Crowdfunding Real Estate in the European Union with John Corey

Full Transcript

 

John Corey  0:00  

Just pay those puppies off and wait, let the tenants pay them off. The tenants will happily do that if you give them a clean, decent place to live. And when they want to move on, they move on and you get someone else. So they get flexibility data shelter from the, from the world, you get your bills paid off, and you play the long game.

 

Taylor   0:19  

Welcome to passive wealth strategies for busy professionals. Today, you are going to learn about crowdfunding in the UK and the European Union. Today, our guest is john Corey, who came from a tech background got into the more financial side of it. And now he lives in London and then other places around the world, investing in property in a wide variety of markets. 

He invests using crowdfunding, he's got experience in that he's going to teach us the important differences between crowdfunding in the UK and the EU, compared to how we do it here in the us when we pull money from passive investors by Hey, syndication, there are some important differences over there that you're going to learn about, you're going to learn some of the keys that have enabled John to take his career from working directly with Steve Jobs early in his career now to being a location independent entrepreneur, and investor and just being very successful around the world. 

This is a really information heavy episode, you're going to learn a lot of important lessons that you can apply both in your career and your real estate investments. And I hope you enjoy this one. It's a bit of a long one, but it will be absolutely worth the ride. Thank you for joining us once again. Now here we go. John Corey, thank you for joining us on passive wealth strategies today.

 

John Corey  1:50  

Happy to be here.

 

Taylor   1:51  

You have a very life, you've done quite a few things. Can you walk our investor our investors? Can you walk our listeners through what you've done where you are now, and how you're living your life?

 

John Corey  2:06  

Okay, so there's sort of two tracks, I went to university graduated with a degree in computer science. And that was in 1982. I then went out to Silicon Valley worked for EULA Packard. And for the tech people in the room, this might be interesting. I'm one of the authors of HPC Unix standard. 

So rather, the definition of what the Unix product line is for HP, along with a bunch of other people. 1982 is paid to be online to as part of that exercise. I then after eight years at HP moved on to next, which was Steve Jobs, next company after apple. I was there for three years through a series of management changes, I ended up working directly for Steve for a year. Among other things, I met people there that you might know or people that did create software that change the world. And you're all in using it.

I can go into little tangent about Bill. When we think about Steve, he, there's a Stanford University talk and he talks about how when you look backwards, you can connect the dots. Well, there's a couple things about that. That's true, which is also a way of saying you can erase the dots are over class over the dots that aren't part of the story that people want to hear. So you learn how to tell a story. And if you have enough interesting things, and you can be sort of selective about the bits you share. So in this whole time, so that would have been three plus 811 years. 

After about a year when I was first starting up to 1983. I read a book called nothing down. I did a two day one evening. Free seminar didn't realize there was an upsell. The guy kept talking about you know, there's three ways sorry, there's seven ways to do this one going to cover three tonight. Like what about the other four. 

I liked what he said it followed largely what was in the book. And sure enough, myself and Amex decided that was smart for me to go to a weekend seminar. So I bought the weekend seminar Saturday and Sunday had to drive up to San Francisco. Now let's put this in context. 

There's no Google Maps. I live in Montecito, which is next to San Jose, which is below Cupertino where I worked. And I had to get to San Francisco for 830 or so start at the hotel. I've never been to a city. I knew where it was, it's 70 miles away. 

But I had to actually use like a physical landline phone because there's no cell phones to call the hotel to figure out well, what's the parking situation? I had to then figure out where the paper map. Okay, what do I think this is going to take me to get up there. I couldn't put it into Google. 

The Google guys hadn't been born yet, probably. So I go up and I take this class Saturday, Sunday, there's probably 20 of us in the room. And essentially, I'm paying a few hundred pounds, basically just under $5. Because I do live in the UK. But this isn't dollars. It's about $500. Now that I remember, right. And it's really just a blown up more detailed version of the book I read that cost me like $10. But anyway, it was fine. By Sunday, I figured out I can actually do this. So I remembered in my mind that the next amount of Serena is Los Gatos, bottom of the hill miles away.

Monday morning, I'm going to walk down there to see the real estate agent, I figure if I can find the office, because I'm pretty sure there is one. And my boss doesn't expect me in right away Monday morning anyways, because rather well train when it comes to the bus. I go down, I walk into Monday morning, if you're from the US and you understand real estate agents, the top person doesn't work Monday mornings for any walking trade. So I get the sky. Nice enough guy, but he was probably not the top person. 

He starts talking to me. And I talked to him and I answer some questions. And he says, Well, let me look in the book. And he pulls out the MLS, other he pulls out a book, it doesn't get on the computer. He gets out a book. He was old enough that he liked the book better. He finds three properties that he thought fit the criteria based on the interview with me. He said, Would you like to go see him? I said, Sure. We jumped in his car, we got CYN, we got CT, because the three third wife said actually I sort of like this one in San Jose, down by Santa Teresa, which is where the IBM facility is South San Jose near Gilroy. 

She said, Well, would you like to write it up? I said, Sure. Because I've been to the weekend course you're supposed to do this. So we go back to the office, we fill out the form, we write it up, I figure grandma can help out a little in the down payment that my cousin called MasterCard can help with the rest.

 

John Corey  6:50  

I drive into work about two o'clock, having signed the offer form. And about five o'clock, I can't quite remember, the agent calls and says you're now the owner of the house that they've accepted the offer. So we just have to go through the normal escrow process. And that's how I bought my first property. 

It turns out between the tax benefits and everything else, I could buy a house and rented two bedrooms to complete strangers who I found through a physical newspaper ad that was going to cost me less than renting a bedroom and a house that I was renting minus three now. 

So here I am with a better position and I'm an owner. So these days, we call it maybe house hacking, whatever we want to call it, the hadn't even invented house hacking, there was no such thing as bigger pockets. In fact, there was no such thing as the web. So none of that stuff existed, you had to go to physical meetings.

But those two careers continued. I ended up moving with Swiss Bank Corporation from Oregon where I was then living later, probably this probably 15 years over to switch back cooperation London, work till the London office continued on properties in the US started buying a property in the UK. 

And these days, I'd like to say a property from Hawaii, to Bradford, England, or say London, if you want to know that, you know London is London time zones between them. Mostly nothing that I own in between them. But a few here and there. based on where I've lived, it worked. And that's sort of the tech property story without all the sexy bits.

 

Taylor   8:30  

Well, I mean, the first house hack before it was called house hacking, that is a great way to get started, especially if you're somebody that doesn't have a whole lot of capital to invest, if you can make that initial down payment. There are even a lot of options today, to do that 3% 3% 5%. In

 

John Corey  8:50  

this was a 5% loan, with deposit down payments of 5%, the bank was providing 95, the interest rate was 10 and three quarters percent interest in it changed monthly.

 

Taylor   9:03  

Yeah, so that is the other part of this equation. Back then it was a completely different world in terms of the debt that was available. And the rates, it was available at what were some of the other details on that loan.

 

John Corey  9:21  

So it was a negative amortization loan, and that each month the interest rate could change. But the payment, physical payment amount was fixed for 12 months, and then it would reset once a year. And if the interest rate cause the rate that that's because the payment that you they would want you to pay to be higher than the contract about then they would just add that to the loan balance. 

So you could actually see your loan grow month a month rather than go down. Otherwise, it was meant to be a fully amortized loan. In my case, I took the view, I just keep up with the extra payments if I had to. And I can't remember what happened some months, but as such, it was fine. That was competitive interest rate at the time. And the 95%. down it was it was a portfolio lender. So it was not a Fannie Mae, Freddie Mac, FHA, anything like that was literally lender that was holding on their books. 

That was essentially the prevailing climate, I mean, inflation rates had been a lot higher, and we had the crash of the late 70s. The some buying what 83. So we're coming out of essentially a housing crash. Now here's the funny thing, by the way, too. I say housing crash. So there were parts of the US that had experienced negative growth or falling prices. But historically, from 1947, I think it was till 2007 or 2008, the US as a national market, it only ever seen rising values, with one year that was flat. 

There was like 67 appears in one year flat. But yet within the local market, you can have housing corrections, you could have housing crashes, Southern California had two or three over that same period of time, at least, the Texas area and everything fell apart in the 80s. So one of the problems when you think about property investing is people hear stories, and a lot of the details left out. And it sounds very different. Or it sounds more positive, it sounds more negative. It depends on how the person's trying to tell the story. But if you drill into the data, you might find that the reality is very different.

 

Taylor   11:32  

Hmm, absolutely. So, you know, times have really changed, we're at a completely different debt environment right now. And you're working on a new type of investing with investors, that is unique to the European Union, from what we do here in the US and what is legal here in the US. So can you walk us through what you're doing there the whole situation with your crowdfunding efforts?

 

John Corey  12:05  

Okay. So crowdfunding globally has sort of four main models, there's just a straight up donation, or there's when you buy things in advance, whether it's tickets, whether it's at future watch design or something. And those two, ticket sales or product sales, or donations are not regulated, generally anywhere in the world. There may be some fringe countries that have issues, but otherwise, they're unregulated. When you get into offering a financial return or financial reward, whether it's a loan based type structure, or a share based startup type structure, those are regulated, those are essentially in the US would be the SEC in the UK, it's the FCA, which stands for the Financial Conduct Authority. 

The FCA in the UK in 2014, came up with a framework for crowdfunding. So you can either borrow money, or you can sell shares. So I'd like to say debt or equity, so you can raise debt from the crowd or you can raise equity from the crowd. And in particular, some of the platforms that have become authorized under this legislation, are focusing on letting people raise money for their real estate deals or their property deals as they generally call it. So people can put up a deal on a platform, they might pay 500 pounds to get the deal listed on the platform. So in today's dollars, maybe six $650. 

They essentially have what I like to say as a single deal IPO, initial public offering. So you are literally offering a piece of your deal to the public retail public, not just the sophisticated, accredited or high net worth public but any member of the public. The FCA is legislation tends to apply across the cross the EU, at least subject to the Brexit issues. So I can advertise, I can bring in investors from anywhere in the EU. Many times the investors are in the UK for UK deal. There may be a platform in France under the French legislation is raising money, that would probably be country centric only because people tend to invest closer to home.

But the point is, it is legal across the EU. So and the other thing that's interesting more for the property investors here is you can also break it down into phases. So if I was buying a property that I thought I could put a larger multifamily property on. So it's a single family house now. And it's permissions, in theory exists, and I'm going to apply to get the permissions specifically to do that on this site. 

Literally, I've run campaigns or participating campaigns or help fund campaigns or design campaigns, where the crowd is funding the paperwork costs, to get that permission to uplift the value of that property, there is no building being done. There's no building, necessarily anticipated by the investor who as the deal under control, they're intending to sell it on to someone else that wants to build it out. 

But they're funding the paperwork to get the value increased. So in the UK, we call this planning uplift and planning game. And the in the US you would say zoning in the UK, they would say planning. So you're asking for a zoning change, in a sense, if you're in the US, and if you get it then that asset might be more valuable. Problem building becoming condos, that sort of thing.

 

John Corey  15:37  

Yeah, that's a

 

Taylor   15:38  

common strategy here, at least with land is buying raw land and then having it re entitled or entitled to say, you could turn it into a subdivision and build a bunch of houses on it or something like that. And correct. 

Very common strategy. So what are you finding? Is like is they're a dominant? As far as real estate investment go? Is there a dominant strategy amongst that crowdfunding? Those crowdfunding platforms? Are people doing everything? And what do you think is the most successful type of real estate, that could real estate investing net could use this as a tool.

 

John Corey  16:22  

So I would say that, based on the UK so far, and my experience with it, and I've guided some people in how to put together their offers, so I have a reasonable Okay, being British here. So in America, I have a great understanding how this works. In Britain, I would say I have a reasonable understanding. 

The sweet spot is shorter projects, 18 months, two years, maybe slightly longer than that, but nothing more. People want to be able to get in and get out. It's like an early date, it's not marriage. So I'm interested in your project, I'm interested in getting their money back, I'm happy to have my money locked up for 12 to 24 months. But then I want it all back. I'm not into not buying cash flow, not investing for cash flow, it tends to appeal to people who are interested in being property investors themselves, and they just can't find a deal. Or they have a bunch of deals, and they have a bit of spare cash.

This is a way of investing spare cash, or they think they might want to do their own deal in the future. And they're learning how this works. So one of the easiest ways is to learn how to work as being an investor, see what the investors receive, see what the information is, see how the documents are organized, see on the shareholders agreement or the loan agreement set up. And then if you ever want to raise money yourself, now, you know, because you bet on the other side. 

I'd like to say there's a term mismatch. Anybody they wanted, like 30 year financing, you won't find many investors interested in providing it. There interested in short term stuff. So you have the person for the project was long term, the purse with the money one short term. So the projects that do the best are the ones where the developer can either created different phases, and they can fund one phase exit those investors with the next set of investors exit those investors the next set, or they have a flip, they want to buy it, they want to fix it, they want to sell it, they're going to be in and out nine months. So they raised the money with the proviso they could run a little late, but it's a short term deal.

 

Taylor   18:30  

So what do investors you mentioned the they want a short timeframe? As far as returns go? What are they typically looking for in this crowdfunding strategy.

 

John Corey  18:45  

You can go to some sites in the UK. And if people want to get in touch later, I could give you specific URLs. So it's a way of just looking you wouldn't necessarily be able to invest because a lot of the platforms specifically exclude my reckons there's some tax reporting issues. But you can at least see the information at the headline, the returns vary quite a bit. So if I was asking you to co fund or put up some money to obtain planning change, or zoning change, I would probably be paying you 40 to 50% return on your money. 

That's essentially for what would be a one year project. So for zero to five, zero percent. Now, why could they afford to do that? Well, as an example, there was a project that was raising 40,000, they had already put in a bunch of money themselves, they wanted to obtain permission to build a small development of essentially what you would call condos. And if they receive  permission from the local government authority to build that complex, the uplift and value from what they were able to buy it, they had an option, and they were got the uplift of WB about 300,000 Sterling. 

If they raised 40, and they had to pay a 50% return, that means they needed to be able to pay back 60 or pay a buyout the shareholders at 60. So the rest of that 300 minus to 60 would be their profit. So they could easily pay that type of return. Because the uplift was very good. When you're developing something that produces only a 20%, total return for the whole project, you probably can't pay anywhere close to 20% for very much of that money. So it tends to vary quite a bit. I've seen offers that have been in the 6% range, secured first lien, I've seen offers that are 40 50% for planning, where if the opportunity doesn't go, Well, they don't get permission, you would actually lose 100% of your capital. So

Taylor   20:55  

yeah, the risk adjustment to that return is a pretty substantial when you consider it could go to zero pretty easily.

John Corey  21:04  

Yes, you and one of the things you do is you.

John Corey  21:09  

So in the UK, capital is at risk is the standard one in which means that there's no guarantee at all. There's no government backing, there's no way that anybody is protected from a complete loss. But what individual investors can do is you do your due diligence on the project. You do your due diligence on the actual team, have they done something like this for? Do they know what they're doing? 

Do they have the outside consultants that are needed or whatever for the project? You also then say, well, let's now if I have 1000 pounds only, or 1500 dollars only, let's divide that over a few projects of the same type maybe. So if I like the 40 50% return from planning, well, I'll not put it all in one, I'll put 100 pounds and 10 of them or 1500 hundred $50 and 10 of them. So then that way, if a team screws up for planning officer or government council person says No, you haven't lost all of your capital. And if you say three or four, those go badly, and five or six of those go well, and you're making 50% return on the ones that didn't go well, that papers over the ones that you lost money on. So you end up still in positive territory with the blended return that is much more appropriate.

Taylor   22:30  

Wow. So I mean, that's incredible, those returns are huge, and then could also be not very poor, non existent. One of the, I suppose issues that I see with this structure, the strategy is, it can be very open to prod for lack of a better word, you know, how do you know that the better sponsors for I don't know what the term would be. 

But deal sponsors, how do you know that they're going to put their best efforts in, they're not going to, you know, hire their brothers law firm who's going to do a poor job just so they can get it? I don't know, any of the things you could think of that could make the deal go badly, just so they can walk with the cash. I mean, how are investors protected here.

John Corey  23:23  

So let's be blunt investors are not absolutely not protected, they have to do their own homework. Now, there's a reputational risk to the actual person that has the deal. If they trying to do deals over time, they want to, as much as possible do their best job right. At the same time, they can't predict when planes are going to crash into buildings, they can't predict when the weather is going to go bad. 

Or the lorry, which is in the UK language for truck is going to tip over and materials are going to get destroyed, or someone falls off a ladder and gets hurt. So you have to look, look at the complexity of this. If anybody's investing in a flip, all kinds of things can happen and screws up your flip. What the passive investor can do is the following. Put very small amounts in and test them out. They give it as dating, this is a first date, you're not going to have grandkids on the first date, you're going to have a coffee, you're going to chat, you're going to figure out whether you like the person, do they communicate? Do they call when they say they're going to call? Does the investor send you updates? 

Like they said they were going to send you if something went wrong in the project? Does it make sense that it happened? And did they do what was appropriate to try to mitigate the problem? Understanding that there's they don't have a crystal ball so they can anticipate everything? Do they keep the insurance payments up so that if there was a fire, at least the insurance paid out, eventually that sort of thing? So anytime you invest in a deal yourself, you absolutely have these risks? 

What would you do to address those risks? Is this other person who's running the project doing what you would do? Are they listening? If you ask questions, do they have decent responses. And if you put in $100, you can afford to blow it to find out if they're a bozo. And this is the cost of maybe checking them out. It's a cost of a first date. If you like what they've done, the tracker seems good. The team is solid, because by the way, you want a team of people on the project, someone's going to get hit by a bus, someone else is going to take a holiday or get pneumonia or something stuff happens. 

So you spread out the risk of that by having a wider team is spread out the risk of any one project going poorly. They had a problem in Britain, they dug up a site and found a king who had been buried. Now it's an archaeological a significant site, it's all shut down for six months, where they figure out how they're going to move the king. It's like, You gotta be kidding me if you get alone in that it's going to be killing you. But it happens. So you put 100 and this I did not do five or six or 10 of these. 

You listen, you pay attention the people who do a good job who seem to be on the ball, say Okay, next time I'm going to put 1000 in or something, you know, you you very again, I like using the dating analogy. First day, second day before we get to discussions about possible marriage, discussions about grandkids and university education. know there's an order to these things. And the biggest mistake passive investor would make is to dive in too deep, too fast. Particularly people that have a bunch of money, it's like, it's better to have the money in the bank earning zero than it is to have a bunch of it in the hands of a bozo. You want to check these people out?

Taylor   26:43  

Wow, could you say that one more time? I gotta get a clean take. I let I laughed over that. Because it's an awesome quote. I love it. Could you repeat that?

John Corey  26:53  

Too many people worry about the money's not producing. So I say it's better to have the money in the bank earning nothing, but you still have it. And it is to be in a rush to put your money into the hands of someone that you haven't checked out and they turn out to be a bozo and they lose your money.

Taylor   27:09  

Nice. I appreciate the second go around on that I wanted to have some clean audio there. So we have that for later. I really like it can these. These By the way,

John Corey  27:20  

let me go a little further in the so friend of mine. One of the things I didn't mention was when I worked at the when I worked at next I was running the project at IBM I was a team manager for our next and I had a counterpart at IBM and was a joint project. And one of the people I got to know there was summer higher. He was a student at Stanford. And he and I stayed in touch things moved on. He went and did an advanced degree. My he came back to Stanford as a student after getting his advanced degree somewhere else and was working on his PhD I met him before headed off to Britain in 1994. We went down to computer science lab, he shows me this thing it's called the browser was one of the first browsers known demand. And now, complete tangent is by the way, the web was invented to justify buying a NeXT Computer. And I can add a few on. 

It's in Tim burners Lee's book about why he came up with the web because he wanted to get access to build software. So anyway, I see this demo browser, things move on some more. There's a few other companies involved, I bring the person into work at Swiss bank for a bit, just a tiny bit. And some other things happen. But anyway, he calls me up one day and or somehow reaches out and asked me if I could beta test some software for a company he's now with. He's a co founder.

The company created an online platform for business professionals. So he's one of the co founders of LinkedIn, and I was a beta tester. And jumping forward from the birth of LinkedIn till now, more recently, we're talking about how can we do more transactions over the internet? And one of the big hurdles is trust. So how do you trust a person that you've never met? Never mind, trust people you have met? 

And what can you do online, to substitute the fact that you just don't have FaceTime with people and all the rest? So he and I have been talking about how to crack that issue in the space of the real estate investing area of like, how do we engender trust? How do we build track records? How do we build reputation so that people can fund their deals and fund the deals legally following the necessary regulations?

Taylor   29:41  

That I mean? That's a huge question. I mean, how to, I mean, we have bigger pockets out there, and people maintain their reputations and get the word out about themselves through bigger pockets. That's how we got in touch. I mean, I guess that's as closest we have to LinkedIn for real estate investors.

John Corey  30:05  

Yeah, and I would say that LinkedIn and bigger pockets both failed to even try to solve this. So this is looking at the problem differently, and assuming that those platforms exist, but then how do you actually build a reputation that can be verified?

Taylor   30:21  

Hmm. It's a big question. I don't know.

John Corey  30:24  

I don't know the answer to that. I mean, I've seen some of the online forums where individuals are talking about a game than they have ever done. Whether they are significant on a platform or not, there are other cases where they have multiple personas. And you start to wonder who the hell like the sounds like that person commenting on this person, but I pay the same person.

Taylor   30:54  

I don't know, we don't need to get into any names and sling any money at any

John Corey  30:59  

time, it's,

John Corey  31:01  

or without, it's not about the names, it's more about the environment in which this happens. And how to separate the wheat from the chaff or how to create a positive environment for the people that have deals and make it in a way that the people that are more of the rogue behavior, basically, that we suck the oxygen out of the room, so the robes don't have anywhere to go.

Taylor   31:28  

Yeah, so that the cream rises to the top, if you will, and the best people stand out. So that and

John Corey  31:35  

also, so new players have a way to get established, like academically we have a process by which we graduate. And then we go to universities, whatever we get degrees and blessings or whatever they are, that signify that we must know something. So if a person is willing to do the homework they can get there. It'd be nice if there was a more prescriptive process by which people could establish trust. 

Similar to eBay, where people can establish trust. I'm a good vendor, and I've done enough transactions, and you're a real customer, and you've done enough transactions, Airbnb, they're all sort of working for that point of view.

Taylor   32:14  

Oh, yeah. I mean, if I need a, or an Amazon product, and therefore the seller, if they have a three star rating, no way am I going to buy their even, you know, $15 trinket, let alone, send them my you know, 25 or $50,000 Plus, to handle and invest. And we don't even have that kind of system. You know, if I say a five star rating system out there view sister, yes, it sounds like you have something in mind. Are you working on something in this regard?

John Corey  32:47  

It's very early stage. There's an element of using blockchain as a way to publish the information not because we believe in a cryptocurrency but more that we believe in a distributed database that you can then share, and therefore is a little bit hard to fake. And second of all, we take the view that individuals should be able to decide who can see their profile. 

So if you're trying to raise money, and investors are interested, there's a bit of a dance that you and the investors would do to say, Okay, are you credible as an investor? Are you credible as the developer and you know, start to open the kimono, so to speak, so that we can share information? So it's almost like an NDA process. Without the idea of an NDA, it's more of a digital process to let people see information.

Taylor   33:38  

This is an interesting idea. You said it's an early phase of the process. Is it? Is this something you have a maybe a target launch date for? Do you have a prototype in mind that maybe you don't have one working now,

John Corey  33:55  

there's, there's no target date, at this stage, there's a white paper there was done for the general principle. And there's been a couple of the companies that have nothing to do with what I'm talking about, that are using some of the same concepts with the same individual that I'm working with. Because it, you could argue that there's possible test cases or solutions in different domains. And what you might want for real estate investing might be slightly different. One of the positives, the real estate investing field is a long history

John Corey  34:26  

of online forums.

John Corey  34:29  

I started online in 82, there were online real estate forums and 82, that are bigger pockets. They weren't, you know, what we think of today's a Facebook forum, but there were of that time, something and it's evolved since then, the first online website for real estate that had a forum was care online. Now, that's sort of been surpassed and passe now, but ultimately, the idea that people share information and best practice and get to know each other, maybe meet up at events or do live sessions like this. So you could argue that blogs and podcasts are also a different type of medium for the same thing.

Taylor   35:13  

It's a similar idea. I mean, we're getting the word out there about what we do and our experience and yeah, man, we're not. We're not publishing reviews, or anything right here. But we're getting our name out there talking about our experience. And

John Corey  35:32  

yeah, one of the little tangents, and then we can get back maybe on topic if you want. In the early days, when I was online, we only had text, we didn't have images, we didn't have sound, we didn't have any that we had text. And supposedly 7% of what a person communicates is in the actual words that the words they choose to use the word I'm literally the words I'm saying are the words I type. 

The next chunk or increment is tone, this no tone. In written words, there were no emojis back then this is back before emojis. So there is no tone. In the words, it was very easy to misunderstand what someone saying, if you only have 7% of the full bandwidth. So 39% is tone 50 something percent, so more than half his body language. 

And we all know this, because we're told that if you hear something from someone, but the body language doesn't match, ask them like, okay, you just said the fine. But from your body language, I don't think you really mean it. Or there's something else going on? Or are you okay? Or is this something wrong? 

So we're, we're as human beings, we're trained to pay attention to body language. So how do you get more of the richness? If you can't have body language? Well, maybe you can with video. If you can't get tone, well, maybe you cannot podcast, if you have written words, contracts, did they deliver? Yes. So know, how much money went in? How much money came out? Can I see that data? Okay, well, now we have lots of artifacts to build trust with.

Taylor   37:03  

I mean, that's a good point about the audio and video, you know, the first time you meet a podcaster that you've been listening to for years, it feels like you know them, but they have no idea who you are. But, you know, you've had an inside view on their life and their thoughts for potentially years sometimes. So it's a you do really feel like you know, the people that you've been listening to

John Corey  37:33  

crack know, if words and tone definitely a visible and podcasts. And it but it is, as you said, broadcast, so you get as the listener? A lot of benefits, but they don't know you.

Taylor   37:44  

Yeah, it is. I've had you know, even though short life of this podcast, I've had people who have listened and I've never met, but then I meet them in person. And you know, they know some stuff about being a Michael, did I talked about that? Oh, okay.

John Corey  37:57  

Yes.

John Corey  38:01  

I know the experience. Yes. And I learned it from running concerts at University where I would have a few hundred people working for me at a concert of the next week on campus. people greet me, as if I should know them. Well, technically, they worked for me. So I probably should have known them. They only work for me one night maybe? And is like, okay, they all know me, but I don't know them. Okay, I gotta get over this.

Taylor   38:27  

So, while we've got you, I also wanted to ask about these crowdfunding platforms? Can they only buy assets in the EU? Or can they buy anywhere in the world? Can you buy us.

John Corey  38:40  

So the legislation allows the asset to be anywhere in the world, an individual platform might make a business decision to restrict the markets in which they choose to allow the assets to be listed from and that partially would come down to do they think their community of investors would understand? If they're not allowing you, US investors to invest? Does it make sense to have us property available? 

If the UK investors are happy to buy, say, stuff around Disney, which is fairly common in Florida? Then it might make sense. But if it was an apartment complex in Cleveland, a lot of Brits might say, Cleveland, where's that? What's that apartment complex? As an example, by the way, there's no such thing as multi family residential in the UK. It doesn't exist as an asset class the way it exists the US. So the whole language methodology, the marketing, the value proposition would be rather difficult for a lot of UK investors to get their head around. It be kidding it cold, huh?

Taylor   39:45  

You mean? multifamily residential like a while your case of a 50 unit apartment complex or a 200 300? unit apartment complex? Something, you know?

John Corey  39:56  

Yeah, they generally don't have apartment complexes in the UK.

Taylor   40:00  

Wow, I didn't know that.

John Corey  40:02  

Exactly. And this See, this is what you don't know you don't know can be interesting, if someone wants to put in 100, to learn, that might be an inexpensive way to learn. The way I talked about this is, if you're going to go take a weekend course, you're going to spend 100, or 500, or 3000, or whatever the number is, what if you put the same amount into investing in some deals that are focused on the same topics you want to learn. 

So you're going to learn through secondary exposure to the deal. But you might actually get a profit out of the deal, rather than you bought a ticket. And now you've got the receipt from a ticket and nothing much else.

Taylor   40:38  

Yeah, I think that's a great way to go, you know, and we're not talking about 100,000. We're talking about 100 pounds in this case, which is, you know, most busy professionals, hopefully, you know, if you're listening to this show, hopefully you've got at least that much.

John Corey  40:56  

You know, well, if you don't, then you probably shouldn't be taking the course anyway. Because the course is only going to teach you how to invest more than that. And there's no guarantee that the course is right for you or that you're going to have the ability to implement what you're learning. Yeah, absolutely.

Taylor   41:15  

So we're going to take a quick break for our sponsors. All right, John, I've got three questions I asked every guest at the end of the show. Are you ready? Go for it. First question, what is the best investment you ever made.

John Corey  41:36  

So without the say, doing the math, I would say the

John Corey  41:42  

it was a property in the UK in London. I was buying it before it was built. So I put down the 10%. For the property, I bought it, I was buying it because I liked the layout, the location, it was going to be what they would call live work, which meant I could actually you run a company out of part of it, and have a residence and the other part. 

Before the purchase finished. There was some delays because the developer had a problem with the different building on the site was a multi site, multi site, which then extended things for next year, fine. It was a rising market when that happens. So for my 10% Oh, they also then said we have this extra parcel that we thought we're going to need for something else, we don't need it. Do you want to buy it senior on two sides of it?

I said, Sure. So we added that into the deal. And but I didn't have to put any more deposit down. So it turns out that I was in the deal for 10%, it took 20 months instead of 12 months. And it had gone up by I think how much they go up by so went up by it almost doubled in that period. So is quite a rapid moving market. I didn't know this in advance. So it turned out there when I did the math roughly was 1,000% return in 22 months. And I was talking to the venture cap friend of mine, again that you know, the tech network that I have. And I said you know, I had earned about 1,000%. And he said, Well, those are like VC type returns. But you don't have the downside. So then I said, Well, what are you talking about? He said, Well, when we make our investments, a lot of times we end up with zero from our investments other than us furniture, it's rare that when you're buying a piece of real estate that it's going to go to zero. So while you could get wiped out, the point is he thought it was low risk. And I made and I'm earning the same as what they consider one of their home runs 1,000% return in two years or less. So that would probably be the best investment if we skip the whole general commentary about education.

Taylor   43:50  

And yeah, my when those VCs, they blend their thousand percent returns with their zero percent return, they're probably still the good ones are probably still doing very well. But they're not there, their portfolio return is not 1000. Well,

John Corey  44:09  

the the target portfolio return historically. And this is probably not valid today, per se, but in general, is a 25% compounded return. So that includes all the zeros plus the thousands. And when you blend it, and they want to be able to offer 15 to 25. So you may be lowered today, return to their investors because they're basically raising the money from someone else. And they want a blended return over that. And I would say with property deals you can achieve that if you're smart. And by smart. I mean you have to pay attention to your homework. This field does not record sorry, does not reward people who are brain surgeons, their rewards people who pay attention to the details.

Taylor   44:54  

I like that does not reward people who are brain surgeons, It rewards people who pay attention to the details. Now, on the other side of that best investment coin, we have the worst investment you ever made, what is the worst investment you ever made?

John Corey  45:11  

There's been some courses that have been complete throwaways. But I would say probably the worst investment is not exactly an investment, it's actually getting distracted by things. So my profile, if you were to do some psychometric testing is I'm a creative or create tour. And therefore I will be early an early adopter. And I will therefore start out with a strategy. And rather than scaling it really big, I will tend to figure out the next strategy. So my investing activities didn't scale sometimes because I was always off on the next one, or I was spending money on the next strategy. So you could say that it's allowing myself to be distracted. So it's not exactly a financial loss. It's a little hard and a buy and hold investor, which is what I am to lose money only for 20 years, and you bought it reasonably well located, it's going to be hard to lose money. So I would say it's listening to the distractions rather than focusing my time and energy and my money. So it's not a financial loss, it's an opportunity loss.

Taylor   46:25  

The old shiny object syndrome that afflicts so many of us I have to caution myself away from shiny object syndrome on probably literally a daily basis. So I definitely appreciate the struggle there. My favorite question out of these three is what is the most important lesson that you've learned in investing.

John Corey  46:54  

So there's sort of two parts to this property, investing is capital intensive. So when you buy real estate for investment purposes, it chews up a lot of capital and produces a small return. But you can enhance that with leverage or debt. So you can magnify it. The other side of that, though, is you can do quite well if you hold long term. So if you buy and hold and let inflation do its thing, generally the central banks are trying to create a slight degree of positive inflation, which means if you own assets that appreciate because of inflation, then they're almost building in that you're going to end up selling asset later at a higher value. Just stay in the game. So my view there is if you can get 10 properties that cash flow, so that the tenants are paying all the bills, including all the maintenance, everything else, that they pay enough rent to cover everything, so you're not out of pocket every month. 

Just pay those puppies off and wait, let the tenants pay them off, the tenants will happen do that if you give them a clean, decent place to live, and when they want to move on, they move on and you get somewhere else. So they get flexibility, data shelter from the from the world, you get your bills paid off, and you play the long game, which means you got to have a bit of a life while you wait out the long game. So whether it's family, whether it's a career that you enjoy, find something to do with your time. But you'll make more money from playing the long game than you will constantly flipping deals. I've seen a lot of people who just constantly flip and then they wonder why after, you know, a meltdown in the market, they're they're looking at almost where they were a few years ago.

Taylor   48:39  

They don't have a long term vision, we want to have that long term vision. Don't wait to buy real estate, buy real estate and wait.

John Corey  48:48  

Correct. Now to be sort of the other side of it. The the person who really enjoys hunting for deals should hunt for deals, they just have to appreciate that economic, they need to retain a few of those, the people who like to flip, they like to tear it apart and fix it up and give someone a nice place. That's great. And they probably shouldn't be holding all of them. But with crowdfunding, maybe they can, they can let the crowd funded and they can move on to the next one. And the crowd might love those investments. 

If they want to secure their financial future, they want to be passive. They want to have income without having to get out of bed in the morning, they want to be able to take a holiday or get injured on the job and still have the bills paid. They need to be growing some assets. And they can do that with their activities. But they need to hang on to some of those assets to make it work.

Taylor   49:39  

All right, John, I appreciate everything today, all the lessons and exposing us to this, at least from my American perspective, this different way of passively investing in properties, and also bringing passive investors into a deal to help fund it and you know, everything that in a way everything that we in the US are missing out on in terms of crowdfunded real estate opportunities. If people want to learn more about what you're doing, who you are, where they can find you. How can they get in touch? And where are you on the internet?

John Corey  50:19  

So a few things.

John Corey  50:21  

And before I answer that question, sure the US FCC has created legislation that allows you to mimic some of the things I said work well in the UK. Going through the process right now of translating and deciphering and peeling back five of six be five or six see are two ways that you can do syndications. Read a or rich CF, the crowdfunding or public ways that the SEC allows people to, in a sense, do something similar. My assessment right now is they're not quite as easy or as flexible as when I can do in the UK. But I think you can possibly use the legend that does exist in the US. So it's not with it's not like it's close to you. It's just that it's different than what I've been explaining. 

Yep, part of the exercise. And the reason for highlighting this is I will be sort of mapping that out and figuring that out. And I'm working with some other people lawyers to like break it down. Because part of what I like to do is explain things to people, that's part of the creative side of me. So if people want to follow along, and they want to know more, they can go to property fortress, com, that's https://www.propertyfortress.com/, they can book a call, if they go to the Ask hyphen, john, ASK hyphen, JOHN. 

Happy to have a chat, they can get in touch through Facebook, I saw to use LinkedIn, it's not top of my list. But john, Corey CREY is on Facebook, you'll notice on Facebook, there's also a property fortress page from my business. So that might be the easier thing to find on Facebook, john Corey being a little bit common. But I use the same photo across most of the platforms. So once you find the right profile, you'll know it's me because it looked like me across all of them. Hmm,

Taylor   52:11  

yeah, it's a you're pretty recognizable, easy to find. I would. Yeah. Just follow up on your comment about the differences between syndication law here versus across the pond. It appears to me or it sounds to me like this crowdfunding method in the EU is indeed easier than the crowdfunding method, at least here in the US. I mean, I syndicate deals myself, I invest passively in deals, and I bring investors into deals that I'm doing. But we do five to six be so we don't publicly advertise on a website. And my knowledge of the publicly advertised crowdfunding requirements here, it does indeed seem more restrictive.

John Corey  52:58  

Yeah, it is. And then I forgot to have that background. So the five or six definitely has the restriction of succeed, you can allow sophisticated investors who aren't accredited. I'm not sure whether you can advertise if you do that. One of those, maybe I reverse them. But one, you can advertise in some limited way. But it isn't quite as wide open as what I was explaining. And the cost of entry, the cost of starting is higher. I'm hopeful that there'll be progress in the US. And at the same time, I think for some number of deals. If it works right now. It works fine. And you just have to work with the tools you have.

Taylor   53:39  

Yeah. All right. Well, this has been a great discussion, I hope we can have you on again, in the future to get some follow up information, maybe a little bit more detail on the differences between, you know, crowdfunding over there versus here. And compared to syndication over here. This is a very large and complicated topic. And I really want to stay on top of it and keep in touch with you about it.

John Corey  54:04  

No problem. Happy to have future chats with you or anyone else that's been listening.

Taylor   54:07  

Absolutely. Well, everybody who is interested, definitely reach out to john. He's a very helpful on bigger pockets, always adding great information to the discussion. And it's been a great discussion today. If you're enjoying the show, please leave us a rating and review on iTunes to big help and helps other people learn about what we're talking about here on the show. If you know anyone that could use some more passive wealth in their lives, please share the show with them and bring them into our tribe. I want to thank you for tuning in once again. And I hope you have a great rest of your day and a great rest of your week and we will talk to you on the next one.

John Corey  54:46  

Bye

 

 

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