Real Estate & Life Insurance: Secure Your Family’s Future Today!
Show summary
In this conversation, Gary Sund shares his extensive experience in real estate and finance, focusing on how life insurance can be utilized to manage and pay off debts. He discusses various strategies, including leveraging family loans and the importance of securing life insurance policies to protect financial obligations. The discussion also touches on the significance of financial education and the need for comprehensive planning in real estate investments.
Key takeaways
- Structure family down payment help as a second mortgage, not a gift: parents lend the money at the applicable federal rate (around 4.5% on a 30-year basis), which fully encumbers the house and protects equity in case of divorce.
- Have parents gift back each second-mortgage payment so the child can use that gifted money to pay premiums on a convertible term life policy covering at least the mortgage balance.
- Size life insurance coverage using income multiples: aim for 20x last year's gross income, 30x if possible, and note that policies up to $1 million are available today without a medical exam.
- Start with a large term policy to maximize death benefit early, then convert portions to whole life each year on the policy anniversary as cash flow allows, since cash-value-focused (IBC-style) designs reduce the initial death benefit (e.g., $1.2M instead of $2M).
- Avoid refinancing once the structure is in place; instead use a 30-year term with a 10-1 interest-only period, which Sund says creates about a 12-13% lower out-of-pocket debt service cost versus a fully amortizing loan.
- If no family loan is available, look for alternatives like municipal down payment grant programs to reduce the amount financed (e.g., a $3,000 grant on a $100,000 purchase cuts the loan to $97,000).
- Rookies should borrow as little as possible to get into a deal and buy as much term insurance as they can afford monthly, converting to whole life over time rather than taking on unnecessary 'naked debt.'
In this episode
- 00:01Introduction to Gary Sund
- 01:00From rent collector to mortgage and real estate broker
- 02:58Building a notary and loan modification business
- 03:26The intra-family second mortgage strategy
- 05:26Using life insurance to secure debt without family gifts
- 06:32Term vs. whole life and the IBC comparison
- 07:45Advice for investors with limited cash flow
- 09:33Why not to refinance and the interest-only 10-1 strategy
- 11:50The education gap and Gary's comprehensive approach
- 12:48Licensing, state foreclosure rules, and how to reach Gary
About the guest
Gary Sund is a mortgage broker, real estate broker, and life insurance broker licensed in Massachusetts. He started his career collecting rents, became a Century 21 salesperson, got his broker's license, originated Fannie Mae first mortgages at Wells Fargo, Washington Mutual, and Countrywide (through 2008), then built a mobile notary signing business working primarily with First American Title. He recently got his mortgage broker license again and operates his own mortgage company, 1800GarySon, working with UWM on wholesale and Finance of America on reverse mortgages, while still running his real estate brokerage.
Listen to the audio
“If we do it in the form of a second mortgage, the house is 100% encumbered. So it's advantageous from a liability standpoint for the groom's parents to do it on a second mortgage.”
Gary Sund
“The average mortgage is paid off in eight or nine years. So most people take a 30 year note, but they only use an eight or nine years. So they're overpaying for those other 11 years, 29 years. So that is a sin, that's a cardinal sin.”
Gary Sund
“You don't want to be irresponsible to your family. So it's a timing of... not every tool should be utilized today or implemented today or put into service today.”
Gary Sund
Questions answered in this episode
How can parents help their kids buy a house without a straight cash gift?
Gary Sund recommends parents lend the down payment as a second mortgage at the applicable federal rate (he cites about 4.5% on a 30-year basis) rather than gifting it outright. This way the house is 100% encumbered, so in a divorce the equity isn't simply handed to a spouse as it would be with a gift. Every payment the child makes on that second mortgage is then gifted back by the parents, and the child uses that money to pay premiums on a term life insurance policy.
How much life insurance should a real estate investor carry relative to their mortgage?
Sund says the policy should cover at least the amount of the mortgage, and ideally be based on income: aim for 20 times last year's gross income, or 30 times if possible. He notes you can get up to a $1 million policy today without a medical exam, and most people can qualify for that amount.
What's the difference between a term policy and a whole life/IBC (infinite banking) approach?
According to Sund, designing a policy to maximize cash value (the IBC approach) means allocating more of the premium to cash value, which reduces the death benefit you can get early on (e.g., $1.2 million instead of $2 million). Term insurance is pure premium with a bigger death benefit, so he recommends starting with a large term policy and converting portions of it to whole life each year on the policy anniversary as cash flow allows.
What should someone do if they don't have family who can lend them money for a down payment?
Sund says if there's no intra-family loan available, look for alternatives like local municipality down payment grant programs. Any outside money that reduces your loan exposure helps — for example, a $3,000 grant on a $100,000 house cuts your debt obligation to $97,000.
Why does Gary Sund advise against refinancing a mortgage once this strategy is in place?
He says the average mortgage is actually paid off in 8-9 years even though people take 30-year notes, so he suggests getting a 30-year term with a 10-1 interest-only structure instead. This way you only pay interest for the first 10 years, which he says creates roughly a 12-13% difference in out-of-pocket debt service costs compared to an amortizing loan, so there's no need to refinance.
Is this intra-family loan and insurance strategy limited to certain states?
Sund is only licensed as a mortgage and real estate broker in Massachusetts, but he says the underlying strategy works in theory throughout the country. He notes the U.S. has judicial foreclosure states (26 of them) and deed-of-trust states, and while he's confident the strategy works in judicial foreclosure states, he's less certain about how it plays out in deed-of-trust states.
Resources and links
Full transcript
Gary Sund (00:00.151)
Yeah.
John Harcar (00:01.068)
Hey guys, welcome back to our show. I’m your host, John Harcar, and I’m here today with Gary Sund. And what we’re going to be talking about besides his incredible journey that we shared, he shared with me before we got on here, but talk about using life insurance to pay debts. Guys, remember at Investor Fuel, we help real estate investors, service providers. I mean, really all real estate entrepreneurs, two to five X their business. And we do that by providing tools and resources to help them grow.
That business they want to grow, which in turn helps them live the life that they want to live. So, Gary, welcome to our show. Yeah. I, I appreciate you coming on here and I’m excited to learn about your, what sounds like a wealth of knowledge and experience and then talk about, you know, the topic of life insurance to pay debts. But before we go into all that, you know, do me a favor and just tell our audience a little bit about you kind of where you’re from, your, your background, how you got into real estate and you know, what got you here?
Gary Sund (00:36.664)
Hey, thanks. Yeah.
Gary Sund (01:00.814)
Yeah. In I started collecting rents for a guy next town over. Got my notary. And then enjoyed it a lot. Until somebody put a shotgun in my face. So that was the end of my rent collecting career. I became a salesperson for a franchise, one of the local, you know, Century 21. And then worked there for a while. Then when I got my broker license three years later, I started my own.
John Harcar (01:13.742)
Mmm.
Okay?
John Harcar (01:23.907)
Okay.
Gary Sund (01:30.442)
I got involved with a foreclosure project, a hundred units and half of them were done and sold. The other half were, were a friend of mine got to, got to finish the project. The project fell apart and took a bank down with it. So, so I worked with him and then I got into mortgage business originating Fannie Mae first mortgages. And I did that for a while.
John Harcar (01:46.251)
Okay.
Gary Sund (01:59.374)
with a local bank in Boston, and then I found a lender that would take me in, and then I made it to Wells Fargo, and then Washington Mutual, and then Countrywide. When it all hit the fan, I was a law originator at Countrywide back in 08. And then from there, I started this notary business. I had been a mobile signing agent. I’m an independent contractor in Massachusetts. 26 states, including Massachusetts, require notarization of wet ink signatures.
for documents, if the property is located outside the state of Massachusetts, the title company can hire a notary, they have hired an attorney, so it saves the customer’s money. So I get certified and approved and bonded and insured and all that. So my biggest, get, I’m a B2B guy. My biggest customer is First American Title. They do 60 % of my business. I get calls from their agencies all over the country when they need somebody in Massachusetts.
John Harcar (02:36.024)
Mm-hmm.
Gary Sund (02:58.04)
So that’s what I do. And then I noticed what was going on, which was a lot of financial distress out there. I’m doing a lot of what’s called loan modifications. And so I decided as hell of it, I’m getting back in the mortgage business. So I just got my mortgage broker license two months ago from Massachusetts only to originate. And I’m working with UWM and the wholesale side and I’m working with…
John Harcar (03:07.768)
Yep. Okay.
Gary Sund (03:26.478)
Finance of America on the reverse side. Yeah. And I still operate my real estate brokerage business. the whole thing, the whole strategy is coming together finally. But what it amounts to is if you’re getting married and you’re going to get a gift from your parents, you’re better off getting the parents to lend you the money in a second mortgage than outright gifting you the money. Because they can lend you the money at an interest only rate.
John Harcar (03:29.216)
Okay. So let’s.
John Harcar (03:50.338)
Mm-hmm.
Gary Sund (03:55.992)
for as long as they want based on the applicable federal rate. That’s a four and a half percent 30 year mortgage today. That would be a loan from the parents to the children. But the beauty is if the money is coming from the groom’s parents, instead of gifting the money to the dealer and insurers.
As night follows day, if there was a divorce, the wife would get all the equity that they put into the deal in the form of a gift. If we do it in the form of a second mortgage, the house is 100 % encumbered. So it’s advantageous from a liability standpoint for the groom’s parents to do it on a second mortgage. But the way you finish it off is parents give you the money on a second mortgage.
Every payment you make to them on that second mortgage, they then gift back to you to purchase a term life and policy, a convertible term life policy for at least the amount of the mortgage. But it’s gifted money from the parents. So $1 doing the work for $2. They’re giving you the money, you’re giving it back to them, and they’re gifting it to you to pay the premiums on a life insurance policy.
John Harcar (05:16.27)
Okay.
Gary Sund (05:17.016)
So now you’ve got your foundation, you’ve got your equity and you’ve got your debt secured. You don’t have to do anything else except pay the mortgage.
John Harcar (05:26.23)
Now what happens if someone doesn’t have people that gift them, don’t have family members that gift stuff? How can life insurance help pay off debts?
Gary Sund (05:32.333)
You
Well, life insurance policy, should be on the one who’s financially obligated to make the payments on the mortgage. If it’s the husband or the wife, it don’t matter. But that’s the person upon whom there should be placed a term policy, at least for the minimum amount of the mortgage. So you can get up to a million dollars today without an exam. Anybody can qualify for a million dollar policy.
The best thing to do is to get, if you can get 20 times last year’s gross, if you made 100,000 last year and you get 20 times that, if you can get a $2 million policy, by all metrics, all standards, you’re doing the right thing, that’s a good thing. If you can get 30, all the better. And then you convert that to whole life along the way.
John Harcar (06:21.826)
Yeah, I’ve heard a lot of people using the whole life and you know, the whole infinite banking type of model. How does this differ? How is this better? What are the pros and cons?
Gary Sund (06:32.823)
Well, insurance…
In this particular instance, you can design a policy to maximize the cash value as fast as you can. However, by allocating the dollars to that strategy, you give up the opportunity to maximize the death benefit early on. So instead of a $2 million death benefit, if you design it for the IBC, you might get a million, a million two or something.
John Harcar (07:06.296)
Why?
Gary Sund (07:06.638)
Well, because it’s paying the premium plus, which goes into the cash value. And term is just premium. But for the period of time, for the first four, five, six, seven, eight years, you don’t want to lose the opportunity to be able to maximize the death benefit. And the only way to do that was with a big term policy. So next year, you’d convert a…
a little bit of it to whole life. And then next year you convertable, every year on the anniversary of the policy, you can convert little segments to whole life. That’s what you want to do as your cashflow permits.
John Harcar (07:42.21)
Hmm.
John Harcar (07:45.55)
Okay. Okay. And then what if someone doesn’t have like a lot of cashflow to keep putting in? What if they’re kind of scraping by the day?
Gary Sund (07:54.252)
Well, if it’s a situation where they’re taking on debt, they just need the amount to pay off the debt. Don’t get extravagant. But you should never take on naked debt if you don’t have to. that would presuppose you had other equity and other assets prior to taking on more debt. typically, if you’re just a rookie starting out,
You borrow as little as you can to get into a real estate deal, and you buy as much term policy as you can afford monthly and convert it as you go. But otherwise, you’ve done your job. You got a house, you got a mortgage, and now you got a mechanism to be able to pay it off because you don’t want to be irresponsible to your family. So it’s a timing of…
John Harcar (08:48.811)
Mm-hmm.
Gary Sund (08:52.608)
Not every tool should be utilized today or implemented today or put into service today. But life insurance, mortgage, house. You gotta have that. Now you got everything you need. You can go out and another piece of real estate if you want and they got that debt covered by the life insurance policy. But the gift of the premium back to the…
Your parents are going to repay that second mortgage to you, and they’re going to turn around and gift you that money, and you’re going to take that money and buy it and pay the premiums on the insurance policy. then just, you don’t have to do nothing else from there. Just write off into the centset. I wouldn’t even recommend refinancing the mortgage. Just do everything as it is. Well, if you can lower the constant, shorten the term, always. The holding period fits into some
John Harcar (09:33.07)
Why not refinance the mortgage?
Gary Sund (09:49.325)
lifespan to a mortgage. The average mortgage is paid off in eight or nine years. So most people take a 30 year note, but they only use an eight or nine years. So they’re overpaying for those other 11 years, 29 years. So that is a sin, that’s a cardinal sin. So the way to get around that is to take a
John Harcar (10:04.64)
Other years, yeah.
Gary Sund (10:15.95)
get a 30 year term and then get a 10-1 interest only. All you have to repay is the interest only for the first 10 years. And you’re not coming out of pocket with as much money as you would have had to come out of pocket if you were amortizing the loan. There’s about a 12, 13 % difference in out of pocket costs for the debt service between an interest only and an amortizing.
John Harcar (10:25.581)
Hmm.
John Harcar (10:32.962)
Right, right, that makes sense.
John Harcar (10:42.848)
Okay. Okay.
Gary Sund (10:45.14)
It’s something that should be implemented every chance you get, especially if you’re using the strategy within the familiar lending. To get back to your question, if you don’t have any father, mother, sister, brother, grandparent.
son, daughter. You don’t, the loan doesn’t qualify as an intra-family loan. But any, if you can get like, the same way to do it would be like to go to your local municipality and ask them if they have any grant programs for down payments. The same amount of money coming into the deal, whether it’s a third party source or down payment from a
from some grant program, anything you can do to cut down your exposure. If it’s $100,000 house and you can come up with a $3,000 grant, now all of a sudden, you’re only obligated for 97 of it. Yeah.
John Harcar (11:50.988)
Yeah, right. Do you think there’s a lack of education out there for this for, you know, the General Joe?
Gary Sund (11:59.734)
Well, yeah, I know what I put in for time. I put in huge amounts of time and research and licensing and experience. It’s my whole life. I can’t imagine anyone else going through what I go through. That’s what propels me more is I know that I know more than most because I’m spending more time than most.
It plays right into my strong suit, which is I’m a mortgage broker, I’m a real estate broker, and I’m a life insurance broker. So you want a comprehensive design for your future real estate holdings, I’ve designed it already and it’s just getting off the ground now.
John Harcar (12:48.192)
Is all your business or are you licensed only in the Massachusetts market?
Gary Sund (12:51.97)
Just Massachusetts, but it works. Well, are you familiar? In the United States, there are judicial foreclosure states and the D to trust states. Judicial foreclosure states is 26 of them. so I know they work in those states. I’m not sure about D to trust states, but I’m only licensed to practice in Massachusetts, but everything I do in theory is good throughout the country.
John Harcar (13:06.094)
Mm-hmm.
John Harcar (13:10.69)
Okay.
John Harcar (13:20.824)
Okay, all right, well cool.
Gary Sund (13:21.902)
But the foreclosure rules are different. And yeah.
John Harcar (13:24.706)
Yeah. OK, well, mean, it sounds like that something this is something that a lot of our listeners might be interested in wanting to hear, maybe talk more about. How would someone get a hold of you if they wanted to kind of reach out and talk to a little bit more about this whole subject?
Gary Sund (13:39.096)
Well, 1-800-GARY-SON.
John Harcar (13:43.106)
Hmm, you got that number, huh?
Gary Sund (13:45.294)
Yeah, I did. And I got the website, 1800garryson.com. And that’s the name of my mortgage company. I’ve been working on this for quite a while.
John Harcar (13:49.622)
Wow, okay.
John Harcar (13:53.518)
I have to say, you had to probably get that a while back. I appreciate you coming on here. And is there any last information you’d like to share with our audience, something that they need to know?
Gary Sund (13:57.133)
Yeah.
Gary Sund (14:02.52)
Well, anyone can reach out to me on LinkedIn. I’m on Facebook every day. I use Messenger. I have a YouTube channel that I’m just getting started. All my social media is just getting started. At 1-800-GARY-SON. I’m on X and YouTube and Instagram and Pinterest. it’s just blossoming out for me. It’s all just coming out there. It’s just me.
John Harcar (14:25.752)
Got it.
Gary Sund (14:26.478)
a kid that’s helping me out with the computer stuff. the website ain’t up yet, but probably in a month it’ll be up.
John Harcar (14:33.078)
Well, awesome and and Gary will put all that stuff in our show notes So everybody can you know if they want to get in touch they can I appreciate you again coming on Guys reach out to Gary if you have any questions sounds like a very interesting You know way to you know better use your money and insurance policy at the same time. So Gary Thank you again folks. I hope you enjoyed it and we’ll see on the next one Cheers Cool,
Gary Sund (14:36.929)
Okay.
Gary Sund (14:52.822)
OK. All right. Later.
