Unconventional Real Estate Funding Strategies with Sarry Ibrahim

May 12, 2022

Expert CRE Secrets Podcast

Sarry Ibrahim founded Financial Asset Protection after learning about the Infinite Banking Concept (also known as the Bank On Yourself Concept). He saw this as an opportunity to save retirement accounts, real estate properties, and businesses from market failures and other risks. Sarry believes the number 1 rule to your money is to make sure it lives somewhere safe and accessible. As Sarry states when working with clients “it is never an either/or situation, it is a both/and situation. We want you to integrate the solutions we recommend alongside your business and real estate portfolio to have a double-compounding effect on your money.”

Sarry earned his MBA from Keller Graduate School of Management in Chicago, IL, and has consulted companies like Blue Cross Blue Shield, Allstate Insurance, Humana, and Cigna Healthspring. Sarry lives in Chicago with his wife Dina who is an oncology nurse.

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Unconventional Real Estate Funding Strategies with Sarry Ibrahim

Brett:

I'm excited about our next guest. He's out of Illinois in the Chicago area. He founded financial asset protection after learning about the infinite banking concept known as the bank on yourself concept. He saw this opportunity to save retirement accounts, and real estate properties, and businesses for market failures and other risks. He believes the number one rule to your money is to make sure you live somewhere safe and accessible, and he states when working with clients, it is never an either-or situation. It is a both-and situation, and so please welcome to the show with me, Sarry Ibrahim. Sarry, how are you doing?

Sarry:

Good. Thanks for having me on. I appreciate it.

Brett:

For our listeners to get to know for the first time would you give us a little bit more about your story and your current focus?

Sarry:

Definitely, as you mentioned, I run a company now called Financial Asset Protection, and our main focus is using the infinite banking concept, also known as The Bank On Yourself concept, primarily for real estate investors to become their own sources of financing, and to grow their wealth. This journey started about six years ago, when I was doing my MBA, and I kind of was looking for different jobs, I wasn't really sure what I wanted to do. I got a concentration in project management, I thought I was going to be a project manager. But after taking those courses, I didn't really like it, I didn't really click that well with that subject. I got into sales and marketing for different insurance companies, and that was like my calling. I don't know how but that wasn't my calling. I enjoy talking to people, I enjoy talking about money, and I started to realize that people were also comfortable speaking to me about their financial issues, and I want to make a career out of this. I read a lot of books, I read it, I read a book called The Bank On Yourself Of Revolution by Pamela Yellen, that talks about the bank on yourself, strategy, and then at the end of that book, there was a section that said if you want it to join the program, as an advisor, I applied, got accepted, and then started the company, and I'm a big financial professional, and I've been doing this for a few years now, and it's great. I love working with clients, I love talking about money, talking about mitigating risks, talking about becoming your own source of financing, and this is what I want to show today to talk about to talk more about this concept and how it can help a lot of people.

Brett:

I believe we've all been given certain gifts in this life. Some people call these strengths or superpowers, I think their God-given gifts and being given to us to be a blessing help to others. Once you go back to your high school days, maybe your college days, when you get your MBA, your younger days I want you to think about maybe one or two gifts that you believe you were given? How does that help how you help and bless people today?

Sarry:

One gift, I think I was given is just listening. I've always listened more than I spoke, I am more comfortable listening to people than speaking. I think that's in my eyes, I think that's a gift. Just being and I think it's it makes people very comfortable. Without that quality or without that gift, I think my job would be a lot more difficult than it is. I'm very blessed to have that quality and to be a good listener because I actually enjoy listening to people.

Brett:

That was jumped right into the show under unconventional real estate funding strategies. Let's just talk with the top deal story when it comes to commercial real estate investing and funding using your strategy. Can we start with the deal story? What was the outcome, and we can kind of reverse engineer how we got there? What's the best one for one of your clients? When it comes to financing commercial real estate? With with your strategy?

Sarry:

Just to be clear, there are many ways that you could use this one of the most recent ways that I remember that I recently worked on, I think that was the best was client sold one of his properties, he had about $400,000 in cash, and then he bought a single premium whole life policy. That's like a one-time payment holds a policy. It doesn't require any more payments after that, and then he instantly had about $375,000 in cash value, and you also had life insurance at this point about $580,000.now he could essentially buy commercial estate or residential real estate up to $375,000, and then that number keeps growing every year. Let's just say, for example, he bought a property for $300,000. He's now his own mortgage, he makes those payments back to himself. Both the asset he bought the real estate as well as the whole life policy would both appreciate in value. He just turned one asset into two assets. That's one story that I've recently worked on.

Brett:

I make sure I unpack that it sounds kind of cool. He sold had cash of 400,000. He purchased a whole life insurance policy after fees or closing costs or whatever it's worth 375 is the cash value. Although the life insurance if you were to die the next day it would pay 875 all tax-free, and then that 375 he can get a little loan to go buy another real estate asset or my following I missed anything there?

Sarry:

The only thing is that what if it was 580,000?

Brett:

580, I missed that one.

Sarry:

He would be able to borrow, he would want to leverage the cash value borrowed against that and use that to buy anything, whether it's real estate or anything else that he wants. There are no restrictions on what he could use the money for, which is a key point of this.

Brett:

What are the restrictions?

Sarry:

There are no restrictions? He could use it for business purposes.

Brett:

There are no restrictions. So it can be business it can be personal it doesn’t matter.

Sarry:

Exactly.

Brett:

Borrow against it, and in the meantime, that cash 375? On average, what do you think it's growing for this particular client?

Sarry:

On average over the lifetime of the policy, it's going to grow about 4 to 6%.

Brett:

4 to 6%. Got it? Then, of course, what is it a borrow? What can you borrow?

Sarry:

Which are what you borrow? If you're borrowing at 5%? Simple interest, over like four years, it would come out to about 1.9% APR (Annual Percentage Rate). But that's how this actually works is that it's a good question. Because the way this works is when you borrow, and you're paying back the growth of the policy outweighs what you're paying into it. You have this split, or this arbitrage between the cost of capital and what you're earning in the policy, which is another benefit of using, because some people ask, like, why do I have to borrow money to use? Why can I just withdraw it and just not be of any interest? The reason why is because when you borrow against it, you don't interrupt its growth. The growth outpaces the cost of capital to use the policy.

Brett:

I said get on a 10-year term. Because you think you said it's compounding at four to 6%? on the 375?, and let's just say I borrow 300 out. 75 in there, and he said, it's 5%. simple interest over like a 10-year term? What's the arbitrage on average? If it let's say, did six with the arbitrage be an extra one to 3%? Because it's compounding versus simple interest?

Sarry:

I wish I knew this right off the top. But usually, I would compare the cost of the loan as it accumulates versus the costs were versus the growth of the policy. But typically, we could see that two to 3%. arbitrage the difference in between the cost of the loan versus how much it gained over time.

Brett:

2 to 3% difference, as the arbitrage, and then I wonder to the one that comes to my mind is just inflation. Inflation is kind of crazy. I don't know what your feedback is for that if inflation is going so far up? I guess you could make both arguments that if you're borrowing, right, you're paying back in tomorrow's dollars, is that inflated? That's not bad. But if you're at 4.4 to 6, like the opportunity cost, right of that 400,000 into something that's producing, let's say, 6, 7, 8 percent plus appreciation plus depreciation. Give us the argument or counter to that to say, I'm like, I could take this 400 and put it as a down payment, or I could put it into the life insurance policy, borrow against it, and then put that as a down payment? Am I capping if I'm only going four to six with no depreciation, and no appreciation? It's just for uncapped out there. What's the counter to that?

Sarry:

Well, it's like what you mentioned, when you're talking about my bio, you said I help with not an either-or strategy, both and strategies, and that's what this content is about. It's about connecting two different assets together, or even multiple assets. Because it makes sense. That's a valid argument. Why do four to 6% in the whole life policy, what I can do 8%, or 10%, somewhere else, arguably and that's the point of this is not possible to replace other investments, it's supposed to be more of a savings vehicle, I think the only thing this is really supposed to replace is a savings account, and the way you finance deals, I think, ultimately, that's what it's meant to replace, but not meant to replace any investments. It's actually meant to enhance investments by providing liquidity to be able to use it anytime.

Brett:

I like it. I mean, I have the numbers would have to, I'd really have to see like 100 unit complex purchase when somebody did this versus borrowing from Fannie Freddie at 3% or three quarter and five years fixed, I'd like to see some case studies of like someone who's done this strategy for 10 or 20 years. Then like a side by side comparison of, I borrow from the bank, or I put it into an insurance policy, and I borrowed here, and then, of course, let's not forget about the life payout write a 580, and I imagine that is that growth over the time period is 10 years. What would the 580 life insurance payout be?

Sarry:

580 payout be around 700,000 in 5 years.

Brett:

How about 10 years?

Sarry:

See 700,000 probably grows exponentially. I want to say probably closer to 900,000.

Brett:

Now, of course, depends on your health, and your age and different things like that. Correct?

Sarry:

Exactly. Somebody who's seven years old, though this does is gonna be completely different than somebody who's 30 years old. That's benefit is entirely based on age and health as well as the initial contribution amount.

Brett:

What's the biggest false belief? Because I brought me a couple of these here. Because I'm still, I'm still really learning about this. I've never I have a level term, the level term for the family. Then I invest in commercial real estate, that's my love, and then we have clients who do Deferred Sales Trust, and they're investing in some insurance policies in some stocks, bonds, mutual funds, some real estate, it's kind of a mix of reverting or diversifying. But what's like the biggest, like the false belief that you would use? If you could tell me or the audience like, what is it? How do you overcome it?

Unconventional Real Estate Funding Strategies: “I'm a big financial professional, and I've been doing this for a few years now, and it's great. I love working with clients, I love talking about money, talking about mitigating risks.” - Sarry Ibrahim

Sarry:

The biggest false belief is that just to initially compare terms to whole life, they have different functions and different purposes. The term is just like straight life insurance only, and the whole life is having the cash value component, and it's for your whole life. But I think that a false belief is just to run those two together, and then say. What, should which one's better for life insurance? I think from that perspective, it's probably going to be a term only because it's going to, it's gonna, it's just life insurance, only, it's gonna cost you less. But I think that it's important to identify your objectives, and what do you want to do with us? I think whole life insurance is it's not about the title of it, just buying the whole life insurance policy, I think it's about the function of what it could actually do for you when you use it for real estate when to use, or for investments with the tax-deferred power, the tax of the income, tax-free, death benefit all these other parts that are happening, that you could use it as a two, I think that's one of the biggest misconceptions about using whole life is that it's more of a tool that can be used for different things, rather than just the title of it.

Brett:

I appreciate that, and by the way, I make sure I pronounce your name correctly. It's Sarry Ibrahim, is that correct?

Sarry:

Yes, Sarry.

Brett:

Sarry Ibrahim and you can find more about him at Financial Asset Protection, it's FinAssetProtection.com. Personally, are you investing in real estate curious? I'm sure you have your whole life insurance policy as well going right? Kind of give us? What's kind of your strategy personally, for yourself?

Sarry:

I have two whole life policies right now, and I'm in the process of being a limited partner, or a passive investor in real estate, that's kind of the route I want to take, I don't see myself doing really active real estate, investing nothing against it. But rather I prefer to invest in somebody else's deal through either equity or through private money lending, where I'm actually loaning money out using my whole life insurance policy. To kind of give you an idea of like, some of the numbers I have estimated, right now, I'm going to borrow from my policy, loan that out to a real estate investor, and then he's going to take that money, obviously, and use it for renovations and for downpayment and other factors, other areas that he needs that money for, and I'm anticipating I'm hoping for a 10% ROI every year on that money, and then to make money that way, and then also to keep earning compound interest in the pot in the whole life policy. When I go to access the money from the holy policy, I'm not interrupting that growth, I'm borrowing against it. That asset keeps growing, and then I can invest in real estate, I don't have to do any work, I don't have to do anything, actually, I was I have to do is just move money from point A to point B. I'm becoming to becoming a fan of passive real estate investing and private money lending.

Brett:

You've got two whole life insurance policies, and then one of them you're borrowing against it to put into LP positions into some commercial real estate, you're hoping to get 10% there. But in the meantime, what you're borrowing it even though you're borrowing against it, you're paying, let's say the 5% interest on that, you still compounding at four to six on the entire amount that doesn't stop. But on the 10, you'll pay the five and then you'll keep an extra five. Is that a fair summary? I catch that right? Did I miss anything?

Sarry:

I'm going to try to also I’m going to run this by my accountant, and I'm also going to try to get a tax deduction on the interest I pay to the insurance company because I'm using it for business purposes. That's kind of tricky. I don't want to be quoted on there. But check with your tax professional, there are ways to deduct the interest that you borrow from the insurance company to you. If that's the case, I borrow five sells at 10 and still can get some deduction in between that split. Cool.

Brett:

You got a plan, you're executing it, you're taking action, you're diversifying and doing different things. curious why 2, why not just one?

Sarry:

Why two life policies?. Because I started one about three years ago, and then as I'm making more money now I started other policies. Each policy that you start typically has some max limits to it for tax purposes, something called a modified endowment limit or modified endowment, contract limit, and MEC limit, and I reached that limit for the first one. Now I'm making more money, and then I apply a ton of the policy and it's very common for people over their lifetime who are using infinite banking to have like 15 policies they're just making more money and then maxing out and kind of like, it's similar to real estate, how you can have like 15 properties each one is being maxed out. Similar idea to that.

Brett:

Are you required to take any distributions, like any minimum required distributions, and or when you take distributions, are you paying ordinary income tax on that?

Sarry:

You're not required to take any distributions from the whole life policy, and then type the way the taxes work is that the growth of is tax-deferred growth, and then in most situations, as long as it's a Non-Modified endowment contract on Non-MEC Policy, then the gains in it can come out tax-free, because you've used after-tax dollars to pay for the policy, and under current tax law, the gains are tax-free, and then the death benefits income tax-free. That's kind of a tax way. The only time the gains could be taxable as ordinary income is if it's a Modified Endowment Contract a macro policy in other words,

Brett:

By the way, you learn more about that and dive at FinAssetProtection.com scheduled time. With Sarry Ibrahim. By the way, I look them up on LinkedIn, or Instagram, or Facebook. All right, well, let's shift now. I think we think we hit that pretty well. Let's shift a little bit into commercial real estate experts, who are helping their clients I believe that the whole industry is changing. The value proposition of agents is, is switching from brokers just selling and binding to becoming like advisors. Where it's like, it's like, it's more than just selling and buying a property. It's capital gains, tax deferral, it's income tax deferral, it's estate tax planning. It's, perhaps it's diversification, especially as clients get older. Being aligned typically with experts, like yourself, or what in other industries, can help you bring more value to your clients and close more deals? What would you say to the commercial real estate expert out there? How are you working with those currently?

Sarry:

I like how you said that it's more of an advisory approach, it's more of solving some problems, not just selling real estate, but more of actually solving some problems, like the tax benefits. One thing I would tell you, or mention to the broker is that how much are you paying in interest to other lenders? How much are you paying are and how much is your tax exposure going to be in the future? Also consider inflation, which you mentioned earlier take into consideration all these things and try to solve them one by one, and typically, this could all be done through infinite banking through tax-deferred growth, usually, it's tax-free income that comes out of it, and the ability to be in almost a 0% tax bracket in retirement, so many different ways, and I would kind of address that the current problems or current potential problems that one could face taking some ordinary conventional roles when it comes to financial planning.

Brett:

Now let's shift into the 1031 Exchange, if you're familiar with that is the biggest frustration with capital gains tax deferral on the sale of highly appreciated assets? I'm curious, any thoughts on that? Like if you have any friends selling crypto or high-end primary residences or commercial real estate or businesses? What's been the biggest frustration when it comes to selling high having a huge capital gains tax and trying to defer it?

Sarry:

I am familiar with 1031. I don't I don't work in that space. Really. One thing that I did speak to a client recently, he said that he prefers not to do 1031 for some reason. He said that because he's rushed to buy in order to defer the temptation to defer the capital gains tax. But for the most part, I think it's a good idea to not pay taxes on the gains that keep rolling into other properties. I think that's a smart thing to do. The only thing is, is that correct me if I'm wrong, but one problem right now is because real estate values are so inflated, they're so high right now, I think that can be a little bit tricky.

Brett:

We call the shotgun wedding. You get engaged in 45 days, you got to get married at 180, and it's kind of like the blockbuster way of doing things you show up on a Friday night and you're trying to get that movie but it might be rented out or even if you get it you have three days to return it. Drive in the snow if you're in you know if you're in a cold-weather state and back and forth, and that thing called Netflix came out right there's no more timing restrictions. You can buy and sell real estate whenever you want. You can move funds outside of your taxable estate.

You can also diversify you can buy some insurance you can buy some stocks, bonds, mutual funds, you can do ground-up development, you can you could also just buy commercial real estate, you can do so many things start a business, hard money lending. That's the transformation when people would know that, I don't have to deal with the toilets. Trash liability. The Gavin Newsome, new rent control laws, the eviction moratorium, or whatever else you're just, 67 years old, you're just ready to be retired to have a little bit simpler life. That's where the Deferred Sales Trust comes in. By the way, you can learn more about that at capitalgainstaxsolutions.com. All that being said, are you ready for the lightning round?

Sarry:

Let's do it.

Brett:

All right, knowing what you know now if you go back to your 20 or 25-year-old self with the one golden nugget you need to make sure to tell yourself to do.

Sarry:

I've just always done it. Just execute don't really care about the result right away, you won't know until you actually execute.don't worry too much about the details. Just take action.

Brett:

Second question. What’s the number one book you've recommended or gifted the most in the past year?

Sarry:

Rich Dad Poor Dad for sure.

Brett:

Third question. What are you most curious about?

Sarry:

I'm most curious about just becoming like a billionaire. Like I want to know how that works. All that you know what happens when you make that much money you wouldn't do like I'm very curious about that.

Brett:

Second, last to the question. The number one leadership quote or theme that you strive to live by.

Sarry:

So Mark Twain said that a banker is a fellow who will loan you his umbrella when the sun is shining, but once it back the second it starts raining, so never really rely on banks for funding kind of become your own banker.

Brett:

I love that. It's also part of why the crypto world is exploding as well. Get tired of certain asset classes and want some change, and some freedom flexibility. Last question. After all your success helping the people you can curious how do you stay centered in your values? How do you stay encouraged to charge forward to reach new heights?

Sarry:

I definitely try to TEDx all my goals. I never want to really reach my goals. I want them to be much bigger than they actually are, and kind of always pushing myself to do more almost like I want to push myself to do more on autopilot where I'm doing more without even realizing it.

Brett:

Excellent love that listeners want to get in touch with you. Would you mind one last time what's the best place for them to find you?

Sarry:

The website FiNAssetProtection.com is the best way you can go there, you can schedule a free 15-minute call with me. You could connect with me on LinkedIn and you can check out the YouTube Channel and Podcast Thinking Like a Bank our show all from the website FiNAssetProtection.com

Brett:

Thanks so much for being on the show, and also thank our listeners for listening to another episode of the eXpert CRE Secrets Podcast, also streaming on Capital Gains Tax Solutions. Hey, we're here to try to bring you value from really smart people doing different things in the real estate world insurance world finance world leadership world. Also, you can create and preserve more wealth, defer more capital gains tax and or help your clients do the same. I encourage you to go to expertcresecrets.com and or capitalgainstaxsolutions.com to learn more about the Deferred Sales Trust and ways to grow your business and level up how you're helping your clients. Thanks so much for watching us or hearing us today and we'll talk to you again real soon.