Tax Free Real Estate Capital w/ Indexed Universal Life—Principal Protection & Policy Loans Explained

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Show Summary

In this episode of the Real Estate Pros podcast, host Erika speaks with Kayla Leatherwood of Leatherwood Finance about her innovative approach to financing real estate investments through indexed universal life insurance policies. Kayla shares her journey into real estate, the concept of being your own bank, and how she helps others achieve financial freedom. The conversation also touches on common misconceptions about financial products and the importance of educating consumers about their options. Kayla discusses her future plans for expanding her reach and the various ways she aims to help others in their financial journeys.

Resources and Links from this show:

• • • Investor Fuel Real Estate Mastermind
    • Investor Machine Real Estate Lead Generation
    • Mike on Facebook
    • Mike on Instagram
    • Mike on LinkedIn
    • Kayla Leatherwood on LinkedIn
    • Kayla Leatherwood on Instagram
    • Kayla Leatherwood’s Email Address: [email protected]
    • Kayla Leatherwood’s Website
    • Kayla Leatherwood on Facebook

  Listen to the Audio Version of this Episode

  Investor Fuel Show Transcript:

  Kayla Leatherwood (00:00)
  The interest rates with where they’re at right now, like last year some of the policies did 13 % growth. And so if you can imagine like putting a lot of money in there can really like skyrocket your growth. There’s protection of principle because it’s guaranteed to never ⁓ lose money. ⁓ You’re getting double digit growth. And ⁓ if I were to take a loan from said cash accumulation in this pot,

  It’s tax free, it’s a tax free event. So there’s no strings attached, it’s my money, I’m not having to ask anyone’s permission to use it, and I never have to pay the loan back if I don’t want to, it just comes out of the death benefit.

  Erika (02:13)
  Hey everyone, welcome to the Real Estate Pros podcast. I’m your host Erika and today I’m excited to be chatting with Kayla Leatherwood of Leatherwood Finances. She’s been shaking things up in the lending and private capital space. Kayla, I’m glad to have you here on the show.

  Kayla Leatherwood (02:30)
  Thanks for having me.

  Erika (02:32)
  I think our listeners are going to be really fascinated with what you’re doing and I hope they have a notepad or they’re ready to follow along. let’s dive on in. Kayla, can you share with our listeners what led you to real estate and ⁓ leatherwood finance?

  Kayla Leatherwood (02:54)
  Yes, so ⁓ my husband and I, after having two kids and kind of making our dreams come true of buying our own farm, we’re looking for passive income. And as millennials, everybody’s ⁓ hopping on the Airbnb train. And so that was something that we wanted to do. ⁓ We had a little bit of money set aside, but not enough to go buy a second home.

  And so we considered doing like a HELOC loan or I called around to a bunch of different banks trying to find capital to invest in this real estate opportunity. And I kept getting the word no. It was too risky of a business for ⁓ banks to invest in as far as short term rentals. And so I kept, I didn’t take no as an answer. I pivoted and.

  wanted to find a different solution and the solution was to use myself as the bank. And so what I do now and what I help other people do is just provide principal protection, ⁓ creating tax-free ⁓ generational wealth and creating an opportunity for people to really achieve financial freedom. And so with Leatherwood Finance, what I specialize in is indexed universal life insurance policies.

  We also provide principal protection with annuities as well. But basically, the solution that I found for my passive income conundrum was to use myself as the bank. My real estate investment business purchased a cash accumulating index, universal index life insurance policy on myself. It’s a whole life insurance policy. And basically, as the key employee,

  ⁓ because I’m the only employee. I ⁓ pay a premium every month, which is reducing my taxable income for my business. ⁓ And this premium goes into a no risk guarantee little pot. And so as long as nothing happens to me, God forbid, ⁓ this policy continues to accumulate tax-free cash.

  ⁓ The interest rates with where they’re at right now, like last year some of the policies did 13 % growth. And so if you can imagine like putting a lot of money in there can really like skyrocket your growth. There’s protection of principle because it’s guaranteed to never ⁓ lose money. ⁓ You’re getting double digit growth. And ⁓ if I were to take a loan from said cash accumulation in this pot,

  It’s tax free, it’s a tax free event. So there’s no strings attached, it’s my money, I’m not having to ask anyone’s permission to use it, and I never have to pay the loan back if I don’t want to, it just comes out of the death benefit.

  And so that is the solution that my husband and I used in order to be able to accumulate the capital to then go reinvest in other business opportunities. And so that’s what I help other small business people and other small business owners. ⁓

  be able to utilize in order to get strings-free capital to invest in their future and be able to ⁓ really achieve some growth. One of the benefits of also doing that is this money is tax-free due to IRS code 7702. No money coming from a life insurance policy shall be taxed.

  So not only am I accumulating like this big chunk of cash that I can then go use to reinvest, it’s tax free, but also the ownership of that policy can change. And so 25 years from now, my husband and I are done with our Airbnb adventures and we wanna go travel the world. ⁓ The ownership of that policy can change from my business to my personal name. And then the millions of dollars that are accumulated in there are tax free that I can go then live off of.

  And so this has been something that I have found to be incredibly useful. And I just want to share that opportunity with other people. And if they want to participate in something like that, would love to help them learn more.

  Erika (08:05)
  Yeah, ⁓ that’s awesome. I haven’t had anyone talk about this on the show yet. So I’m just curious, Kayla, how did you stumble upon this method in the first place?

  Kayla Leatherwood (08:18)
  So I have a bachelor’s in biology but a master’s in YouTube. And so I fell down the deep rabbit hole of like, how do I generate thousands of dollars of capital to invest in my business without a bank? Well, I discovered using myself as the bank. And then I found out that I could become licensed to help other people be able to achieve their dreams and do this as well. Heck yeah, sign me up. And so that’s what I do now.

  Erika (08:48)
  Well, wouldn’t you know with the people that you’ve worked with thus far, are you noticing any common misconceptions when you’re helping them walk through this process?

  Kayla Leatherwood (08:57)
  So most people have, especially if they’re in a position where they’re running a business or they’re thinking about retirement or something along those lines, most people already have a financial advisor, a CPA, somebody to help them with their money. And even though they have those professionals in their life, this is still something that they don’t know about, like indexed universal life insurance policies.

  wasn’t anything that I learned about in high school or college. And I paid College of Charleston a lot of money. Granted, I was studying biology, but still, like, this is not something that my parents knew about. It’s not something that anybody in my blue collar family knew about. And so this was just an opportunity that was hidden from me, just from lack of knowledge. And so I’m finding that other people don’t know about this unless they’ve gone down the, you know.

  YouTube rabbit hole like I have and so just trying to spread the awareness making sure that people are informed consumers ⁓ especially when it comes to their money and being able to retire comfortably and being able to maximize their return on investment like that’s what I’m really passionate about and so I’m just trying to tell as many people as I can about index universal life insurance policies

  annuities and just different forms of saving and investing for the future.

  Erika (11:02)
  Yeah, and that’s really awesome. And because of that, I’m sure you’re the perfect person to ask this question. When it comes to those policies and how they work, is there anything in particular that people should be aware of if they’re considering it? Would you say that it’s a great option for most people? Or is there a certain kind of person or situation that it’s more ideal for?

  Kayla Leatherwood (11:29)
  So typically, it is a whole life insurance policy. And so it’s something that you plan on keeping for a long duration of time. It’s not a get rich quick method. It can be, you know, if you have a lot of money to dump into it. But also, these are life insurance policies. So the companies that are issuing them want to make sure that they’re making a good investment as well. You know, if you’re 68 years old,

  have diabetes and have smoked for the last 30 years, you’re probably not going to qualify. But there’s other opportunities to you. And so the best time to start is really young. You don’t have to be the person that’s insured as well. And so another thing that I specialize in is Head Start programs. And so I have a four year old and a six year old. My four year old son, you know,

  He could go to college. He might. But he also is very inclined to be a rodeo star. Granted, he’s four and he lives on a farm. So maybe that’s what he wants to do. If not, whatever. So starting a 529 plan, we have one for him. But as far as, know, is he gonna go to college? I don’t know. And I don’t wanna have to be stuck paying a 10 %

  Penalty if he decides that he doesn’t want to go to college and he wants to I don’t know join the rodeo circuit And so a head start program. He’s four he’s healthy. He’s young The amount of money that I am putting into his policy is like 200 bucks a month That is honestly us as a family for not going out to eat once a week or once a month. So 200 bucks a month

  Over the next 25 years, he will have over $100,000 tax free that he can then go start a business, go buy a house, and it’s all tax free and it’s no strings attached and he can use that money for whatever he wants. I own the policy though. And so if I want to take money out when he turns 16 to buy him a car, I can. There’s no penalty applied to that.

  So this is risk-free money accumulation money growth that’s tax free and by the time he turns 65 the illustration showed that you know 200 bucks a month for 60 years he will have accumulated over a 4.3 million dollars Tax free that he can then go use for whatever he wants and it’s a loan that he never has to pay back It just comes out of the death benefit

  And so until he turns 25, again, his aspirations are to be a rodeo star. I’m gonna control that money for him. But when he matures, I will change the policy over into his name so he can then go use it for whatever he wants. you know, one of my business partners has a history of prostate cancer. He wouldn’t qualify for a life insurance policy, but he is the guardian for his three-year-old grandson, and that’s what he’s doing. So he bought a policy to cover his three-year-old grandson.

  And he’s using that to live off of in retirement. know when ⁓ he passes that policy is going to pass to the grandson. He’ll hopefully be 25 by then. But if you wouldn’t qualify yourself, as long as you have a vested interest in someone else’s life like your kids or someone that you’re related to, it’s okay. This is common in professional offices ⁓ where there’s partnerships like attorneys and doctors, veterinarians. They’ll partner up and they have a buy-sell.

  policy on each other. I used to work for a dermatologist. If one of our surgeons were to suddenly pass, it would cost the business quite a bit of money to replace the income loss from that surgeon trying to find someone else to potentially join the practice. And so this is common in professional settings where people have a vested interest in another person.

  Erika (16:21)
  Yeah, wow, there’s so many different ways you can use this and it can be useful to you depending on the situation at hand.

  Kayla Leatherwood (16:29)
  Yeah, they’re great tools that nobody really knows about. And so that’s my goal, is to try to spread the word and provide the education, ⁓ answer any questions that anyone has, because they can be used in all situations, even if you personally wouldn’t qualify for life insurance, there’s still an opportunity for you.

  Erika (16:50)
  You know, with who you’ve worked with before and you’ve helped with these policies, do you have any exciting testimonials or success stories through helping them on their journey?

  Kayla Leatherwood (17:05)
  Yeah, so I recently helped a 19 year old ⁓ purchase his own policy. He’s a rare bird where as the at the age of 19, he’s thinking about his future, wanting to invest in himself. And he was thinking about doing like a Roth IRA or some kind of investment vehicle. And those are great opportunities, but

  He is 19, he watched his parents suffer through 2008, 2020 and watched the market fall. And so he figured that there was some other way to invest money but not be at risk of loss. And so he and I got together with his mother and he’s in college right now, so he can’t afford very much, but he’s able to put away a hundred bucks a month.

  And so what we did is we set up a policy and because he’s 19, the cost of insurance on a 19 year old is basically nothing. The amount of that money that he’s putting into this policy every month, most of it goes towards growth. Very little of it goes towards the cost of insurance. And so 100 bucks a month for the first five years and then it’s gonna slowly increase ⁓ over a five year period. So.

  ⁓ Years 6 through 10 it’ll be 200 bucks a month. Years 10 through 15 it’ll be 300 bucks a month. By the time that he turns 65 ⁓ he will have accumulated well over a million dollars and he will have $85,000 to live off of tax free annually until he turns 120 in ⁓ his retirement because he decided to put 100 bucks away for the next five years.

  And so even a hundred bucks a month can really turn into something powerful. You just have to give it enough time. And that he’s 19. That’s all he’s got.

  Erika (19:07)
  Yeah. Well, Keela, what you have is so exciting going on with Leatherwood Finance. Can you share, you know, what’s next on the horizon? How do you plan on reaching out to more people and helping them get started on their journey?

  Kayla Leatherwood (19:23)
  So honestly, ⁓ trying any avenue I can. Of course, I have postings on LinkedIn and Facebook and Instagram, but I’m finding that the podcast space is a great way to just get my message out there as far as just trying to create this informed consent for consumers on investing in their future. And so thank you guys for hosting me. I really appreciate this.

  Because I think together we’re going to be able to reach a lot of people and do a lot of good. ⁓ But yeah, ⁓ hosting seminars, that sounds nice. You know, doing podcasts, radio, things of that nature, any way that I can. It’s going to be interesting in the next couple of years with AI and new technological developments.

  where the social media space goes as far as like paid ads and ⁓ content to listen to or books to be written. Like, are we even gonna have authors and you know, all the jobs that are at threat. I feel like customer service industry and customer service based jobs will always be there. But as far as content creation, ⁓ I’m hesitant and excited to see like what happens.

  And then, you know, what springs from that?

  Erika (20:47)
  Yeah, yeah, absolutely. Well, what you were saying with customer service, you we didn’t even really touch on it, but you also have a property management company too.

  Kayla Leatherwood (20:55)
  Yeah, so

  ⁓ with that was one of that was the reason that I came up with trying to pivot and find new avenues as far as finding capital. ⁓ So my husband and I wanted to create some Airbnb like empire. And so I have some good ideas. We have a couple of properties, but as far as.

  being able to fund them. That’s why I started Leatherwood Finance and got into the whole indexed universal life insurance policy. But Leatherwood Property Management is going to be an up and coming name as far as the Charleston, South Carolina area. I have lots of big plans in the next 10 to 15 years. But yeah, I come from working two jobs to put myself through college, one of which was waiting tables for four years.

  I feel like God created me to help people and so I went into medicine and as a medical assistant and a surgical assistant, that’s how I helped people and so I feel like I’m always trying to help people but using multiple tools in order to be able to do that. So if I can be a Swiss army knife and accumulate even more tools to be able to help people create jobs, create informed consent and be able to just serve God’s creation, then I’m

  I’m finding fulfillment in whatever I’m doing as long as I’m actively doing it.

  Erika (22:24)
  That’s awesome. I’ve never heard someone describe themselves as a Swiss army knife, but I honestly love it. And it’s so accurate with what you’re doing. ⁓ It’s fantastic. And Kayla, if someone listening wants to reach out to Leatherwood Finance or maybe they need help with property management, how should they reach you there?

  Kayla Leatherwood (22:34)
  Thank you.

  So they are more than welcome to email me. It’s K leatherwood, L-E-A-T-H-E-R-W-O-O-D dot finance at gmail.com. ⁓ Leatherwoodfinance.com. They can also find Leatherwood Finance on Instagram and Facebook. so smoke signal, carrier, pigeon, however you want. I’ll find a way to get back to you.

  Erika (23:15)
  I love it. Well, Kayla, it was so awesome having you on the show today. I think how you’re helping people is really inspiring. And, you know, I hope that we can have you on again and you can share more about what you have going on with your Airbnbs as they happen.

  Kayla Leatherwood (23:33)
  Thank you. I appreciate that, Erika, very much. When we get a miniature Highland cow, I’ll invite you guys out so we can come take pictures.

  Erika (23:40)
  I love it. Well, for our listeners today, if you enjoyed this episode, make sure that you’re subscribed to the Real Estate Pros podcast. We’ve got more conversations lined up with experts like Kayla, who are out there building fantastic real estate businesses. We’ll see you on the next episode.