Jason shares inspiration from Og Mandino, tax advice from CPA Peter DeGregori and Richard Lillycrop one of our British investors.
Announcer: Welcome to Creating Wealth with Jason Hartman, President of Platinum Properties Investor Network in Newport Beach, California. During this weekly program, Jason is going to tell you some really exciting things that you probably haven’t thought of before, or a new slant on real estate, fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible.
Jason is a genuine self-made multimillionaire, who not only talks the talk, but walks the walk. He’s been a successful investor for 20 years and currently owns properties in nine states. This program will help you follow in Jason’s footsteps on the road to financial freedom through real estate. You really can do it. And now, here’s your host, Jason Hartman.
Jason Hartman: Welcome to another edition of Creating Wealth. This is Jason Hartman and we’re glad to have you listening today. Few things – we have a 3-part show for you today, but before we get to that, I just wanna mention a few things.
No. 1, I hate it when I go to those real estate seminars or I hear some salesman selling any product under the sun and they tell me, “This is the best time ever to buy this widget” or whatever it is, right? Well, I do have to say that this is becoming a very, very, very opportune time to be investing in real estate. With the Federal Reserves actions this past week and the week before, we are coming into a time of exceptionally cheap mortgage money. As you’ve heard me talk about many times in the past, the mortgage is a major part of the real estate asset, and because of this artificial reduction in interest rates and this loosening of the money supply caused by the mortgage meltdown, which became apparent last year, especially last August – but you could see the seeds of it a long time before that, obviously – it is becoming a very, very good time to be stocking up on cheap debt.
And the other side of this, of course, I wanna remind you, is that this means we will have inflation because the money supply is being loosened more than it should be in a time where we already have a lot of inflationary pressure. And I tell you, we’re gonna do a show on this in the future, but there is so much inflation heading our way, in my opinion, over the next ten years or so as India and China’s economies continue to boom and grow and more consumption occurs. So we’ll talk about that later.
But suffice it to say, pay attention. The market is soft. There’s kind of a perfect storm developing right now and you’ve got developers who are under a lot of pressure nationally. These are very motivated sellers. We are striking incredible deals with them. At the same time, the other factor you have is the mortgage money is getting very cheap.
And then the third factor here is that even though the mortgage money is getting cheap because of the mortgage crisis, lenders are still leery and conservative and a little bit scared, as they should be. They should have been more careful years ago and we wouldn’t have been in this mess, but regardless of that, it is harder for your renters to qualify to borrow. But those who can qualify have a very, very great opportunity right now because they can borrow at really, really opportune, really, really low, low rates.
Think about it. Two months ago, mortgage rates were 14 percent higher than they are today, approximately. Of course, it depends on your qualifying situation and it’s a little more complicated. But if you’ve got a mortgage two months ago, you would have paid significantly more in your interest rate and remember, when you talk about interest rates, don’t talk about like the rates are up or down 1 percent. Talk about it like what is the relative difference in those rates, and from two months ago, it’s about a 14 percent difference. That’s extremely significant.
All right, a couple of reminders. We cooperate with brokers. I wanna just remind you. You know I really don’t mention this very much on the show here, but we are an open network and a lot of real estate brokers and mortgage people outsource their investor clients to us, and so we do cooperate with brokers. So keep that in mind if you are a licensed real estate person.
Also, we are moving next month. We’ve got a big beautiful new office that we are moving to in Costa Mesa, California, right by the very famous South Coast Plaza area. We’re going to be almost triple in size in terms of office space and it’s a nice upgrade for us. So just know that we are moving soon and our new address will be on the website. And we are growing quickly. We have career opportunities available. If you’re interested, talk with any one of our investment counselors or visit the Careers page on our website at www.jasonhartman.com. If you’re interested in franchises, talk to us about that. Check out the Franchise page on our website as well.
And be sure – I know a lot of you listening are non-local listeners. We have listeners from 26 countries at last count all around the world and you can get on our conference calls. They are 100 percent free and the difference between the conference calls and the Creating Wealth podcast show is that the conference calls are a little bit more timely and we usually have on them a lot of different speakers and a lot of guests. A lot of local market specialists from various areas. So just wanted to mention those few reminders and housekeeping items to you, and let’s get on with the show.
Now we have a 3-part show for you today. The first part, I want to share something that really, really changed my life. It is an inspirational sort of poem or prayer, if you will, and it is by one of my very favorite mentors from many years ago, Og Mandino, the late Og Mandino. You may have heard of Og Mandino, read his books; very famous. Probably his most famous work was called The Greatest Salesman in the World, but he’s written many books and is an excellent, famous speaker worldwide for many, many years; just a tremendous guy. And a long time ago, I picked up a book called Mission Success, probably when I was about – oh, I’m going to guess I was about 20 years old, maybe 21 years old at the time. So I’ll share a little bit about that.
And then we have a prior guest back on the show today, Peter DiGregori, who is a CPA who specializes in working with real estate, investors, and business owners, and he will be talking about another way that the IRS is picking on us and attacking us, and how to make sure we keep them out of our way and keep them from bothering us. And I think you’ll be interested in that.
And then last but not least, we have one of our clients who will be on this show today, and that is Richard Lillycrop, frequent listener – and hi, Richard, I’m sure you’re probably listening now – from England, who will be talking about some of his reasons for investing in American real estate from abroad, the currency exchange rate issues, and why he likes American real estate so much. So I think you’ll enjoy that.
First, The Seeds of Success by Og Mandino. Now, this is a story and I would highly recommend you get the book. I believe it’s out of print, but you can still find it on the internet and I was able to find the tape. Yes, the cassette tapes, and buy them used on the internet. I couldn’t find them new and someone must have borrowed my version of it from long ago. But I used to listen to this multiple times a day and it was really, really inspiring for me just in setting my mindset right. I used to listen to it every single morning and I think you will really like this. This is a story about a young man who, during World War II, was stationed over in England and he met an older woman who became his mentor. And she mentored and helped teach him about life and success and good mindset and a good attitude, and all of these things. And when he left England, she gave him this book called The Seeds of Success.
And in this book was this beautiful little verse that you’re about to hear. It’s about five minutes long and we’ll just start with the part where he is opening the gift as he’s leaving England, and then he will read The Seeds of Success and then we will go on with Peter after that, and then our client from England. So listen in. I think you’ll enjoy this and you may want to just play it over and over and over because it is really inspiring and really beautiful.
“Our enlisted men were already engaged in a serious poker game when a C47 transport lifted off from Scotland’s Prescott Airport early on the first day of the New Year. Bob had his clipboard out and was writing another letter to his wife. Hank was agonizing over a crossword puzzle and Tim had his face against one of the small windows, scowling at the Atlantic Ocean far below.
“Winnie. I reached into my travel bag and removed her gift that I had carried close to my heart on that last mission. I carefully peeled the gold foil away from a thin, red leather book. On its jacket cover, embossed in gold, were the words, The Seeds of Success. Clipped to the cover was a letter dated December 1, 1944.
By the time you open this package, there will probably be an ocean between us, but neither distance nor time will ever really separate us. Here with all my love is this tiny book. I’ve asked many favors of you and you have never disappointed me. I now ask one more, the most important of all.
Every morning, take a few minutes to read The Seeds of Success. When you do, you will plant seeds of love and sharing and courage and perseverance into your subconscious mind that will produce a glorious harvest throughout the day because you have programmed yourself for success. Not failure. For joy; not hate. For giving; not hoarding.
Later in your life, after you prove to yourself that using The Seeds of Success has borne good fruit, you are free to share them with the world if you wish, providing that you are willing to offer yourself as a living example of their value. When and if you do, just tell them that it was your legacy from an old lady who loved you very much.
“I folded the letter carefully and tucked it away. Then I began to read the words in the little book. Except for two days, when I was recovering from surgery, there has not been a day in the past 40 years when I faced the world without first reading these words from The Seeds of Success.
“God, I thank you for this day. I know have not accomplished as yet all you expect of me, and if that is your reason for babying me in the fresh dew of another dawn, I am most grateful. I am prepared at last to make you proud of me. I will forget yesterday with all its trials and tribulations, aggravations and setbacks, angers and frustrations. The past is already a dream, from which I can neither retrieve a single word, nor erase any foolish deeds. I will resolve however, that if I have injured anyone yesterday through my thoughtlessness, I will not let this day’s sun set before I make amends, and nothing I do today will be of greater importance.
“I will not fret the future. My success and happiness does not depend on straining to see what looks dimly on the horizon, but to do this day what lies clearly at hand. I will treasure this day, for it is all I have. I know that its rushing hours cannot be accumulated or stored like precious grain for future use.
“I will live as all good actors do when they are on stage, only in the moment. I cannot perform at my best today by regretting my previous act’s mistakes or worrying about the scene to come.
“I will embrace today’s difficult tasks, take off my coat, and make dust in the world. I will remember that the busier I am, the less harm I am apt to suffer, the tastier will be my food, the sweeter my sleep, and the better satisfied I will be with my place in the world.
“I will free myself today from slavery to the clock and calendar, although I will plan this day in order to conserve my steps and energy. I will begin to measure my life in deeds, not years; in thought, not seasons; in feelings, not figures on a dial. I will remain aware of how little it takes to make this a happy day. Never will I pursue happiness because it is not a goal. Just a byproduct and there is no happiness in having or getting; only in giving.
“I will run from no danger I might encounter today because I am certain that nothing will happen to me that I am not equipped to handle with your help. Just as any gem is polished by friction, I certain to become more valuable through this day’s adversities, and if you close one door, you always open another for me.
“I will live this day as if it were Christmas. I will be a giver of gifts and deliver to my enemies the gift of forgiveness; my opponents, tolerance; my friends, a smile; my children, a good example, and every gift will be wrapped with unconditional love. I will waste not even a precious second today in anger or hate or jealousy or selfishness. I know that the seeds I sow I will harvest because every action good or bad is always followed by an equal reaction. I will plant only good seeds this day.
“I will treat today as a precious violin. One may draw harmony from it and another discord, yet no one will blame the instrument. Life is the same and if I play it correctly, it will give forth beauty. But if I play it ignorantly, it will produce ugliness.
“I will condition myself to look on every problem I encounter today as no more than a pebble in my shoe. I remember the pain, so harsh I could hardly walk, and recall my surprise when I removed my shoe and found only a grain of sand.
“I will work convinced that nothing great was ever achieved without enthusiasm. To do anything today that is truly worth doing, I must not stand back shivering and thinking of the cold and the danger, but jump in with gusto and scramble through as well as I can. I will face the world with goals set for this day, but they will be attainable ones. Not the vague, impossible variety declared by those who make a career of failure.
“I realize that you always try me with a little first to see what I would do with a lot. I will never hide my talents. If I am silent, I am forgotten. If I do not advance, I will fall back. If I walk away from any challenge today, my self-esteem will be forever scarred. And if I cease to grow, even a little, I will become smaller.
“I reject the stationary position because it is always the beginning of the end. I will keep a smile on my face and in my heart, even when it hurts today. I know that the world is a looking glass and gives back to me the reflection of my own soul. Now I understand the secret of correcting the attitude of others and that is, to correct my own.
“I will turn away from any temptation today that might cause me to break my word or lose my self-respect. I am positive that the only thing I possess more valuable than my life is my honor. I will work this day with all my strength, content in the knowledge that life does not consist of wallowing in the past or peering anxiously at the future. It is appalling to contemplate the great number of painful steps by which one arrives at a truth so old, so obvious, and so frequently expressed. Whatever it offers, a little or much, my life is now.
“I will pause whenever I am feeling sorry for myself today and remember that this is the only day that I have and I must play it to the fullest. What my part may signify in the great whole, I may not recognize, but I am here to play it and now is the time. I will count this day a separate life. I will remember that those who have fewest regrets are those who take each moment as it comes for all that it is worth.
“This is my day. These are my seeds. Thank you, God, for this precious garden of time.”
Wow. Did you enjoy The Seeds of Success? Isn’t that just a wonderful thing? Play it over and over. I highly recommend it. I have heard it thousands of time and I just love it. One of the parts I love the best is where it says, “I will live as all good actors do when they are on stage; only in the moment. I cannot perform at my best today by regretting my previous act’s mistakes, or worrying about the scene to come.”
And then one of my other favorites is, “I will treat today as a priceless violin. One may draw harmony from it and another, discord, yet no one will blame the instrument. Life is the same and if I play it correctly, it will give forth beauty. But if I play it ignorantly, it will produce ugliness.”
At the end he says, “I will remember that those who have fewest regrets are those who take each moment as it comes, for all that it is worth.” So enjoy the seeds of success. Get the book. If you can find it and you’re lucky enough, get the audio version because I think that’s particularly inspiring, and just read it over and over, play it over and over. Og Mandino is just a wonderful man, just did a great job with that. So thank you to Og.
Let’s talk to Peter DiGregori and let’s hear a little bit about the IRS and what they are doing to that Holy Grail of tax benefits, that real estate professional status. Now, as an investor, this does not necessarily have anything to do with having a real estate license or being in the real estate business as a broker, a salesperson. This is a status that is available to real estate investors and it can really help you save on life’s largest expense.
But the IRS, you know, they’re hungry for money and they are cracking down a little bit on this, so I want you to hear from the expert, just for a few moments here, about what’s going on there, and then we want to welcome our client Richard Lillycrop and end the show with that, and thanks so much for listening. Here is Peter.
Jason Hartman: It’s my pleasure to welcome back a prior guest, Peter DiGregori, a CPA based in Newport Beach, California, with Vertical Advisors, and you can visit his website at www.verticaladvisors.com. I want to say before we get into the topic of the day today that Peter is a tax expert. However, remember that this group tax advice, so it’s general in nature and your tax situation may be different. Taxes are a complex subject, so whatever you hear here on our podcast, this one or any of the podcasts, for that matter, be sure you talk with your individual advisor or call Peter’s office and retain him for your individual advice so that all of the advice is tailored to your specific situation.
Peter DeGregori: Thanks, Jason. Thanks for having me back.
Jason Hartman: Great to have you here. You know I’ve been seeing a lot lately about what seems to be the Holy Grail of tax benefits, that status of real estate professional, as it is called by the IRS, and the IRS seems to be getting a little bit more picky about this tax benefit in terms of who qualifies and who doesn’t. Tell us what’s going on there.
Peter DeGregori: Yeah, good question. I’ve received a lot of phone calls from my clients also. Here’s what’s happening. The U.S. economy is not as good as it’s been. Congress is looking for some more money, so they’ve asked the IRS to go find some more money. And one of the areas the IRS is looking at is real estate professionals because if filled out properly on your tax return, it reduces everyone’s taxes.
Jason Hartman: Yeah, excellent. And you know, Peter, one thing I want to say again to our listeners is don’t get bored with this issue of taxation because it is life’s largest expense.
Peter DeGregori: It is.
Jason Hartman: So please listen carefully to what we’re talking about today because I think it can really benefit you. Okay, well, tell us more.
Peter DeGregori: Well, so what I want to go over briefly in the next five minutes or so is just giving the listeners a little bit more information on the real estate professional status is not changing. The IRS is looking at it more. So what do you need to know to make sure, if you do get audited, what is the actual law.
Jason Hartman: Okay, so in other words, what you’re saying is it is still possible to qualify as a real estate professional and get all of the wonderful tax benefits that go with it. The question is the qualifications are being judged and scrutinized a little more closely by the IRS, right?
Peter DeGregori: Exactly.
Jason Hartman: Okay, good, well, we have a prior podcast on this subject that any of these listeners, if they want more detail because we won’t have time to review it all today as to real estate professional, so go back and listen to when I had Peter on last time. There is a podcast back there. Just look up the prior podcasts about it. But go ahead.
Peter DeGregori: Yeah, I think it was No. 28.
Jason Hartman: Podcast No. 28. Thank you.
Peter DeGregori: It’s down there. So here’s what happened. Probably a couple months ago, there was what’s call the Tax Court Memo that was issued by the IRS. And the IRS went in and audited a husband and a wife and found out and proved that the wife, who was apparently supposed to be the real estate professional, didn’t qualify. And the Tax Court summary opinion is Harmon vs. Commissioner, so if you want, Google it or go to the IRS website and you can read it yourself.
But here’s the overall issue. The spouse had two jobs. She had a full time job, worked 2000 hours, and then she had a part time job. And they only had one piece of rental property. And on their tax return, they wrote down that they qualified as a real estate professional.
Jason Hartman: So I can see the problems here right away and correct me if I’m wrong, but how could she possibly spend another 750 hours a year being a real estate professional working 2000, plus having another part time job and who knows how many hours there. And then No. 2, one rental property, how are you going to justify 750 hours to the IRS with one measly property?
Peter DeGregori: I agree. In my opinion, impossible. So just kind of the highlights here is it just didn’t meet the smell test and the IRS went in and they caught it for audit, and they actually went to the spouse’s employer and said show us how many hours she worked. They qualified that she worked over 2000 hours and they said, look, you have to work more hours in real estate and you’ve already worked 2000 hours in your job, and you have a part time job, so let’s just round it to 2300 hours. So you need to prove to us that you’ve worked over 2300 hours on your one property.
Jason Hartman: Wow.
Peter DeGregori: Wasn’t able to do it. So just make sure it makes sense. I don’t think that there’s an exact number of how many pieces of real estate that you need, but here’s some important facts to remember. The more properties the better because it’s gonna be easier to get real estate professional status.
Jason Hartman: And I’ve heard, and it’s great that you don’t want to name a number because there is no number, and that’s good that you don’t name a number, but just to put it out there, I have heard other tax advisors say that you really gotta have at least six, seven, eight properties to justify the time. If you wanna make a comment, feel free.
Peter DeGregori: Yeah, I think it depends if you have a property manager or not, and I have some clients that have enough time and ability that they actually manage all of their properties, so they’re gonna be able to get their hours much quicker. But if you’re gonna be not as involved, then you’re gonna have property managers and definitely, the larger number of properties is gonna make it easier for you to get those hours.
So we’re gonna go briefly just over the real estate professional and make sure everyone remembers it, and here’s the law. It’s in Internal Revenue Code Section 469c7 for anyone that wants to read it. The law hasn’t changed. The IRS, we’re seeing, is auditing them more, so if you may have potential exposure, make sure you have your ducks in a row. Make sure you have your logbook and your logbook is going to have to prove that you’ve worked over 750 hours in real estate and if you have a job, more hours in real estate than all your jobs combined.
Jason Hartman: Okay, so Peter, a lot of clients get confused on this because I hear them ask the question all the time. You don’t have to have a real estate license or be a realtor to do this, right?
Peter DeGregori: Correct.
Jason Hartman: Okay, because you said “worked” in real estate, so I just wanna be careful. It’s really “worked” on investing in real estate and learning about real estate, right?
Peter DeGregori: Yeah. So if you’re a real estate investor, you own properties and you rent them and you collect rents, then the hours that you spend on those real estate doing rehab, talking with your property managers, going to real estate seminars, all these things are gonna add up. Talking with potential renters, reviewing lease agreements, all those different things.
But there’s other ways of becoming a real estate professional. If you own your own business and you’re a real estate agent or broker, that’s probably gonna qualify you. If you’re a contractor and you own your own business, those hours working in real estate are gonna get help you get to real estate status, so again, this is where you need to understand the rules and talk with your tax advisor.
Jason Hartman: And a lot of our clients, what they do is they just keep an Excel spreadsheet in their computer and every time they come to one of our seminars, they write that down and the time. So no more criticism about my seminars being too long.
Peter DeGregori: Right and I’ll just give you one last example here. I have a couple clients that are under IRS audit under this exact issue and one of the ladies said, hey, you know what? Maybe I’m just gonna let the IRS win. It’s gonna just be a waste of my time for me to pull together all this information. Now I didn’t like to hear that because I want clients to get the benefit. So when I briefly told her if she let the IRS win, it was gonna cost her about $20,000.00 in taxes, she decided that it worth it for her to go through and pull all the information.
So look it, it’s easier to do it and write it down when you’re actually doing it. So go and write it down, put it in a logbook, put a brief comment, example of what you were doing, and that should be enough support. Much better than not having one, and in this case, this lady didn’t have a good enough logbook. It was impossible for her to get the hours, which is only one property. So consider if you have enough properties and consider if you are truly a real estate professional.
Jason Hartman: All right, I’m sure that was helpful to you hearing about the real estate professional status and we have a lot of stuff coming up on taxation, on creating wealth, on lease options as a way to improve your cash flow in your rental properties, and just a whole lot more coming. So keep on listening to future shows. Now let’s go to our client from across the pond as they say and welcome Richard Lillycrop from England.
We wanted to do something kind of different today and talk to one of our clients from overseas, so we’ve got Richard Lillycrop on the phone. Richard, welcome.
Richard Lillycrop: Oh, thank you, Jason. It’s good to speak with you.
Jason Hartman: Good to speak with you, too. I know you’ve been a podcast listener and we appreciate you listening, and we’re particularly fascinated and wanted to have you address a little bit the subject of why you were interested in American real estate and maybe the issue of the exchange rate and so forth.
Richard Lillycrop: Okay. Well, basically, it comes down to figures simply. The rental returns here in the U.K. are pretty short compared with some of the properties in the U.S. You can typically get like a double rate of return and the property is half the price.
Jason Hartman: That is really amazing. I’ve long felt that American real estate is really in many areas, not in, of course, the overpriced bubble markets, is still really a bargain when you look at it on a global scale. That’s interesting that you noticed that. How did you happen to find us, by the way?
Richard Lillycrop: Probably middle of last year, I was listening to quite a few business and investing podcasts and I’d done a real estate search and basically, your podcast came up. I’ve aft listened to a few. I registered on your website and that’s when Gia called me back to discuss what I was interested in buying.
Jason Hartman: Excellent. Well, we’re glad to have you as a client. Now, you’re on the pound, so you live most of your life in pounds, not Euros, right?
Richard Lillycrop: Yeah, that’s correct, yeah.
Jason Hartman: In England, are the mortgages denominated in pounds also, because I know many European countries, even if they’re not on the Euro, they denominate mortgages and larger assets in Euros sometimes.
Richard Lillycrop: Yeah, everything in the U.K. is pound.
Jason Hartman: Okay, great, and so how has that exchange rate changed for you, Richard, over the past few years?
Richard Lillycrop: Well, I can remember when I was younger going on vacation to the U.S. and it was probably about one and a half dollars to the pound. Recently, I’ve seen on the news it’s like $2.1 to the pound. It’s a pretty amazing exchange rate at the moment.
Jason Hartman: Yeah, and you know, I think that’s actually going to get even a little bit more favorable for you, unfortunately for us in ways.
Richard Lillycrop: Yeah, I’m wondering how far it’s gonna go.
Jason Hartman: Our government, as you know, has been extremely irresponsible with their spending and the only way to sort of get out of this mess is to devalue the dollar, the currency. That seems to be the only way out really.
Richard Lillycrop: Yeah, yeah.
Jason Hartman: So the rental returns are about double in the states. Have you looked at other countries as well as the U.S.?
Richard Lillycrop: I haven’t actually. But there’s been a lot of hype recently here about Eastern Europe, Romania, Bulgaria, but I haven’t really looked at those markets. I like the U.S. because it’s, for one, the size, it’s just so big and established. And it’s just so stable as well.
Jason Hartman: Right and the legal system is so transparent here. I don’t know, Richard. Did you happen to catch the podcast I did on my Eastern European tour?
Richard Lillycrop: I did, yes.
Jason Hartman: Yeah, I don’t know what you thought of that, but I felt that Romania was probably the best out of all of those, but still speculative.
Richard Lillycrop: Yeah, I think there’s some big gains to be made, but you’ve really gotta be brave to give it a try.
Jason Hartman: That’s a good way to put it, brave. Brave and know what you’re doing, and a lot of management attention because I heard lots of stories about corruption and payoffs and that sort of thing over there, so.
Richard Lillycrop: Yeah, my reason for choosing the U.S. as well was also the language.
Jason Hartman: Yeah, that’s a good thing. Of course, you speak English better than we do, by the way.
Gia Jurevich: It sounds so much nicer.
Richard Lillycrop: I think we’ve been doing it longer.
Jason Hartman: I love it when you call a company and they have a British person answering the phone or on the voice mail. It sounds so classy. It’s wonderful.
Richard Lillycrop: Oh, well, the American accent is just as good for us, believe me.
Jason Hartman: Really, wow, okay.
Gia Jurevich: We don’t have the accent, right?
Jason Hartman: Yeah, we don’t have an accent. Gia has a question for you.
Gia Jurevich: I just wanted – you know, you mentioned the rental rate was different. If you can just give us a comparison, because you purchased the house in Austin.
Richard Lillycrop: Yeah.
Gia Jurevich: What was the price of that property?
Richard Lillycrop: $171,000.00.
Gia Jurevich: And what rent are you getting on that?
Richard Lillycrop: The rent is $1,250.00 a month.
Gia Jurevich: So you’re saying a property that price in your area would be about $650.00, half that. Is that what you’re saying?
Richard Lillycrop: Yeah.
Gia Jurevich: Okay.
Richard Lillycrop: Yeah, I can give you an example. I’ve got the first property I bought – it was a couple years ago now – where I bought it for 119,000 pounds, so I guess $230,000.00. And I’m getting 525 pounds a month.
Gia Jurevich: Wow.
Jason Hartman: How much were you able to borrow on your U.S. purchases, Richard?
Richard Lillycrop: I could borrow up to 70 percent.
Jason Hartman: Okay.
Richard Lillycrop: I had to put a deposit down of 30.
Jason Hartman: So 30 percent down for a foreign buyer and that’s good. You still get a lot of leverage, and remember: one thing we always say is denominate your debts in dollars or any other depreciating currency and denominate your assets in hard assets like the real estate, the property, the commodities within the structure of the house sitting on the land.
Richard Lillycrop: Right.
Jason Hartman: So that’s a good thing. And how did it go in terms of getting your property rented in Austin. Austin was the first one you bought and I know you’re doing another transaction through us as well in Ohio.
Richard Lillycrop: Yeah, I found Austin to be very quick. The property closed November; middle of November last year and it was leased by the middle of December, so basically, one month from closing.
Jason Hartman: Yeah, good, so that was really fast. What interests you about real estate as an investment vehicle?
Richard Lillycrop: I think it’s fantastic. Basically, you put down what is a small percentage of the property costs. The bank then lends you the rest. The tenant pays your mortgage for you, and with every pound or dollar of it, the property goes up in value. It’s basically yours.
Jason Hartman: Isn’t that great? I mean there is just no better equation than the – I always say that real estate is different because it has special characteristics and as we’re talking now, Richard, I’m sure you’ve looked at the financial markets today. It seems like we’re in a big mess as far as the stock market, and I don’t think that’s going to get much better any time soon.
Richard Lillycrop: No, I saw your mortgage rate came down today, your interest rate.
Jason Hartman: Yeah, and you know what means, don’t you? It means more inflation and devaluation of the dollar and so that 70 percent loan you have on that Austin property and the next one for your Ohio property keeps getting cheaper to pay back. It’s a great deal, yeah.
Gia Jurevich: I have a question for you. Had you looked into working with other investor networks and if so, how did Platinum Investor Network differ from those?
Richard Lillycrop: I haven’t done too much with other networks. Basically, the three properties I have here in the U.K., I’ve done the work myself with the inter markets and stuff. I did have an off plan investment, but didn’t actually go through last year. But basically, once the company farmed me out, I didn’t really hear anything after that. I was just left on my own.
Gia Jurevich: Oh, I see. Okay. So would you recommend Platinum Investor Network to your friends and relatives?
Richard Lillycrop: Yeah, totally. Yeah.
Gia Jurevich: Great.
Jason Hartman: Good. Well, thank you.
Richard Lillycrop: Yeah, starting from the initial market recommendation from the sales to choosing the property, right through to the leasing process with the property manager, everyone has been just totally professional and the communication is excellent, especially you being such a long distance away.
Jason Hartman: That’s what’s so great about today’s world. Email and the internet makes it all so easy, doesn’t it?
Richard Lillycrop: Yeah, totally, yeah.
Jason Hartman: Good.
Richard Lillycrop: Yeah, but the communication has been just fantastic. And even after leasing the property, Platinum Properties kept in contact to check that everything’s okay.
Jason Hartman: Excellent. Thank you for your kind words on that, Richard. Are there any things you’d like to see us do differently or any services we should add?
Richard Lillycrop: That’s a tough question, really. I don’t know if I’d change anything. Maybe the only addition would be like a tax advisor as part of your group, someone you could just speak to who would know just the basics of like the number so investor questions and someone you could just fire questions to.
Jason Hartman: Oh, yeah, that’s no problem. We’ve got that already. Karam and Gia will get that for you after we’re off the call here. We’ve got a couple different advisors that can help you there.
Richard Lillycrop: Okay, excellent.
Jason Hartman: Richard, I think that this is really one of the best things for foreign investors. I think that the foreign investors have a real leg up on buying American real estate in undervalued markets where the land is really cheap and where you’re borrowing the money, the currency is devaluating. We think it will continue to devalue a lot more and it’s just a great thing for you. It’s kind of like you’re arbitraging the currency, but you’re doing it with the bank’s money mostly, or at least 70 percent is with the banks. And then the tenants’ money paying the bank back for you.
Richard Lillycrop: Yeah, exactly, yeah.
Jason Hartman: So it’s a good thing. Any words in closing you’d like to mention about that or anything else?
Richard Lillycrop: I guess just a quick comparison of the two markets. Here in the U.K., the land probably makes up over half of the total value of the property, so it’s pretty lucky to be able to buy the property pretty much cheaper, or the land effectively so much cheaper in the U.S.
Jason Hartman: Right and I’m sure you’ve probably listened to the podcast we did on the risk evaluation model where cheap land lowers your risk dramatically and expensive land becomes much more speculative and risky.
Richard Lillycrop: Exactly, yeah.
Jason Hartman: Good, yeah, that’s a good thing to notice. Well, Richard, thank you so much for being on the podcast today. I’m sure our listeners all over the world will appreciate your thoughts and your perspective on it, and we appreciate –
Richard Lillycrop: That’s okay. Thank you. Thank you for having me.
Gia Jurevich: Thank you, Richard and we will definitely be in touch.
Richard Lillycrop: Great. Thanks very much.
Jason Hartman: Take care. Bye-bye.
Richard Lillycrop: Bye.
Jason Hartman: Thanks so much for listening today. Stay tuned for a few announcements and happy investing.
Hey, I just wanted to announce a couple of quick things for you. I’m here with Area Manager, Karam and if you’re looking for positive cash flow – yes, you can actually do that with only 10 percent down. Quite an amazing deal to do in today’s market and remember: the interest rates are getting a lot lower right now, so it’s a good time to be locking them in so that you lock in your cost of borrowing for the next three decades. Karam, tell us about positive cash flow and rent guarantees in Columbus, Ohio.
Karam: Well, Columbus, Ohio, we have a builder who is very, very creative. What he did was he went ahead on all these brand new single-family houses, townhouses, and condos. He’s guaranteeing six-month rent. Not only that, he is going to pay our investors the homeowners association fee and the management fee for two years. And what that does is, with 10 percent down, you get anywhere from $100.00 – $200.00 positive income before even the tax benefit is considered.
Jason Hartman: Wow, that is really phenomenal. That’s gotta be one of our very best markets in terms of cash flow, so excellent. Anything else you wanna say about Columbus, in general?
Karam: Well, the economy is booming there. There are several major corporations headquartered there. University is big, so a smart workforce, low cost of living. That attracts a lot of investors there.
Jason Hartman: Okay, Karam thanks for updating us on Columbus, Ohio. Great market.
Karam: You’re welcome, Jason.
Jason Hartman: If you are interested in a Platinum Properties Investor Network franchise in your area, we are now approved for franchising in 18 states. Please visit www.jasonhartman.com and click on the franchise link and fill out the short application.
If you are able to come to one of our live events, we would love to see you and meet you in person. We’ve had people fly in from all over the U.S. for them. So hopefully, you can join us for some of those events.
Also, remember our rental coordinator is here to help with your rental properties. If you need assistance with your rentals, your property managers, your advertising, remember we’re here to help and we stay with you through the life of the investment. So feel free to call our office anytime and ask for the rental coordinator for assistance on your rentals.
Also, if you are interested in career opportunities with us, our company is growing quickly and we would love to talk with you about career opportunities.
Also want to remind you, listen to our old podcasts. At least go back to podcast No. 13 forward and listen to all the podcasts after that. You’re welcome to listen to all of them. The ones before No. 13 are older, but they’re also good, but the newer ones are No. 13 and forward, which are really good ones to listen to, so please take advantage of that.
Be sure to see appropriate disclaimers and disclosures on our website at www.jasonhartman.com. Remember that we are not tax or legal advisors. So give us a call on any of these issues, and remember, we are here to help, and we will look forward to talking to you on the next podcast.
This material is the copyrighted creative work of either Jason Hartman, the Hartman Media Company, Platinum Properties Investor Network, Incorporated or the J. Hartman Company, all rights reserved.
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Duration: 44 minutes