Infinite Growth with The Most Unsexy Financial Product - Insurance - with Karl Schnitzer

Karl Schnitzer: [0:00] People call it the Rockefeller method because this is what they've done. They have compound interest working for them, which we all know how powerful it is Perfect. For three, four, five hundred years. Go put that into a, you know it's probably not five hundred. I think the max right now is, like, two fifty, maybe three hundred years. Whole life has been around longer than any other institution, but put into a calculator, two hundred years worth of compound interest with massive lump sums coming. At each death, there's a lump sum that gets put in. So you can really scale this out, and the idea behind it is you're just creating, you know, again, that pool of money that you can bank with, and, obviously, the bigger pool of money, the higher interest you're gonna accumulate.

Speaker 2: [0:39] Welcome to the Collecting Keys Real Estate Investing Podcast with your host, Mike DeHaan and Dan Austin. From wins, losses, horror stories, and tactics for optimizing your business, Mike and Dan take a real uncensored deep dive into the ins and outs of running full time real estate investment and wholesaling business.

Mike DeHaan: [1:02] Carl, man, thanks for coming on the show. For those who don't know who are, haven't heard of you, we'd love to get your background as a real estate investor and everything else that you've been got.

Karl Schnitzer: [1:11] Hey, guys. Thanks for having me. So my background started in law enforcement. I was a cop in Philly. I love them. All that kinda led into real estate investing first. I was I started seeing all the the construction going on around me when I was working, and I I networked with a few investors that, you know, were flipping houses, buying rental properties in my areas, and that kinda sparked the the real estate bug. I actually had a duplex that I was, you know, house hacking. I didn't even know what house hacking was at the time. When I went to buy my first house, my my dad gave me the idea, he said, hey. Why don't you buy a duplex? You know? You're you're, you know, single. You don't really need a big house. You can run one unit out. And I like, yeah. It's a great idea. So I bought a duplex when I was a cop still. Like Like I said, I didn't really know what I was I didn't really think of it as, like, a real estate investing. I was just saving money every month. That kinda then sparked, you know, the bug of, hey. You know, I'm getting paid rent. This is pretty cool. You know, I'm gonna look into this further. Found bigger pockets. Meanwhile, I'm driving around the district, networking with other investors, seeing how they're flipping houses and stuff, and everything kinda just spiraled into, you know, really learning real estate investing. And my dad was retired from construction, so it kind of worked out well where him and I partnered on some flips, partnered on our first rental property together, and that kind of took off. I was doing both for a while. I was still working as a cop. I was doing flip at a time, nothing too crazy.

Karl Schnitzer: [2:37] Picked up a handful of rentals. That kinda led into partnering on some seller finance deals with some other people for some more rental properties. I was a GP in a portfolio of properties, and then eventually that kind of led into what I'm most passionate about now, is infinite banking, and you know, every real estate investor, I wouldn't necessarily say it's a problem, but every real estate investor is always looking for more capital. More capital you have, more deals you can do. That kind of led to where I was looking for more capital to do more deals. I found my firm and was there as a client before I actually worked there. And as I was a client there, the owner of the firm kind of took me under his wing and was really coaching me how to use these policies to acquire more assets. So I was using my first policy to, you know, just typical burr houses. I was using the cash value of my policy to fund my down payment and any kind of cash out of pocket I needed. I was using a combination of cash value and private money at the time because I didn't have the when I first started, I didn't have the cash value to fully fund an entire flip or a BRRRR. So I was just combining it. That kinda, you know, grew from there. My passion once I kinda learned how it worked and physically did it myself, is where it kind of all, you know, took off of becoming really passionate about it. Yeah. And then in meantime of all of this, I got my realtor license too, so.

Mike DeHaan: [4:00] Good, okay, perfect. Man, you just threw out a ton of stuff there that people are probably listening and going, what the hell was was does that even mean? What is that? So so, I wanna go back to your your investing where you started as well here in just a minute. But first, the whole infinite banking cost that you just talked about. Give us like the explain like I'm five version

Karl Schnitzer: [4:18] of that. Okay. Explain like I'm five. So if Michael Scott ever asked me what infinite banking is

Mike DeHaan: [4:24] There we go. Yep.

Karl Schnitzer: [4:25] Yes. The idea is there's only one pool of money in the whole world. The founder of Infinite Banking, Nelson, he would explain it from, like, a real high level overview. Think of the pool of money in the world as the globe. So the globe is just one giant pool of water. Obviously, we have continents, we have land, but all of the water is interconnected, and it's always flowing. It's in constant motion. So every ocean is connected to rivers and seas. It's all always in constant motion, and it's always flowing. And the water always flows back to this one giant pool of water. Well, our monetary system and the central banks have created a similar system where there's only one pool of money, and it's always moving, it's in constant motion, and it always flows back to them. So to put this into perspective, you go out and you buy a coffee. Money's gonna go from your checking account to whatever Dunkin' Donuts business bank account. So it flows from bank to bank, but it flows back to the central bank. They're gonna pay their employees. It's gonna go from business bank account to the employee's personal checking account. They're gonna go buy groceries, bank to bank. It's always, always flowing back to the central banks. So what the infinite banking concept is, is a strategy where you can essentially take a portion of that pool of money. You can't create your own pool of money, but you can take a portion of that pool of money and use that as your pool of money.

Karl Schnitzer: [5:50] So it's when you're spending money making purchases you're going to make anyway, primarily large purchases, it's keeping the money flowing, but flowing back to you and your private bank. That's what it is. The way it works is we utilize whole life insurance policies specifically designed for this purpose. It loses a lot of people when when you say life insurance. Life insurance is not a sexy product at all. A lot of people do not even understand life insurance in death. Everyone just thinks life insurance is, hey. When when you die, your family gets a death benefit, which is true. That's the death benefit of a life insurance contract. There's also living benefits of a life insurance contract as well, and we can tailor when we design policies, you can tailor the policy to focus on living benefits versus the death benefit. So it's a sense of basically creating a pool of money that you can use, you can transact. It's gonna continue to grow even while you're using and transacting it and transacting with it, and you can recapture a lot of opportunity cost or interest that you would've gave to a lender.

Mike DeHaan: [6:58] Okay, I got a bunch

Dan Austin: [6:59] of questions, but I wanna ask the first one. You said a whole life policy Yes. Basically designed specifically for infinite banking. What is the difference in this designed policy than the one that my financial adviser pitched me ten years ago?

Karl Schnitzer: [7:13] Sure. Let's start at the top. So life insurance, you know, if it's a big umbrella, there's term insurance and there's permanent life. Term is for ten, fifteen, twenty years terms. If you die within that term, your family gets a payout, a death benefit. Permanent life insurance is good for your whole life. It's permanent. Underneath that permanent life insurance umbrella now, there's different products under that category. So there's whole life insurance, there's index universal life, there's variable universal life, equity universal life, all different products. Whole life has been around the longest. Whole life insurance has been around before the tax code. Within that product, we would never use the other products for a couple reasons, mainly because they're invested in the stock market. They experience volatility. They can go down. Whole life cannot go down. It it's paid a guaranteed minimum interest plus you you get dividend. So whole life insurance now as that product under the permanent life insurance umbrella, under the life insurance umbrella, whole life insurance can be designed through different riders, different splits, different carriers, they all offer a different product. A mass whole life product could be different than a Penn Mutual whole life product, even though they're both whole life, they're two different products from two different carriers. So when someone comes to us as a client and they say, Hey, here's my situation, here's what my goal is, here's what I wanna do, we tailor the product to meet that situation. There's no one size fits all really.

Karl Schnitzer: [8:39] And now when it comes to designing the whole life product, a lot of people think whole life, Dave Ramsey has talked negatively about whole life. That's a conventional whole life product focused on death benefit. An infinite banking policy is focused on living benefits. So what I mean by that, there's certain riders, like I said, you can add to a policy. When you add that to the policy, you can increase the amount of your premium that's going to your cash account versus what's buying more death benefit. So think of it kinda like a scale. You can have, you know, if you're paying, you know, a thousand bucks a month, it could just be going into buying you a thousand dollars worth of death benefit. You can fluctuate that scale to where, hey, you know, maybe we're gonna put, of that thousand dollars, 300 is gonna buy us death benefit, and the other 700 we can stash away in this cash account that's gonna grow guaranteed, uninterrupted interest. We can leverage it to go acquire more assets. You can fluctuate that. So you could go, you know, say a fifty fifty split. You could go sixty forty. Thirty seventy is kinda where most people would fall around. It's gonna depend on risk class, so basically your age and your health, that we'll see how low we can kinda get that. We don't wanna go too low because it could trigger you know, they they call it a mech, which is a it's a taxable event.

Karl Schnitzer: [9:53] So we don't want these policies to ever become taxable. We would not design them to become taxable, so we have to get right on the line of where it's safe from taxes. But that's essentially how you design it. That's where so in the infinite banking world, there's the Nelson Nash Institute. Nelson Nash is, like I said, the founder, father, whatever you wanna call him of infinite banking. He created a institute training life insurance agents how to design policies in the Infinite Banking web. Every life insurance agent in the world will tell you they know how to design these policies because it's a high commission ticket. That being said, there's certain things and certain ways to design a policy specifically for Infinite Banking. Certain carriers you use, certain types of carriers. We always wanna look at how long the the carrier has been in business, all kinds of things we never use. Not that we would never use, but ideally, you wanna stick to a mutual insurer, not a stock insurer, several different things. So that's why I always kinda you know, we get clients all the time that come to us and say, hey. You know, I had my brother-in-law design me a policy like this. Can you take a look at it? And then it's some kind of VUL with a stock insurance company.

Karl Schnitzer: [11:03] I'm like, dude, this is not a Infinite Banking policy at all. Whoever designed this policy is not an authorized IBC agent with the Nelson Nash Institute because you you can't do that if if somebody comes to you with that. It's we have our board of ethics through the state, like the state insurance departments, but then we have a separate board of ethics through the Nelson Nash Institute that we have to abide by

Mike DeHaan: [11:24] Yeah.

Karl Schnitzer: [11:24] Which is there's certain things we can't design because of

Mike DeHaan: [11:28] that. Gotcha. Yeah. Okay. So I'm gonna break it down even a little bit simpler because I have a I have a policy. Basically, what you can do is you you can pay your premium, which has to be relatively high, that'll give you access to a certain amount of life insurance. But a portion of that premium or potential all that premium, I guess your premium that you put in the cash value of it receives a press sort of payment that you get every single year, like mine's like 5% or whatever it was this year. But you can also leverage that. And you can take a loan on that equal to the amount that you typically get paid. So you can use that to go and perform business, do whatever you need to do. So like for mine right now, I do have like $50 in there, I can go and you know, it's getting 5% per year. It's like surplus cash, but I can also get a loan for I think it's up to 90% of it or something that I can pull out at 5% that I

Karl Schnitzer: [12:15] can then use to go

Mike DeHaan: [12:16] and flip a house I can use to make other investments. So basically, while I'm pulling that money out, I'm using it to make more money, my cash value principal that's in there is still collecting interest every single month at like a higher than normal rate from like a bank account.

Karl Schnitzer: [12:31] Yeah. That's, you know, exactly it. Perfectly how you use it. The biggest thing is when you compare this to other accounts, if you were to if you had $50 in a separate account, if you were to go borrow from it, it would actually come out of the account. With the like, actually not coming out of your cash value account. Your cash value account is think of it as the insurance company putting a lien for that portion on your cash value, but the funds actually come from the general account of the insurance carrier. There's also two, so you can borrow up to 90% of your cash value through the insurance carrier. There's also certain institutions that will allow you to create lines of credit across multiple policies, and they'll actually go more than 90%. So one of our relationships we have with an institution, you can combine as many policies as you want, as long as you're the owner of it or or your family, you know, if it's like husband and wife, and you can get one line of credit across multiple different policies up to a 100% of the cash value.

Dan Austin: [13:30] Yeah. Wow. So is there a limit to how much you can fund one of these? So Mike said he has 50. If I go call you tomorrow and I wanna put 200,000 in cash in a policy, can I do that?

Karl Schnitzer: [13:40] You can. There is a limit. It's 500,000 a year. Now it may not make sense to do that in one lump sum. We would have to have a strategy call, see what the goal is, but sometimes you may wanna break that up over a five or seven year period. You may get better growth that way. So when you do start a policy, you can front load it with a lump sum like that. When you do that, it inflates your base premium, which isn't necessarily a bad thing. It depends on the situation. Some people don't like that inflated base, because your base is required every single year.

Dan Austin: [14:13] Oh, gotcha.

Karl Schnitzer: [14:14] Within your premium, you have a base premium, and then you have a paid up addition rider. Your paid up addition rider is not required. Your base is. You have to pay your base every year or else your policy could lapse. Now, by front loading the policy, it'll increase that base. So just for easy terms, say you had a thirtyseventy split, 30% base, 70% PUA, and you wanted to front load it. That may inflate that to 35, 40% base, you know, 60 or or 65% PUA, which isn't like I said, it's not a bad thing. It works out well. Like, I have a client now that he wants to buy a a Dodge Viper before his his fortieth birthday. So we're working to get him enough cash value into his policy before his fortieth birthday. So we're gonna front load it like that, which, again, it's gonna increase his base, but then he'll have the cash available to borrow from it to go buy this car. If he was not front loading it, then we wouldn't be able to do that. There's not enough time to get the cash into the policy.

Dan Austin: [15:09] So he's going to what's the advantage? That's a great example. What's the for a car for I guess it could be considered an asset, but what's the advantage of him putting money in that policy and then loaning himself the money for that car? Where's the where's the advantage?

Karl Schnitzer: [15:24] So he's gonna spend the money anyway. Whether he does it in cash or he finances it from a bank, he's already got it set in his mind. This is what he wants. So he's gonna spend it regardless. When you fund it or finance it through your IBC policies, it's the most efficient way to do it. When you spend cash, you're losing opportunity cost. If it's an $80,000 car and you're spending $80 cash, that money is no longer working for you for the rest of your life. So when you spend cash, you lose opportunity costs. If you finance it with a bank, obviously you're gonna pay interest to a lender. That's the second way to spend money. Third way is if you were to borrow from your own policy, pay back the funds to your policy, you're not gonna lose opportunity cost on the money because it's gonna continue to grow while you borrow from it to go buy, make the purchase, whether it's a car or anything. It could be an asset or a liability. It's gonna continue to grow. So you're not losing opportunity cost, and the interest that you're gonna pay back to the policy will come into your account as interest and dividend. So you're not necessarily making more interest. I mean, you could charge yourself more interest if you wanted to Right. But you don't have to. It's just there's good videos and good illustrations to show the three scenarios, cash, financing, self financing. And over the long haul, you're never losing opportunity costs. You're not spending any money to, know, a third party finance, a bank or anything.

Karl Schnitzer: [16:44] And the more time that you give your policy, obviously, the more it's gonna grow, you know, to where it's everyone likes to pitch in. I'm sure you see it on, like, social media. Everyone's like, oh, you know, I make money by buying cars this way. You don't don't necessarily make money. You would have made it anyway no matter what you bought.

Dan Austin: [17:00] Right. Yeah. So I think I get what you're saying. So then you're saying you're gonna buy this $80,000 Dodge Viper. Your money is, you know, sitting there making 5% regardless. Say, if that's your quoted interest rate. And then you're going to have to pay yourself essentially interest on the money you borrow. And so say you were gonna pay a bank 90,000 total, including interest for the car after you pay the loan down, well, instead pay yourself the 90,000, so you take the $10 that would have gone to the bank and you just give back to yourself. You're not earning the $10, you're just paying it to yourself anyways.

Karl Schnitzer: [17:32] Correct, but you're also getting the lifetime growth of the funds in the policy. You have two opposing forces. You have compound interest working for you, and you have amortizing interest working for you, but in the opposite way. So compound interest is gonna go up, Your amortized interest is gonna go down. Similar to, like, you know, like a mortgage payment.

Mike DeHaan: [17:49] Right. Exactly. Yeah. And so for any sort of person that has a business, this is why it's so keen with real estate investors too, that have large cash positions. It's kind of just a no brainer. Right? Because you can, you know, hold your cash reserves for, like, your entire rental property portfolio. And then let's say, you know, like, you know, we have what, 40 something units between Dan and myself. So, you know, typically have a couple $100,000 in cash on hand just to be safe. Right? That but to put all that into something like this where it's gonna be getting compound returns of 5%, but then we can borrow from it at 5%. It allows us to not be sitting on those $100,000 just in straight cash when we don't need it. And then sure, when we do have to pull on it to replace a roof, place a furnace, do whatever, we're gonna have to pay that back a little bit of interest, but that's going to us. Yeah. That's going back to us. Right? And, you know, ideally, it's gonna be paid down by the cash flow of the assets that you've owned anyway. So it shouldn't really matter. And, you know, but like, you do that over the course of your entire investing career. You know, we say we didn't buy anymore units.

Mike DeHaan: [18:50] You only have these 48 units that we're gonna always have this cash sitting anyway. You're gonna get compound interest at, you know, whatever our guaranteed rate is over the course of the investment cycle. So

Karl Schnitzer: [19:00] I would say probably I'd have to actually look into it, but it's probably close to, like, 70 or 80% of our clients are real estate investors, and they use just, like, same exact you know, how you said it. They they just keep this as their reserve fund, Or what's a pretty cool strategy too is you can actually if the bank allows you to not escrow your insurance and taxes with them, there's cases where some big real estate portfolios, the annual property taxes could be 30,000 a year, and rather than having that sit in a bank's escrow account doing nothing for you, sit it in your policy, and then just make the payment every year. It's money you're spending anyway, just a matter of where you're storing it in the meantime.

Mike DeHaan: [19:38] Yeah. I mean, that that is actually a good point with the escrow because, like, I I don't know if a lot of people realize this, but if you have if you live in a state where your bank escrows your taxes and insurance, that's technically an asset that's still yours that's just sitting there doing nothing. Mhmm. And if you own a bunch of properties, like, that can literally be hundreds of thousands of dollars that are just sitting there.

Dan Austin: [19:55] It could be a lot of money Yeah.

Mike DeHaan: [19:56] That are being wasted. So yeah.

Karl Schnitzer: [19:58] Yeah. There's a speech on so as a Nelson Nash Institute practitioner, we get access to, you know, a bunch of different training videos, and they have a a video in there with a guy who designed a policy for another investor. He wasn't my client, but his annual property taxes were 200,000 a year. Wow. And, mean, you could just only imagine the compounded growth of 200,000 a year. Even when he's borrowing it to then pay his taxes bill, the compounded growth exceeds that, you know, by tenfold because of the amount of I mean, it's a ton of cash you're putting in there.

Mike DeHaan: [20:29] I mean, let's say, 5%, that that's $10 a year in extra money that you're making.

Dan Austin: [20:33] Yeah. So, basically, you would be escrowing it out of bank anyways. So just escrow it to yourself in this policy, and then spend it. Spend it at the beginning of the year, and then build it pay it back till the end of the year, and then spend it again, and you're compounding. Yeah. That's amazing.

Karl Schnitzer: [20:47] The other cool part too is we have a lot of people that they just use it, you know, as a private kind of retirement income. So you can draw income from the policies, you know, so if you have your other retirement accounts set up, which I don't necessarily believe in all of them, but regardless, if the market's down and you don't wanna draw from your perfect timing this year, market's down, what, 30% or so, it's probably not a good time to draw from a retirement account. If you had this other plan b in place, you could draw from this and and let the other account sit. You don't wanna draw that while it's down. But the cool part too is all these policies, you have a cash account, which is the primary reason we're doing it. You get a death benefit too, which is just a cherry on top. So your death benefit's a multiple of the cash account. So say you got 200,000 in your cash account, the death benefit could be $5.06, $7,000,000. So, God forbid, if you ever do pass away, your family's not getting the 200,000, they're getting the $56,000,000. We're really looking long term, and what we like to do with our clients is really get their short term goals, five, ten, fifteen years, but we're planning, we do a lot of legacy planning too, and planning over multiple generations.

Karl Schnitzer: [21:57] So if clients have kids or grandkids, we like to structure policies on the kids and the grandkids as well, and then we'll establish a trust where the death benefit goes to the trust. Inside the trust, we have a family banking addendum that says any child born into, you know, the Schnitzer family will have a whole life cash value insurance policy designed in IBC way, blah blah blah, whatever, and the trust will fund their first premiums. So now that policy that's on the the child that's born is gonna grow and compound from the fifteen days after they're born all the way up until the day that they're dying. They're gonna have seventy, eighty, ninety years of compound interest working for them, death benefits growing, which is gonna go back into the trust and fund the next generation too. So when you really scale this out over two, three, four hundred years, I mean, people call it the Rockefeller method because this is what they've done, they have compound interest working for them, which we all know how powerful it is, for three, four, five hundred years. Go put that into a it's probably not five hundred. I think the max right now is, like, two fifty, maybe three hundred years. Whole life has been around longer than any other institution, but put into a calculator, two hundred years worth of compound interest with massive lump sums coming. At each death, there's a lump sum that gets put in. So you can really scale this out, and the idea behind it is you're just creating that pool of money that you can bank with, and obviously, the bigger pool of money, the higher interest you're gonna accumulate.

Karl Schnitzer: [23:21] So

Mike DeHaan: [23:22] Yeah. So it's basically, know, it turns into like a a giant savings account that gets premium interest, but you can also borrow from it. Yeah. And, you know, as opposed to having to get a loan from a bank. So, yeah, I mean, it's a no brainer. So with this sort of product, these sort of deals, what sort of financial status do people need to be in? Is this something because I think one of the reasons that, you know, Dave Ramsey hates on it I mean, obviously, you said those are blanketed programs that he talks about. But there's also always the stories of, these are the kind of plans that get sold to, like, families who immigrated here who don't necessarily speak in English or understand American finance, and they have super expensive premiums that most people should not be paying. So I guess for this style where you get having the custom plans, is this something that only people with significant net worth should pursue? Is this, like, right for, a new investor? Like, who is this correct for?

Karl Schnitzer: [24:13] It works for everybody. You know? It does work for everybody now. How quickly it will work for everybody is obviously, it's gonna work quicker for somebody putting $2,550,000 a year in than it is for somebody putting 3 or $4 a year in. You're not gonna have enough cash value to finance a car for ten years if you're not putting enough premium in. So that being said, the perfect client or the perfect fit is somebody that is already saving money, so we always recommend minimum, minimum 10%. If you're not saving 10%, focus on that and then come to us, whether that's in a few months, in a year, in two years, you gotta be saving at least 10%. Now where we keep that 10%, we would recommend here, so even if it is a smaller amount, only a couple thousand dollars a year, it still is the best place to park it. Are you gonna be able to finance a car or a rental property with it in the next five years? No, there's not enough cash going into it. You have to be able to inject cash into it, so what we would say is, look, let's set this up, and then we'll focus on what are your talents, what's your passions, how do you create more income for yourself? So we have, if you go on our website, which is producerswealth.com, you'll see a big diagram of, we call it the capital multiplier, and essentially all that is is a no matter what business or what industry you're in, we're all in the industry of creating capital and multiplying capital. So whatever whatever business you're in, your goal is to multiply capital. You're not doing it if you're not making money. So within that, you'll see on our website, we have four different pillars.

Karl Schnitzer: [25:46] The first is capital creation. This is however you earn money, whether it's real estate commissions, insurance commissions, rental income, flip income, doesn't matter what it is, a salary, w two income. You have capital creation, how you earn income. Then you have to store that income somewhere, so we call that capital capture. Where you store that capital, there is a most efficient way to store it. We wouldn't necessarily recommend a bank in all situations. Know, if you already have 10%, 15 you know, we have clients saving 50%, 60% of their income that are high income earners. You would never wanna keep that in a bank. There's no point. So we have capital creation and capital capture. This is where we're gonna store the money. From the capital capture is where we're gonna deploy it into cash flow creation and then capital growth creation assets. That's gonna then cycle back into our capital capture, and it's just gonna keep the cycle going. From there, that's just like an individual level. From the bigger scheme, now we have trust involved, and we have family generation planning involved where that capital capture account is going to include a death benefit. That death benefit's gonna go to the trust. Trust is gonna fund the premiums of the next generation, so on and so forth. It's it's one big cycle. But I guess yeah. I mean, to answer the original question, there's no one size fits all, and it will work for everybody.

Karl Schnitzer: [27:01] It's just a matter of how fast it'll work. Everybody needs a car. Everyone needs transportation. Everybody spends money. So it's just a matter of flowing that money through a system first that's going to accumulate uninterrupted compound interest, and then spend it. Then that way you never lose the opportunity cost of those dollars.

Mike DeHaan: [27:19] Yeah. Absolutely. So I guess, even though it doesn't kind of fit everyone, I guess, you have, like, a suggestion for should kind of be with this? Because, like, I would argue that, you know, yeah, I could work for somebody, but if you're like, I don't know, a single income earner making $60,000 a year, I don't know if you should necessarily be going and putting all of your liquid cash into something like this because I know it does reduce the cash value over the short term so you can't access all of it. But, I mean, or maybe I could be wrong. Maybe I'm looking at it the wrong way.

Karl Schnitzer: [27:47] Yeah. I mean, I would say that person, they still have to save money no matter what their income is. Everyone has to save. So it's just a matter of where do they save it. You know? Is it in a qualified retirement account? Is it in a savings account? Or is it in a whole life account? There's pros and cons to each. And like I said, it's not gonna you know, one size fits all is not going to work. I would probably steer away from some of them, but I'm also passionate about this. So

Mike DeHaan: [28:11] Yeah. Right. Yep. Awesome. So before we kinda get into the last bit here, I would love to hear just a little bit more about how you use this for your investing as well. Because you talked about at the beginning, we never went back to it, I apologize, about how you got you started buying houses yourself, and this was a product that you used. So like, what what was that situation like for you, so people have some tangible examples?

Karl Schnitzer: [28:28] So I was buying single families, duplex, triplex. I had one quadplex locally here in Philly and then in in parts of Pittsburgh too. And, you know, I got to a point where all my cash was deployed, and I couldn't convince my private lenders to do a 100% financing, so I kinda had like a period where I was stalling until, you know, until this flip sold, until this one was refinanced, anything. Then what I was doing in the meantime was learning IBC through the owner of my firm, and when I had those flip sells, I did same thing, front loaded policy, paid a front load upfront, and then I was able to just use those funds to cover my cash to close on properties going forward. I've used it to buy cars. I've used it. I actually bought an airplane with my cash value, which is pretty cool.

Mike DeHaan: [29:12] Nice. Oh, nice.

Karl Schnitzer: [29:13] Not not like a jet or anything. I'm not that.

Dan Austin: [29:15] Not a g six?

Mike DeHaan: [29:16] Yeah. No. Not yet. Compound interest is crazy on yours, Yeah. 30%.

Karl Schnitzer: [29:22] My partner at the time and I had a crazy idea where we wanted to go get our pilot's licenses, and we, you know, I don't know how much time, we we have real real quick,

Mike DeHaan: [29:32] Yeah.

Karl Schnitzer: [29:32] We went to the local pilot school here in Philly and just to get info. And it was, like, $14 between plane rental and plane lessons to get your pilot's license. So we, like, jokingly said to the to the manager there, we were like, well, what if we, like, owned a plane? Could we just take lessons in our own plane? And he's like, yeah. Absolutely. People do that all the time. So we were joking with him, and

Dan Austin: [29:54] we were like, alright.

Karl Schnitzer: [29:54] We're gonna go buy a plane. We're this was a complete joke at the time. We were like, we're gonna go buy a plane, and then we'll come back, and then we only have to pay for instruction. We don't have to pay for any plane rental, which plane rental is, like, anywhere between 150 and 200 an hour, you know, depending on the the plane. But so then he says, if you find a plane that's instrument rated, I'll lease it from you for the students because he needed another plane in his fleet that had, you know, a full instrument cluster. So we were like, okay. Well, we'll find one. So my partner finds this plane down in Texas that checked all the boxes. The hours were good. It had all its paperwork. It It was instrument grade and everything. We sent him the link, and we just said, hey. If we buy this, would you lease this off of us? He said, yes. He actually sent the manager was so serious about it. He sent somebody down to Texas to do an inspection on it. So we did, like, a prepurchase inspection, made the the agreement. Buying a plane is actually very easy if you if you to finance a plane, I mean, because we didn't we didn't have to pay, you know, buy it in cash. We were able to use combination of cash value from both of us and then from financing terms, and we were able to he flew it back to Philly, and now we I I still own today. It's actually for sale now, but we were able to lease it to the flight school to students taking lessons in it, and then we have a lease agreement with the with the school for maintenance and insurance and everything like that.

Karl Schnitzer: [31:16] But my I never followed through with it. I hate flying, but the But you own it. Oh, man. Love it. If you've never been in a small plane, anybody could just blow in their breath, and you'll feel the turbulence. So

Dan Austin: [31:29] Oh, yeah.

Karl Schnitzer: [31:29] My partner, he finished out his lesson, so, you know, he only had to pay for instruction. He was able to take all his lessons in our plane and finish out those instrument rating and everything, and he essentially, from the cash flow from that, he was out of pocket nothing.

Mike DeHaan: [31:41] So Oh, man. You should get back into it, dude. Those those little planes are terrible, man. I went to Africa last September, and I took this little this little tiny plane on this this, like, sort of scenic trip across Namibia. And dude, there's, like, duct tape on the wings of this thing. Like, it did just fine. It did just fine. Exactly. Yeah. Jesus.

Karl Schnitzer: [32:01] There it is.

Dan Austin: [32:02] Oh, that's a nice plane, man.

Mike DeHaan: [32:04] That is super nice. That's like a

Dan Austin: [32:05] four is that a four seater?

Karl Schnitzer: [32:06] Four seater. Yeah.

Dan Austin: [32:07] Yeah. That's a good plane.

Karl Schnitzer: [32:08] Two adults and maybe, you know, two small adults.

Dan Austin: [32:12] Yeah. Yeah. Let's fly a plane, Mike. I don't need to fly. Don't wanna learn to fly either. But let's just it sounds like a great investment, actually.

Mike DeHaan: [32:18] I mean, yeah, so you basically were able to use your your Infinite Banking money to go and buy this asset that you then turned well, I guess, buy this potential liability that you turned into an asset by leasing back to the Basically, NetJets.

Dan Austin: [32:31] He's basically a NetJets guy. He was just leasing works.

Karl Schnitzer: [32:34] It's essentially like, I always compare it to, a double net lease because so the flight school pays for the insurance, and then maintenance is split. They pay for labor, we pay for parts.

Mike DeHaan: [32:43] Yeah.

Karl Schnitzer: [32:44] And so far, you know, that's never been an issue. We've overhauled the engine, and it's been you know, we we've got cash flow every month coming in from So Awesome.

Mike DeHaan: [32:52] Cool. There you go. I mean, that's the same concept you can apply to like a a real estate as well. Shane will do that same thing.

Karl Schnitzer: [32:57] Part two is you can you can get bonus depreciation for two years on it. So Nice.

Mike DeHaan: [33:02] There you go. That's perfect. That's awesome. Well, very cool, Carl. So as we get the last little bit here, we always have our our finishing questions that we ask every guest. First one, and I know you have some real estate experience. But if you don't have a a one for this, you can give us a business story as well. But what is your craziest real estate investing story? It's gonna be a good story, bad story Oh, man. Anything in between?

Karl Schnitzer: [33:24] Craziest. So actually, one of the reasons why I sold most of my portfolio, not all of it yet. So in I'm in Philly with a lot of units, and it it took me literally to the month, two years to get a tenant out. And this was like during COVID, during the moratorium, and trying to do it the legal way. So there's obviously ways you can get people out, but I was too much of a baby to do that. So Yeah. We bought this property, it was a partner and I, and it was February of twenty twenty twenty, yeah, because we got her evicted this year. She did not. It was a duplex. Both units were occupied. Neither unit were paying rent. We knew that going into it. We didn't think it would be as crazy as it was to get her out. This was, like, the kinda, like, start of COVID. So, you know, we didn't have the moratorium at that point. We didn't think felt, like, ninety days, maybe six months at the max to get this person out. So we buy this property. It was a great price, decent area for for what we were looking for, and turns out we can't get her out. We're going on literally, it was like we filed for an eviction basically immediately and did not get it approved and have the sheriff come out until February 2022. Oh.

Karl Schnitzer: [34:32] This entire time, for two years, the tenants, nobody paid us anything. The day the sheriffs come out, which Philly is absolutely, completely not landlord friendly at all, they made the day the sheriffs came out, they made me, as the landlord, pay for a moving company to come move both the well, at the time, it was supposed to be just one person's stuff out and a storage unit for thirty days, and the sheriff said they were not coming out unless there was a moving company on-site that day.

Mike DeHaan: [35:03] So Oh my god. Oh my god.

Karl Schnitzer: [35:04] We did, during this two years, we did get the 2nd Floor tenant out. She moved out willingly just because she found somewhere else to go. So we were under the impression for the majority of the year that the 2nd Floor was vacant, 1st Floor was occupied. She wouldn't let us in. I was out there so many times with the cops trying to get into this house, and there was nothing we could do short of hiring people to to remove her. Uh-huh. But, anyway, the day we did the eviction, the sheriffs are they're like, yeah. This is for the whole building. Right? And we're like, yeah. You know, I I think the 1st Floor is occupied, 2nd Floor is vacant, and they come out. They're like, you know, there's people on the 2nd Floor. And I said, there was, but I I thought they moved out. And they said, no. Both units are occupied. Well, now they're they're getting removed by the sheriffs, and the 2nd Floor family, it was different than the people I had saw before Yep. That were moved in. The second full family was super nice, and they had no idea what was going on. And they said to me, they were like, yeah, we've been paying her rent for like over a year. Uh-huh. They told me. She said this was her grandmother's house, and she inherited it. So this lady on the 1st Floor, not only was she not paying us, but she was collecting rent from the 2nd Floor tenant for, like, over a year.

Mike DeHaan: [36:17] Oh my I

Karl Schnitzer: [36:18] felt so bad for the family too. And I like, look. You know, I I I didn't know this. You know, I'll help you find another place to live. And, you know, we were able to get them something else, but then get the unit, both units vacant. That was pretty crazy.

Dan Austin: [36:28] Yeah. Nice.

Mike DeHaan: [36:31] That's the one thing when you find like true dirt bags, they're hustlers, man. Oh, They know how to scrape by.

Karl Schnitzer: [36:36] Yeah. The true dirt bag in Filliers, the city.

Mike DeHaan: [36:40] Yeah. Oh, yeah. Yeah. Right. Right.

Dan Austin: [36:42] And I'm curious about is you can hire people to evict your tenants for you in Philly.

Karl Schnitzer: [36:47] We'll we'll talk about like a

Dan Austin: [36:48] was it like a Craigslist?

Mike DeHaan: [36:49] Yeah. Right. I think that's like the similar as how you you hire the mafia to protect your restaurant in the corner.

Karl Schnitzer: [36:56] Yeah. You know? There's I've never done it because I'm a baby, but there are people you can

Dan Austin: [37:02] You can hire, Noosh.

Mike DeHaan: [37:03] Yeah. Well, there's actually

Karl Schnitzer: [37:04] you know, it's funny too, and this was not me, this was somebody else I know, so I can tell the story, but they actually they had a squatter situation too. They paid somebody to squat on the squatters until the first squatters got out. So some guy just comes in, moves all of his stuff into this house that already had a squatter in.

Dan Austin: [37:21] That's actually hilarious. That's really funny.

Mike DeHaan: [37:24] Like, you know, first world problems require first world solutions right there. Yeah. That's just

Dan Austin: [37:28] Yeah. You squat, I'm gonna squat.

Mike DeHaan: [37:30] Yeah. Exactly. But we've we've said that we've kinda joked like that too. It's like, man, we gotta get too out. We should just move into that unit. Like, just along with them. Like, just go in there and, you know, see if they wanna Start

Karl Schnitzer: [37:41] moving furniture.

Dan Austin: [37:42] Oh, man. We're Yeah. Do

Mike DeHaan: [37:45] That's crazy. I'm glad you got out of that. I had a similar situation with the tenant. I inherited them with the property. They were due for their lease to expire. They paid rent when I first bought it. They're just terrible people. And then the lease is due to expire April 2020. And then we all know what happened in March. COVID started, everything shut down. I finally got them out in September of this past year, of like this Yeah.

Karl Schnitzer: [38:07] Same year.

Mike DeHaan: [38:08] It was crazy.

Karl Schnitzer: [38:10] I couldn't imagine, like, the week before the sheriffs were coming out, I got a phone call from the sheriff's department, and they said, do you have a moving truck, you know, ready and and a storage unit? Said, no. What are you talking about? They said, you have to pay for the moving company and the storage unit or else we're not doing it. Yeah. So that was another, you know, $1,500 on top of everything else.

Mike DeHaan: [38:30] Yeah. That's kinda wild. I kid.

Dan Austin: [38:32] Yeah. That's not cool.

Mike DeHaan: [38:32] My person, they ended up costing me about $12 just in general costs of like, missed rent and like other sort of BS, not paid utilities, all sorts of stuff. And then I had to redo their entire unit because they were just freaking savages in there.

Karl Schnitzer: [38:46] Yeah. I mean, if I calculated what we lost in rent, it would probably be over that. Yeah. Like somewhere up there.

Mike DeHaan: [38:51] Anyway, people man, crazy business. That's why you have reserves though. Why you set up infinite banking so that you can on be making that $30,000 you're eventually gonna need figure out their situation. Yep. So awesome. Alright. Next question. What is one piece of advice you would have for a new real estate investor looking to get started or a semi established investor looking to take their business to the next level?

Karl Schnitzer: [39:13] I'd say, you know, I'm always big on always being curious and always continuing to learn. I think some people and to newer investors, least what I've seen, because I I do a little bit of coaching too with newer investors, and the a lot of people, and I don't mean this in a bad way, it's just kinda like human nature in the American way, I guess. When you graduate high school or college, you just stop learning. You're not fulfilling or you're not continuing your education outside of the traditional school system. And, you know, I would always tell people, come to me, and, like, you know, obviously, I had left the police department fairly young, and I'd have cops that come to me, like, yo, you know, I really wanna get into real estate. What should I do? Like, dude, go read 10 books on real estate, and you'll be fine. Like, that's all you need. Good. There's an online course somewhere for $500 on real estate, you know, and it's people just stop learning, and, you know, you can learn. I've learned so much more since I graduated college than twelve years before that just from mentorships, masterminds, books, online courses, you know, just just networking and mentoring with the right people. So I'd say just, you know, always stay curious and continue learning.

Dan Austin: [40:18] Yeah. Yeah. That's great advice.

Mike DeHaan: [40:20] Yeah. To add on to that too, learning is a skill, which I think a lot of people don't realize. And that's one of the reasons it's hard for, like, the, you know, mid thirty to forty something that's wanting to make a life change to be able to do it is they haven't been learning for the last, you know, fifteen years. Yeah. And now they have to relearn how to learn, which is not an It's easy thing to a perishable skill.

Karl Schnitzer: [40:37] It's crazy. Yeah. When, like, I've talked to people too, and I'm like, you know, I'll give you, like, your first real estate book, and they'll be like, dude, I haven't read a book in ten years, and like, that's why, you know, that could be why you are where you are.

Mike DeHaan: [40:49] Yeah, exactly. Maybe. You know, and as that seal gets better too, it's amazing how much easier to just remember stuff or to apply things. Like, even

Karl Schnitzer: [40:56] Oh, yeah.

Mike DeHaan: [40:56] Now, like, you know, have my my wife, she'll be like, how do you know just like these like random things about stuff? Like, I don't know. I like read a headline, and it stuck with me. Yeah. And I guess, like, my learning muscles are strong enough that that's just sort of like They're

Dan Austin: [41:08] just ready to go all times.

Karl Schnitzer: [41:10] Said to somebody last week, because I I sent him a book where you recommendation. He was like, I'll get the Audible because I read slow, and I'm like, you're never gonna increase your reading speed unless you start somewhere. Right. Yeah. Know, Audible's good, don't get me wrong, you know, has its place whether you're driving or you can't read a book, but to actually learn and to get better. If you're a slow reader, the only way to get better is to read.

Mike DeHaan: [41:33] Yeah. Absolutely. It's true. So yeah. Great advice. So awesome. So last question, where can people find you and reach out to you if you let them do so?

Karl Schnitzer: [41:42] Sure. So, you know, if anyone's interested in infinite banking, our website is producerswealth.com. We have a new podcast, The Producer's Bank. The owner of my firm has a podcast, Cash Flow Ninja. You know, any of that, everything's on the website, you know, where you can reach out about IVC. If just you wanted to, you know, connect and say hi, my Instagram is schnitz ninety three. I'll I'll send it to you guys, you can have it. Perfect. And I'll send you my email too. Can throw in there.

Mike DeHaan: [42:07] Perfect.

Karl Schnitzer: [42:08] Instagram and Facebook's just my name. Facebook and Instagram, I'm fairly big on until I hit my limit for the day. I gotta set limits on them.

Mike DeHaan: [42:15] Yeah. Right. Yeah. There you go. Cool. Well, thanks so much, Carl. You got your a mountain of wealth and this stuff and a topic that, you know, it's an interesting thing to sort of wrap your head around. But once you understand the value, like, sort of the compound returns and, you know

Karl Schnitzer: [42:30] That's the thing too in you know, you gotta you gotta research with an open mind. It took me honestly, and I I hate to even say this. It took me, like, two years from the time I first heard about it until I started my first policy because I heard about it, thought it was like a scam, thought it was nothing serious, then the more I networked and knew wealthy, wealthy people, they all stored their money in insurance. So that's when I kinda gave it more luck and, you know, something else we can do too, which I've I've done on other podcasts. You know, I I get books pretty cheap through the Nelson Nash Institute, so I have a a stack of books of becoming your own banker, which is the There you go. Oh, there you go. You know, book on it. So what I've done before, if you guys are open to it, you know, anyone, first three people that can share the podcast and rate it for you guys, I'll mail them a free book.

Mike DeHaan: [43:12] Perfect.

Karl Schnitzer: [43:13] Oh, yeah. You heard it. Awesome.

Dan Austin: [43:14] That's awesome.

Mike DeHaan: [43:14] I appreciate that. Yeah.

Karl Schnitzer: [43:16] So You got three names and addresses.

Mike DeHaan: [43:19] Yeah. Yeah. There you go. So yeah. So you guys heard that here. If you go and you share the podcast, I've listened to this episode and send it to either Dan or me or Carl on Instagram, then we'll send you a free book. That'd be pretty sweet. Awesome. Nice. Well, thanks so much, Carl. Appreciate you coming on. Appreciate you guys having me. Yeah. Absolutely. And thanks so much for listening, everybody, and we'll talk to you guys next week. Thanks, Carl. Yep. Thank you.

Mike DeHaan: [43:41] Thanks for listening, everybody. Please make sure you subscribe and leave us a five star review wherever you listen to your podcast. Also, please make sure you go and you share this with other people within your network. We are really trying to grow this thing, and the best way for us to do so is by you telling other people to come and check us out. You can also follow us on Instagram. I am at Mike underscore invest. Dan is at investor man Dan. You can follow the podcast at collecting keys podcast. And if you wanna learn how to make real money as a real estate investor or you want to grow your already existing real estate investing business, please go and check out instantinvestorprogram.com and book a call with either Dan or myself, and we will see if you'll be

Mike DeHaan: [44:20] a good fit. Thanks for listening everybody, and talk to you next week.

Speaker 2: [44:23] Thanks for listening. Please leave us a review on iTunes or wherever you get your podcasts, and check us out at collectingkeyspodcast.com for tips and guides on starting your own real estate investment and wholesaling business.