I’ve done it because I minimize the risks so much. There’s not a whole lot of cons but I’ll tell you this.
Chris Miles 41:52
Who it’s who is not for one it like I said if you’re if you don’t have at least $5000 a year, you’re putting away towards savings for investments. Any kind of savings for that matter, then you probably should just do term insurance, right? Just do something simple like that. You know, another reason to, it’s like I get sometimes I get people in their 70s. You know, sometimes it makes sense.
Chris Miles 42:12
But, you know, sometimes we might do a different type of strategy for them, you know, versus doing this. This is best used, if you’re in that that phase where you’re accumulating and growing your assets to increase your cash flow. So if you’re in the asset accumulation phase, where you’re trying to build savings, you’re trying to buy more assets, buy more properties, and things like that. This is the perfect strategy for that because this is a better strategy than just using your plain old savings account, you get better protection, better returns, you don’t get taxed on this money. You know, it’s it’s just awesome. So that’s who it’s really for. For those it’s not for it’s those that either one their cash flows so tight, they have no extra cash flow. And they’re not really saving for investments anyways, or two they might be into their 70s and then it may not be the best strategy for them
What are some? What are some of the fees that associate with this setting up this strategy with you?
Chris Miles 43:10
Yeah, there’s no fees it’s just those insurance costs right? Like when I get paid I get up for this particular thing that I do like I get paid off from the insurance company when you set up the policy and they just pay me a percentage of the of the insurance costs that you’re paying. So the really the reason why you don’t even the insurance agent that do know how to do this, which is a very small minority the reason why they don’t usually do it is because they don’t want to cut their commission’s back, because the way I do it, I mean, you’re cutting your Commission’s by at least 75%, you know, by at least you’re only earning about a quarter what you would make normally if you just did the mainstream thing, you know, so yeah, so there’s no actual fees out of pocket. It’s just purely, you know, my own my own. You know, gains that I get is just based on those insurance costs that we’re already minimizing to be the minimal possible for the tax free investing aspect.
And then another question that I just thought of, is because you’re borrowing money from this insurance company, who I imagine would be working nationwide in or international level? Is it truly free for you to take this line of credit out to do anything even investing in let’s say, pot producing businesses? or? Yeah, some crypto or anything that you want to do?
Chris Miles 44:32
Yeah, I mean, I, I don’t, depending on what it is and always recommend it, I usually recommend using the strategy for investments that will pay you at least monthly, quarterly or it’s a short term investment. So when I get people that are doing like, fix and flips, you know, and they maybe need cash for six months, but they don’t have to pay any monthly interest on it. It’s like great, this is the perfect strategy for that because you don’t have to pay any monthly payments, right? I mean, there’s interesting cars but you don’t pay any monthly payments. So it’s kind of cool cash flowing investments. You know, whether it’s they’re paying you quarterly dividends or returns that way or like in a syndication or if it’s a cash flowing real estate where you’re getting paid every month, it’s perfect, right? four things are speculative. I mean, you have to be careful because, you know, for example, I mean, I’ve I’ve purchased Bitcoin before and even made money on it, right? But if you have bad timing, you don’t want to be gambling with it to the point you say, oh, shoot, well, I just bought Bitcoin at $20,000 a Bitcoin and now it’s down at 8000 Oh, you know, now I don’t have no, I have less money, right? So
Chris Miles 45:32
Personally, my personal preference, and what I teach my own clients to do is, Hey, if you’re gonna use it, I mean, you could use it for whatever you want, right? I mean, you can use it to consolidate debt. I’ve had clients, you know, pay off credit cards using the cash in there, versus just using the cash from savings, you know, using cash from a life insurance policy and then taking them off the payment payment right back in and build up the cash.
Chris Miles 45:51
They make a little extra interest than what they do just using their savings account. Right. And I mean, I haven’t do things like that of having to invest in businesses for and business can be a great one because again, you don’t you don’t have to worry about monthly payments to a bank like you like would there, right?
Chris Miles 46:05
Same thing you can say, hey, this might take me 6-12 months for start cash flowing from this marketing strategy I just put money into or, or paying for buying this piece of equipment for my practice, you know, because I work with dentists and stuff, right? It’s like, Cool, alright, we can do that, get the money rolling in and start using that money to pay pay back however you want, you know. So that’s, that’s a cool thing. There’s a lot of flexibility. You can use it anywhere you want. But yeah, I mean, be careful. And you mentioned internationally too. That’s the sad part is that there is restriction internationally, I’ve got clients in Australia and New Zealand, they cannot actually have get a policy like this. They cannot even do this infinite banking concept, even though they want to those countries don’t allow it. So the only way I can get around is if they have you know, either investment properties here in the US, or a corporation here, which my clients usually do because they want to invest in US right because US real estate, it’s way better than money. The other countries. So they do that cool. Now I can actually get a policy on them because they’ve got some sort of domicile here in the US. So there’s ways or work around it. But I’ll tell you from an international perspective, US rocks when it comes to investing right now.
Definitely a lot of international money’s coming in. Yeah. And, you know, from the example that that we talked about earlier, you know, the hundred thousand dollar house, yeah. $20,000. Maximum. That’s that worked out perfectly. But, you know, in the real world, in Utah, in Colorado right now. I mean, the fact is $100,000 doesn’t get you anything at all. So I can see that. I mean, at $20,000 a year maximum, it could take you a few years to build up your cash value to be big enough for that for you to use this strategy. Is that right?
Chris Miles 47:53
Yeah, it can be Yeah, depends on how you’re doing it. Right. I mean, that would be true either way. I mean, if you put your money in a savings, right, it’s gonna be the same. thing. They The one thing that’s kind of cool, and this is what I do personally, right? And you can use it however you want. But this is how I personally use my policy. You know, my wife she wants at minimum, she’s like, Chris, I want $120,000 available for savings at any time. You can’t touch it. Unless we’re in emergency dire straits situation, right? Well, the only problem is $120,000. You think about the opportunity cost on that, you know, even if you get into online savings, or any one or 2% that’s not much, right. And so I told her, I said, You know what, I’m willing to do that. But let’s do this. Let’s instead get two thirds of my emergency savings. Let’s get it into our life insurance policies. Let’s get them built up in there. Keep some of the banks some that we can get overnight, but I know for in a really bad emergency. We can you know, we’ll probably have at least a week’s advance notice and knowing we have to get some money so great. We can do that get the money from insurance company, but now at least in this case, is protected from lawsuits and creditors. It’s tax free as earning a better return than point nothing percent in the bank. Right? And, and that’s kind of how I use it. And then anything above and beyond that anything above that two thirds that those reserves extra cash value I have in my policy, the extra savings there. Right? I can invest it however I want. So that might not be a bad thing. You might say, okay, it might take me a few years to do that, depending on where you are, where you’re doing real estate investing, if you’re doing it locally, if you’re in the western United States, it’s more expensive. And, sadly, the rate of returns aren’t great. You know, I just talked to a guy in Colorado does a ton of properties there. And he’s like, yeah, I gotta sell these. I can get way better deals out of these, you know. So it just depends on what you’re looking at. But yeah, you can build up the savings in there. And it might take a few years, but at least now your money’s doing something more than earning nothing in the bank. And then you get taxed on that nothing. You’re right.
Right, right. Definitely. Now, Chris, just to sum up this strategy, I see that whole life insurance better than term life insurance. You need to pay for your premium and that premium part of it is your cash value. And then in the end, when you die, you get the cash value back and you get the death benefit. Is that correct?
Chris Miles 50:12
That’s right, that we’re overpaying the premium. So we’re putting all this extra money in cash, while also getting our insurance costs too.
So, for instance, let’s say a person premium is $1,000 a month, $12,000 a year, you can still set up so that you can pay in $20,000. And the extra eight grand goes to your policy as cash value.
Chris Miles 50:35
Oh, yeah. And if it’s if we’re looking at 12,000 of actual insurance costs a year, most likely, it’s because I made the maximum about 50 to 60,000 a year. So
Oh, wow. Okay
Chris Miles 50:46
I try to make a much bigger spread. So yeah, just like the example that guy with that’s 40 years old, with 20,000 max a year. He’s putting in 20,000. But his real, and that’s not even his full insurance cost, right. This is the first years insurance costs every year that costs go down. But his first year’s cost was 4100. So really that extra almost 16 grand, it’s just bonus money we’re putting in to go in that tax free savings.
And he could do it or not do it at all. That’s fine. His base is always at 4100.
Chris Miles 51:14
Exactly, yep, you have the freedom to choose to do anything. Anything to the minimum, the maximum at any time. It’s a very flexible, great, it’s great for when you expect the best, but you still want to prepare for the worst, which is my mantra.
That’s great. That’s great. Now before we wrapped up, Chris, just one last question before I let you go. Yeah. What is the book that you have given most as a gift and why?
Chris Miles 51:41
The book I’ve given most as a gift?
Chris Miles 51:44
Oh, man, I, I would probably there’s a few books. That’s probably a tie pretty close tie. Either Think and Grow Rich, which is a very old classic right from Napoleon Hill. Actually, I should probably add that list. Rich Dad Poor Dad by Robert Kiyosaki that’s a given.
Chris Miles 52:03
And then another book I’ve given a lot away is a book called Killing Sacred Cows by Garrett Gunderson who was actually one of my former partners, and Killing Sacred Cows is a great book especially if you want to question a lot of what I talked about earlier in this interview, right where we talked about you know, the the mindset of what people talk about with the myths around money if you guys say forever, right? You know, all this kind of messy here about he really dispels those myths and that killing that book Killing Sacred Cows, so great book to kind of open up your mind for sure.
Was he the one who introduced you to this concept but did you already know about this?
Chris Miles 52:41
I found it out through another person but but yeah, he’s he used the similar concept. He doesn’t quite get as rich numbers when he when he’s done it for himself. But yeah, he’s he’s, he invented actually I was one that got him onto this concept of over funding your life insurance to get extra cash and funny enough
that’s great. Now, Chris, thank you so much for your time sharing your knowledge with us on Infinite banking. This is truly an eye-opening concept. I have been in delve into some of the details that you have shared with us today for a long, long time. And so I’m sure the listener benefit greatly from your knowledge.
Chris Miles 53:21
No, I appreciate that. It’s always fun to teach. That’s, that’s why I keep doing what I do is I want to inspire hope. I know that, you know, no matter who you are, I mean, no matter what place you’re at, there’s there’s hope of creating that financial freedom, especially if you keep listening to what what you’re talking about Vee. I mean, that’s the thing is that, you know, it’s it’s not doing the same old traditional stuff you’ve been doing the whole time. It’s doing something different. And I love I love what your show is all about. That’s what that’s what makes us so fun to be on the show.
Right? It’s the lab, you just have to try out new ideas, right?
Chris Miles 53:50
That’s right. Yeah. We want to get different results than you. You’ve always had. You got to do something different than what you’ve always done, right?
Chris Miles 53:57
Correct. Thank you so much, Chris.
Chris Miles 53:59
That’s the end of the show, don’t forget to subscribe, leave a five-star rating and review on iTunes for The Real Estate Lab Podcast. Until next time, have a prolific week.