Become Your Own Bank: Infinite Banking Strategies for Real Estate Investors

David Hammer (00:00)
So what it allows ⁓ investors that are looking to get into real estate, it allows them to be able to have the dollars that are designated to get returns for themselves and for their investors and have that dollar be able to have ⁓ multiple uses, multiple rates of return that can be derived that if you just use the equity and go into the real estate and then you get, let’s say, capital appreciation,

plus cash flow, those are great, obviously, those are metrics that every real estate investor obviously.

Dylan Silver (02:09)
Hey folks, welcome back to the show. Today’s guest, David Hammer, is the founder of the Hammer Success Method, where he helps real estate investors stop losing money to banks by building IBC powered family office strategies that create private banking systems for funding deals, protecting equity, and building generational wealth. He also brings the mindset of an endurance athlete to his work competing in marathons, Ironmans, and triathlons while helping investors think.

long-term and trust the process. Dave, thanks for joining us today.

David Hammer (02:41)
Thank you for having me.

Dylan Silver (02:43)
What was the moment where you realized investors were bleeding a lot of their money into financing when they could actually be using IBC to protect their hard earned money?

David Hammer (02:58)
What I found out, and it was mostly during COVID, I come from the world of Wall Street, is that ⁓ there are ways of using products that ⁓ I’ve always had available to me. And I realized that there was a way where we all are bankers in our own worlds, whether we realize it or not, when we put

We have our hard earned dollars and we deposited somewhere. It’s got to go into someone’s institution. And what I found out, I’d say about seven years ago, and I was, I was actually helping support a real estate, ⁓ I would call them social influencer where he was actually offering to the public, the ability for them to, ⁓ get involved in real estate and dip their toe in the water. And then I ended up dealing with a lot of ⁓ other.

more sophisticated real estate professionals is that there was a way to be able to use things, including life insurance, but it’s not just life insurance as a way to be able to take mostly the equity component that most real estate investors need to put down as a down payment or even equity as part of a real estate transaction. And instead of them going traditionally to other institutions, they have the ability, and I found out

to be able to use their equity and put it and be able to use what they call other people’s money. And in this instance, we’re talking about the life insurance company where my clients would deposit that money and then leverage it to then go into their real estate investments.

Dylan Silver (04:44)
Now, for folks who are considering a life insurance policy, should they be looking, and if they’re investors themselves, should they be looking at this from the perspective of, this can be life insurance first and my own bank second, or should they be looking at it as this is primarily going to be how I’m going to be funding my deals, and hey, an added benefit is I have this death benefit should, God forbid, something happen.

David Hammer (05:59)
Well, through my through my Hammer Success Method, and I’ve I’ve recently trademarked, can show real estate professionals where if they if they take the money that will initially go towards a deal and first have it be deposited, have it make a right hand turn and then go back into the deal, I can show real estate investors where they’re going to add extra rates of return to the to the real estate investment that they wouldn’t have had otherwise.

by being able to utilize the leverage and the capabilities of being their own banker by actually depositing the money into, it just so happens to be doing a life insurance policy, but if it were another vehicle, all of us would be using that. But I found out that there’s a better way to be able to store money. And again, this is ⁓ a tried and trued method that’s actually been in existence that predates

the IRS, it predates the Federal Reserve System. So for all of your listeners that are listening here is that this is a tried and true system that has been battle tested for at least 100, 120 years. And the way that…

Dylan Silver (07:15)
No kidding. Okay, so

let’s get a little granular here, ⁓ Dave, when you mentioned that, hey, if this was another financial tool, people would be using this other tool. What are the specific benefits that make the infinite banking concept so attractive for this type of use case?

David Hammer (07:36)
So what it allows ⁓ investors that are looking to get into real estate, it allows them to be able to have the dollars that are designated to get returns for themselves and for their investors and have that dollar be able to have ⁓ multiple uses, multiple rates of return that can be derived that if you just use the equity and go into the real estate and then you get, let’s say, capital appreciation,

plus cash flow, those are great, obviously, those are metrics that every real estate investor obviously

is first and foremost to look at. But what about if that dollar or those dollars that are going into these different real estate investments, what if that dollar can also have another capability to earn other rates of return at the same time? And now you have three, four, I can even make a ⁓ argument that there’s five or six different benefits.

that that same dollar can then be able to be used for. And that’s where the extra rates are.

Dylan Silver (08:41)
So

forgive, I guess, this basic level question here, because I’m familiar with infinite banking, but I haven’t actually gotten this granular. When you say multiple uses, break that down for me, because I don’t want to be making the wrong assumption, nor do I want our audience to be. How does this multiple uses work?

David Hammer (08:58)
So what I use are specific type of life insurance policies from mutual insurance companies. So it’s important because when you use a mutual insurance company, unlike a stock insurance company, you actually are going into literally going into business contractually with that insurance company. And then I break it down and go even much another level because there’s something that’s called

If you want to get granular direct recognition loan capabilities from these products, and then there’s something called non direct. And those non direct recognized loans are where I use it for my clients, real estate investors, people that want to do hard money lending out of these types of policies. So when I say non direct, what I’m saying is when you, when you leverage the equity that I helped create for my clients immediately.

is that when they go to leverage and take a loan out, because it’s non-direct, technically,

that dollar that gets loaned out is still earning a rate of return in the policy while it’s being loaned out at the same time. So that’s what I’m talking about when your dollar now is wearing more than one hat than it would have otherwise. And that’s what I mean by.

Dylan Silver (10:53)
Now,

what are the rates that people are paying when they take this type of loan against or from their policy? Is it set at the time of the contract and how is that determined?

David Hammer (11:08)
So it’s set just like any other loan, whatever the prevailing rate is at the time when let’s say someone took a loan, it’s usually on a monthly basis with most of the companies that I work with where the rate will be set. But it follows and mirrors basically a conglomeration of what borrowing rates are in general in the industry. But what I have found is that these rates are typically

at least 100 to 150 basis points lower than what ⁓ a real estate investor, if they went to the bank and we’re asking for loans to be able to finance a property or it doesn’t have to be real estate because we’re talking about real estate here, is that you’d also have ⁓ benefits from a loan standpoint and from a cost standpoint that you can avail yourself, that my clients can avail themselves of because they’re more preferential, which again, will enhance the overall returns.

Dylan Silver (12:09)
What are some of the misconceptions that you see folks having about infinite banking in general?

David Hammer (12:18)
A lot of what I hear people say is one, life insurance. Like I don’t need life insurance and whole life insurance in particular is a very expensive form of life insurance. And what I say to that is that if people are willing to be educated to know that there’s so much more ⁓ at play than just the face value of

hearing, whether it be the noise on social media or just the prevailing wisdom of the fact that whole life, because you’re paying for a death benefit for your whole life, that’s a more expensive alternative. There’s ways where I help reconstruct, re-engineer these policies to de-emphasize the cost of carrying this type of system. So I re-engineer it in a way where

If the client doesn’t want, if that benefit is not important to them, I de-emphasize that in the design of the policy and instead be able to create it in a way where I’m creating a depository of the largest possible, my task is to make the cost as low as possible. So that’s.

Dylan Silver (13:31)
There’s been

a lot of ⁓ talk, I would say, in the last year or so about, and maybe more than that, ⁓ but certainly I’ve seen a lot of it recently, about self-directed real estate IRAs or self-directed IRAs as an investment vehicle and a means to fund ⁓ real estate projects. Do you feel like…

the IBC is better and superior? Do feel like there’s a different use case for each? What’s your general thoughts on infinite banking versus self-directed IRS?

David Hammer (14:06)
I would say it’s not an either or. I think that they should be used in combination with each other because majority of individuals, typically have contributed to some sort of qualified or ⁓ tax advantage vehicles, whether it be IRAs or whether it be 401k. So when it comes to self-directed, what you’re speaking of is that people can take their dollars that they’ve saved up in various different.

tax-deferred vehicles that at some point they’re going to be required to take distributions from. And yes, I understand that they take that and now they’re able to invest in real estate where now you have companies like Equity Trust and some other really well-known companies where people can now invest in assets that they never could before. we do when it comes to life insurance, first of all, you’re taking after-tax dollars.

And then you’re creating tax benefits after the money has already been sort of taxed. So to me, they can be side by side used for real estate purposes.

Dylan Silver (15:55)
One of the things that is a deal killer, even while the deal may be underway, is holding costs, right? And so this is immediately what comes to mind. First thing that comes to mind when I think about infinite banking, you know, if you’re borrowing from yourself and you’re paying the prevailing rate versus borrowing from a hard money lender and paying, you know, what the rate, the hard money rate is, which could be double, right? Makes a whole lot more sense to be borrowing from yourself. Do you see?

infinite banking working really well for folks who are doing some type of fix and flip or some type of value add where they may have some type of short-term financing but it may make more sense to be their own bank.

David Hammer (16:42)
So the way that these policies are structured, they could be for fix and flip, or they could be for people that are doing buy and hold, or people that are holding their real estate for longer periods of time, because what we’re doing is we’re creating a system of cash, a cashflow system, where someone who has, let’s say they have a property and they sell it and they have equity that they, ⁓

derive from it and they need a place to put it, they typically will store it in some banking institution. And then they’ll take that money and then, you whether they do a 10, you know, a 1031 or if they, or if they need, let’s say six months of a holding period, I create these policies in such a way where you can use it. You create a depository, you put the money in.

you then can lend it, you lend it, leverage it back out. And then once, let’s say you do a fix and flip, you have a rehab and let’s say the turnaround time is even three months. These systems can accommodate that cashflow going in and out.

Dylan Silver (17:48)
Makes sense. ⁓ We are coming up on time here, Dave.

What’s the best way, Dave, for folks to reach out to you or your team?

David Hammer (17:57)
I can be best. My website is www.hammersuccesssystems.com. I could also be directly reached out to my personal phone number is 201-709-6158. And my email address, thank you, sorry. My email address.

Dylan Silver (18:19)
Thank you so much. Go ahead. No, go ahead, go ahead.

David Hammer (18:23)
My email address is my last name, H-A-M-M-E-R, the letter D, and the number three at gmail.com
([email protected]).

Dylan Silver (18:31)
Thank you so much for joining us today. Thanks for your time.