Life Insurance to Fund Real Estate Purchases

[ProsperSBC]

Greetings all,
I have been a life agent for 3 years now trying to get into bigger markets. My brother manages a real estate investment company that buys properties and turns them into rentals in college towns. His boss is interested in seeing if there is a way to insure the owner of property they have targeted for aquisition so that upon the owners death they can use tax free dollars to provide funding to purchase the real estate from the deceased family.

Do any of you have experience with this? They are interested in insuring people in their 60's and cash flow enough to pay the premiums. I am looking for any insight benefits/drawbacks of this approach and they would like me to prepare a powerpoint on how I could help them. Any comments or suggestions would be greatly appreciated.
Thank you very much for reading this post.
Tom

 

[insuranceexec]

Greetings all,
I have been a life agent for 3 years now trying to get into bigger markets. My brother manages a real estate investment company that buys properties and turns them into rentals in college towns. His boss is interested in seeing if there is a way to insure the owner of property they have targeted for aquisition so that upon the owners death they can use tax free dollars to provide funding to purchase the real estate from the deceased family.

Do any of you have experience with this? They are interested in insuring people in their 60's and cash flow enough to pay the premiums. I am looking for any insight benefits/drawbacks of this approach and they would like me to prepare a powerpoint on how I could help them. Any comments or suggestions would be greatly appreciated.
Thank you very much for reading this post.
Tom

Yes.

 

[bluemarlin08]

Where is the insurable interest?

 

[insuranceexec]

Where is the insurable interest?

If it is set up as a partnership; then it is a "Business Survivorship Plan."

Or possibly a "buy-sell agreement"; however you want it structured, either would work.

 

[bluemarlin08]

Only if the owner of the property they have targeted for acquisition enters into an agreement to sell. Why would an owner be interested in this arrangement unless he was guaranteed what the market price would be at their death, and why would the real estate investor want to do this?

 

[insuranceexec]

Only if the owner of the property they have targeted for acquisition enters into an agreement to sell. Why would an owner be interested in this arrangement unless he was guaranteed what the market price would be at their death, and why would the real estate investor want to do this?

I understand your angle now. Very good point. I guess you could negotiate on the front end what the purchase price would be; or just rely on the spouse to have good negotiating skills.......................LOL


I have dealt with a couple of these deals. But they were not soliciting investors, they were partners in the beginning, and purchasing property together.

 

[ProsperSBC]

Only if the owner of the property they have targeted for acquisition enters into an agreement to sell. Why would an owner be interested in this arrangement unless he was guaranteed what the market price would be at their death, and why would the real estate investor want to do this?

The investor would want to do it because he has significant cash flow and permanent life is a could place to put it to grow tax deferred. If the owner dies sooner than later it could possibly cost the investor much less (in the form of premium payments) to purchase the property with the multiplication of the death benefit tax fee. The owner of the home could negotiate an inflated price because of the death benefit factor to make sure his family gets some money at the time of death to cover final expenses and what ever else they might want the survivors to have.
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Thanks for the perspectives. Does anybody have any training materials on this specific use or any web links?
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Ok so to establish the buy sell and show the owner of the real estate value what type of concessions should be offered to the owner of the property? Free Funeral?lol

 

[bluemarlin08]

You are saying you are targeting folks in their 60's, I can't imagine why a owner would enter into an arrangement like that. In addition, I have never seen successful real estate investors, with lots of cash flow consider permanent insurance a good investment. I own real estate and near your target market and can't see the advantages.

 

[dgoldenz]

Life insurance is NOT an investment. I repeat, life insurance is NOT an investment. If you use it as an investment, you have the potential to get burned big time.

 

[Joe Moore]

Greetings all,
I have been a life agent for 3 years now trying to get into bigger markets. My brother manages a real estate investment company that buys properties and turns them into rentals in college towns. His boss is interested in seeing if there is a way to insure the owner of property they have targeted for aquisition so that upon the owners death they can use tax free dollars to provide funding to purchase the real estate from the deceased family.

Do any of you have experience with this? They are interested in insuring people in their 60's and cash flow enough to pay the premiums. I am looking for any insight benefits/drawbacks of this approach and they would like me to prepare a powerpoint on how I could help them. Any comments or suggestions would be greatly appreciated.
Thank you very much for reading this post.
Tom

He could probably become partners with the owners, have a buy-sell agreement and make it work. However, I see a lot of drawbacks. He basically is trying to out-fox the actuaries, which ain't too realistic. To start, how are they going to "cash flow enough to pay the premiums"? He would probably need very deep pockets to invest before he would see any dollars returning.

I had a friend who had been to Tunica, MS, and won $60,000. He came back home, quit his job and announced he was becoming a "Professional Gambler". After about 30 days, the $60,000 and a bunch more was gone. He was bankrupt in 60 days.

I see this approach the same as I saw my friend's plan. Both are "sitting on the wrong side of the table". It is very hard to beat someone constantly at their own game; insurance companies, as casinos, have it down to a near science.

With today's real estate deflated pricing, they may be able to "partner" with some seniors to save foreclosures. But, it still would take many dollars to invest. And who's to say where the bottom is in real estate prices? If he took on the debt and prices continued to plunge, he would be under water real fast.

For some reason, this reminds me of the -0- premium life insurance plan.