Joseph Kimbrough, the founder of Apex, a private equity fund specializing in acquiring multifamily assets to ensure strong returns for investors, is shedding light on the concept of “infinite banking” and how it can be utilized in passive multifamily investing strategies. Infinite banking involves setting up a whole life insurance policy that offers both a death benefit and a cash value that grows over time. The cash value of the policy grows tax-deferred, and investors can borrow against it to use for investments, repaying the loan at a lower interest rate than if borrowed from a bank.
Combining infinite banking with passive investing allows investors to access liquidity and cash without dealing with banks, providing financial independence and control over their financial decisions. The benefits of passive multifamily investing include group purchasing, which allows investors to acquire larger and potentially more profitable real estate investments, and passive income from distributions paid out by multifamily properties. Additionally, multifamily investments offer tax advantages through depreciation and long-term capital gains on rental income and sale proceeds.
By combining infinite banking with passive multifamily investing, investors can have quick access to investments while growing their policy cash value. For example, borrowing from the cash value of a whole life policy and investing in a multifamily opportunity fund can offer a preferred return that can be reinvested into the policy’s cash value. However, investors should be mindful of their liquidity needs and risks associated with this strategy, including excessive borrowing, lapsing of the insurance policy, high interest rates, and potential tax consequences.
This strategy may be advantageous for high net worth individuals but may not be suitable for early-career investors or those who require immediate liquidity. Consulting with a licensed professional is recommended before considering this strategy. Joseph Kimbrough’s insights on infinite banking and passive multifamily investing showcase the potential benefits and risks of combining these two strategies for investors looking to maximize their wealth and passive income.
