#1008 – The Expat Files: Tax Burdens, Real Estate Chaos, and Rental Realities

Automatically transcribed from the original recording; names and wording may contain errors.

[00:00] South of the border down Mexico way That's where I fell in love when the stars above came out to play and now that I wonder Hello there all you ex-pat wannabes I'm Johnny Mueller and you're listening to the expat files living in Latin America the show that tells you just what it's like to live Workplay and or retire down here in Latin America It's a mix of the good the bad the ugly and the great and it's all right here. So let's get started All right. Here's another reason to skip Ecuador the Ecuadorian association of home appliances Wow Can you believe that little Ecuador in South America has an association of home appliances?

[00:45] Sounds like something that had to be set up by gringo expats They're sounding the alarm in Spanish. I'm reading this article translated now from Spanish. It says The Ecuadorian Association of Home Appliances is warning that there will be a new tax starting in December on Get this large-screen TVs though these days who knows what constitutes a large-screen TV back in the day I remember when TV still had tubes Remember those things tubes Sometimes called valves in Europe in the UK. Yeah, I remember tubes and tube testers in electronic Supply stores, and I also remember the middle American dream. That would be a 25 inch color TV man That was the tits of the Ritz back way back when when I was a kid working on my paper route when I was 12 years

[01:34] Old I promised myself I'd buy my mother and father a color TV Of course, it was me that really wanted it and I never got around to saving enough money to buy it Because you know at 12 years old There are lots of other temptations in life like a dozen or so DC and Marvel comics that came out every week Of course, they were only 10 or 15 cents back then But I think I was making something like 16 bucks a week on my paper route and mando Chicago tribunes were thick They were heavy man. I hated that paper route But hey, where else does a 12 year old kid make 16 bucks a week with inflation? That'd be something like a hundred bucks a week today, but not to digress too much In Ecuador starting January 1st, there'll be a 17% increase approximately in the cost of all big screen or any screen televisions

[02:21] So here's how it breaks down Ecuador's foreign trade committee comics has imposed an additional import tax on TVs with get this $158 tax plus 5% on 50 to 75 inch televisions with a tax of 158 bucks plus 20% on televisions over 75 inches man, that must mean bar TVs I don't know anyone who's got a 75 inch TV to you except You know bars and restaurants and they're all dead in the water because of this cold video thing But I suppose governments are so stupid as to think Slamming attacks on big TVs that'll soak the rich and the little guy won't get upset Since generally only bars hotels restaurants and rich people buy gigantic TVs like that

[03:08] So it's another smack down against people in the tourism and hospitality business Couldn't come at a better time, huh right in the midst of the biggest tourism blowout in history Well, that is actually typical of government, isn't it? Think about it do the numbers You can buy a 50 inch television on Amazon when it's on sale for let's say 250 bucks Then Ecuador's government will slap $158 tax plus 5% on that So right there the taxes make that TV almost double the cost and if you're buying from Amazon and doing the courier thing You'll pay three or four bucks a pound and a 50 inch TV weighs 25 pounds So you're looking at at least another 75 bucks for shipping So in effect, even if you're ordering from Amazon, you're gonna be paying more than twice the original amount for the TV

[03:55] Hey, you know just pointing this stuff out because you'll never hear about it anywhere else And obviously this is meant to squeeze people with money and gringos for government. It's a great deal. Why not tax gringos? They can't vote you out of office Then again, I've been into some middle-class Latinos homes, you know, that'd be white trash or lower middle-class Edging on poverty compared with the US or Canada that is funny thing. I've seen people in seemingly dire straits sacrifice other Conveniences in life even what we'd consider Necessities to have a giant screen TV and I'm talking about homes that have bare light bulbs hanging out of sockets and No clothes dryer sometimes not even a washing machine Priorities priorities go figure and now from the getting out of Dodge Department. We got an email from Russell in

[04:43] California he says Johnny, what about us landlords? We're dying here, too Will there be a moratorium on mortgage defaults for us? I belong to a landlord association in Los Angeles And 90% of us have mortgages Funny thing is the public thinks we're all flush and own our properties outright. Nope. That's not our normal business model We just keep buying and leveraging and pumping air into the bubble. We're all guilty as charged But so is everyone else you see if you don't use accounting tricks and tax angles You don't survive that kind of expansion model has been a way of life since around the year 2000 20 years ago So banks they're loaded with our mortgages, of course They repackage them and sell them to who knows who but then what about the banks and institution that are holding our repackaged mortgages?

[05:35] Will there be a moratorium or forgiveness on bank failures, too? If not, then who will end up with our mortgages bottom line Johnny? We as landlords are pissed We realize we've been left the shit end of the stick because we're not a big voting block It's renters and individual mortgage holders who will get saved not us then you've got those stupid students Most of whom who should never have gone to college in the first place who took out $100,000 loans to become aroma therapists tanning bed specialists and espresso machine mechanics Like that special machine mechanics. Yeah, I guess there's a big call for that Look at Starbucks and all those other see and be seen places with ten thousand dollar espresso machines Those things are cranking out five dollar lattes

[06:22] 24-7 people never clean them right so you got to know they're breaking down all the time So maybe espresso machine mechanic not a bad idea But I digress as usual anyway, then Russ says of course Johnny the feds will bail us landlords out if we squeak loud enough Anything to get our votes and stay in office Even though there's not really many of us compared to the idiot students who took out those Unbelievably lopsided loans and now that Biden and the Dems are in office Nothing will change and we could probably look forward to an everything bailout. For example What about real estate prices if landlords can't collect rents and can't pay their own mortgages Won't real estate prices fall. Of course, they will they're doing so in the big cities right now

[07:07] The way things are going and the way the heavy hand of government's always stepping in. I In other words wage and price controls. It's a typical move of broke and failed governments I expect eventually there'll even be a so-called government decree on fair cost per square foot on residences and commercial property Problem is people just love handouts and politicians love to stay in office and to stay popular We can eventually expect a moratorium on bankruptcies defaults that includes Repossessions and you can expect handouts to any large voting block that's been hurt by the pandemic. Yep. All that's coming It's here or in the works already Why not put a government moratorium on weight gain include cigarettes junk food

[07:57] Sugar in old-age too. After all if you're fat old smoking have a crap diet risk for Covid increases Astronomically, so they say however now experts are saying smokers are somehow protected from the virus. Have you heard that? It's all over the net bottom line Johnny, even though I've got a lot of properties here in LA I've got to get out of Dodge Plan B to and I've got to say there's something else people are just not talking about Just wait the next six months to a year. We're in for an atomic blast of lawsuits class action and otherwise and when the dust settles Every media blabber mouth with a medical degree who said something publicly that turned out wrong or counterproductive Will surely be ripped into orifice and rightfully so the consequences being huge

[08:43] Insurance companies will go bust and rightfully so too Imagine the trillions of dollars needed to bail out the big insurance companies I for one don't want to be there when that all comes tumbling down one last thing Johnny I've noticed all kinds of big charities have popped up lately They've always been around but there's lots of new ones. The Covid thing is ripe for charity scams There are virtually thousands of organizations just begging for money because everyone's hurting, right? Well, I can tell you my experiences when I used to have a real job working for the man You might remember in the 80s and 90s the biggest charity in the world was United Way And I remember once a year the boss would call each and every one of his employees in the office and have a little Talk with us asking how much we were gonna donate this year

[09:29] Because you see we had to beat out the other departments and have a higher percentage this year than last The pressure was on if you failed to give more than last year's donation if you didn't succumb to those gentle but persuasive Extorative efforts. Well, you just knew it'd be points against you on the next pay review Yep I found it out the hard way charities are mostly all scams to benefit the managers that run it and allow its enablers to feel righteous Well generally degrading its target group the poor and downtrodden flavor of the month Why don't people get it that big charities big government big anything that doesn't produce a product or a service people actually want to buy Eventually becomes a scam to benefit its managers and cronies. I should know I was once on the board of a charity

[10:16] I won't name right now and man did we have a nice expense account so much for those shoeless starving Amazon kids, huh? But Johnny as far as getting out of dodge day by day I'm thinking more and more about packing a few bags and just walking away from it all why not even though it appears I have lots of real estate the banks own most of it anyway. Thanks for everything you do Johnny signed Russell PS Johnny I would be coming to your seminar But I don't want to take that PCR test and I'm definitely not taking the vaccine But I will be getting out of dodge by hook or crook. You can count on it. All right Russ Thanks for that. Speaking of getting out of dodge comes this email from mr Joe Kay a former expat insider seminar attendee. It says hey Johnny. I Made it. I finally made it to Guatemala and got out of that shit show. That is, California and the USA

[11:07] Just in time too. I hear Biden won and Trump won't cave. So the riots should start soon. Oh Well, as you say Johnny I'll be able to watch all the craziness from a nice safe distance in some really amazing weather, too I've met up with our seminar lawyer to get all my paperwork in order for residency and I'm meeting with your seminar logistics Coordinator to help me find a long-term place to rent This has been such a smooth transition for me, and I finally feel like I'm right at home My only regret being going home to the states after the seminar I should have just stayed down here would have saved me lots of headaches And Johnny using that phone app WhatsApp I'm able to communicate with friends and families back home without a problem at all Mostly I've just been showing off and bragging about my new home to them

[11:55] Everyone is more than a little jealous now, too And that suits me just fine because I only got funny looks or concerned lectures when I said I was moving early on Then came kovat and disaster politics. It's proof. The sheep will have been lied to to keep him in the barn Anyway, Johnny, I just wanted to say thank you for your podcast and the seminar If it wasn't for the podcast and your advice, I wouldn't be here and it wouldn't have been so damn easy It'd be great if I could take you to lunch the next time you're available all the best and thanks again Mr. Joe Kay All right. Thanks for that. Mr. Joe And you know you and a million other plus people want to get the hell out of california That seems to be the epicenter along with washington dc of all that's rotten in the u.s

[12:41] Though it looks like new york city's running a close third, huh? Speaking of california and medellin columbia comes this disturbing email. I just got which ties into everything we've been talking about Including the rental and the real estate stuff This comes from pd P-e-t-e pd He says johnny i've been renting a place in medellin columbia now for about three quarters of a year I had to put down two months deposit Didn't get much of a deal being that i'm a gringo and maddie As you know one of those destinations everybody's talking about so prices are kind of high though Nothing compared to california prices i'm paying about 750 a month for a one bedroom. It's nice I'm on the third floor of a residential tower It's got a gym and a rooftop common terrace and the rent includes the maintenance and my gas bill

[13:30] They use propane gas like you say johnny down in the underground parking There's a gigantic propane tank that I guess they must fill up every couple of months It's a common gas supply for everybody in the complex Anyway, I have to tell you the contract that I signed with the rental agency Was about three quarters of a page long in spanish, of course when I first saw it and read it Of course, my spanish is bad. So I don't know exactly 100 what it was saying So I ran it through google translate and it came out surprisingly understandable In other words, it was pretty much free of legal jargon I'm bringing this up because I want to tell you about my experience renting in california I rented a place for a couple of years just outside of san francisco and my rental contract. It was eight pages long

[14:16] It was so complex and convoluted. I didn't understand half of it So I sat down for an hour to figure it out and parse through it and discovered I had to waive my rights to almost everything not only the possible future ones but against endless past contingencies as well For example, the rental complex had used some insecticides in the past some bug bombs And the contract said they had the right to use them again in the future I had to sign away my right to sue them if they did so for any residual health effects Or property damage that might accrue to me in the future I also had to sign off that I was aware of aircraft noise that might come from an airport eight miles away And that the contract could not be revoked if I decided in the future

[15:02] That noise was an issue and I had to waive the right to sue If anything were to happen in the gym pool or parking lot I also had to provide detailed financial information going way back in the last three months of my bank statements to prove I could afford the place I even had to give them consent to do a background check on me And of course a credit score on top of that. I had to pay two months deposit How ironic that just a few years earlier the unemployed were strongly encouraged to take out half a million dollar mortgages You know during the subprime thing for no money down So you're absolutely right johnny latin america really does operate on heavy duty lag time My bare bones apartment contract here in medellin Really does remind me of rental contracts back in the good old days when california dreaming

[15:49] Wasn't just a number one song by the mamas and the papas, but was a reality back then I do remember my parents regret at not leaving for california Like my dad's brother. My uncle did he left for california in the late 50s because his wife my aunt Had bad asthma problems and they were living in michigan at the time her doctor suggested california They moved there. My uncle got a job at mcdonald douglas near ainaheim. They bought a house in 1959 for around 30 000 and now it's worth a million, but the neighborhood's gone right down the drain But what really prompted me to write this johnny Was a real pleasant surprise when my landlord here in medellin handed me that three quarter page rental contract At first. I thought it was just the cover letter for the contract, but it was the whole thing

[16:37] And johnny this place i'm renting in a residential tower in medellin An equivalent place in anahim or elsewhere in california two grand a month minimum So that's my story signed pete Thanks for that pete. But you know, there are some things about signing contracts here in latin america The average person does not find out until they actually want to move out for example Unlike up in the states down here in latin america. You're responsible for all the repairs, etc Like if a window or lock on your door breaks air conditioners on the blink or your bathtub drain springs a leak You can call your landlord up. He'll get somebody over to fix it But you'll get the bill and if it's furnished you're on the hook for all the furniture and appliances, too In other words down here. There's no such thing as normal wear and tear when you finally decide to move out

[17:25] Your latino landlord is bound to subtract a big chunk out of your deposit For repainting the place furniture and apartment cleaning even if you cleaned it really nicely yourself Yep, they'll charge it for that kind of stuff whether they do it or not So bottom line you can almost count on the fact that your landlord will not give you back your full deposit And here's how it usually goes down Most often you give them two months deposit up front Now, of course, you've heard me say if you pay six months or a year up front You got negotiating power to have them skip the deposit That's the best way to go because then in the end when you move out You've got all the cards because they're not holding any of your dough But anyway, if you just came down like a regular gringo or expat and you didn't know these things and you put up two months Deposit then a year or so later you decide to move out. You know what usually happens, right?

[18:12] The landlord will tell you he'll give you your deposit back after a month or so When the final utility bills come in well, that's the time you should open your mouth and say no problem But at least give me half of my deposit back. They'll usually agree to that but you have to ask them They're not going to bring it up. At least you'll get something back again. I repeat. I've been down here 30 plus years now I've lived mostly in places i've built but i've rented places too and i've never ever in the half dozen or so places I rented and had to give a deposit Did I ever get 100 of that deposit back and remember i'm just a single guy With no kids wearing terrors minimal when I rent a place and still the landlords will find ways to gouge you out of that deposit Now personally, I think a lot of it's because most landlords don't even have enough cash on hand to give it back to you

[19:02] Of course, i've got no way to prove that but i've been down here long enough to know how these guys manage their finances I should say mismanage their finances talk about land rich and cash poor That's the definition of the upper classes here in latin america. Meanwhile, the rest of the population's always broke Sound familiar? Oh by the way, just got some good news in my email box turns out some of those miami courier services You know the mail forwarding and package forwarding services. We always use for amazon stuff Well, they just got a message that one of the services I use is having a black friday sale It actually kicks in on november 20th and lasts through december 15th and here's the deal Here's the promotion and it's a great one Instead of charging around four bucks a pound for packages coming from amazon or elsewhere this new black friday promotion

[19:51] And really that's a pretty poor name because they don't know what black friday is here in latin america. They don't have thanksgiving Here's the deal if you order anything that weighs over 15 pounds from now until december 15th It's only a buck a pound. So what's that mean for me? Well a lot of times I want to order something from amazon or ebay whatever but it weighs So much that the final cost is greater to or equal than what you could get at four down here However for light stuff from one to five pounds. It's almost always a better deal. For example I've been wanting to buy this really spectacular bass guitar amp But it weighs 50 pounds and even at three bucks a pound for shipping through my courier. That's 150 bucks for shipping No, thanks However, now i'm thinking it's a go By the way, the amp itself costs 900 bucks, which means they're gonna nail me with taxes, right?

[20:41] Wrong the freight company will ask me to forward them a copy of the receipt and photoshop will come in very handy Once again, oh and for you guys and gals coming down to my january seminar You're gonna hear a lot about playing the angles here Oh and here's a little tip you won't hear anywhere You know if you buy on amazon or ebay whatever you can buy used stuff or refurbished stuff. There's lots of that out there I bought a tv refurbished. It was basically brand new in the original package saved about 150 bucks off the new price So even though it was something like 15 pounds and I paid about 50 bucks for shipping. It was well worth it Well, suppose you bought something worth 400 bucks You might recall everything over 200 bucks gets taxed and you could easily get hit with a 50 tax bill However, if that 400 receipt magically changed to 150 bucks, let's say you might get a little nervous that the tax guys could catch that

[21:31] Not so if it says on the receipt it's refurbished or rebuilt Then if there's any doubt you've bought yourself a lot of wiggle room. I'm not suggesting you do anything illegal I'm just telling you what a lot of smart and kg expats do after all, you know here in latin america The national sport is tax evasion And getting over on government in general though. It's true that some claim the national sport is cheating on your better half Either way humans are a mass of contradictions, huh? For example, most people will admit they hate the government But secretly they really like a government job makes sense though in a twisted kind of way, huh? Hell they pay a lot more than the private sector and you can't get fired unless maybe you get caught screwing the boss's wife In the broom closet even then they'd probably just lay you off with full pay

[22:20] To get fired with no bennies. You'd probably have to screw her kill her and get caught with a crack pipe No, I could be wrong speaking of medellin columbia. I like the place i've been there quite a few times Comes this email from max. He says hi johnny. It's max The guy you basically called a newbie for seeing someone get shot in downtown medellin columbia You told that story a while back on your show But now i'm in yukatan mexico and everything's great. However, something struck me funny. I was reading a report called implementing the oecd anti-bribery convention Complementing the department of justice in the states on their global anti-corruption efforts get this it said Quote international rankings show that the u.s. Regulatory environment is broadly

[23:08] Business friendly in the rankings for doing business the us places six out of 190 economies Indicating regulatory policy is conducive to opening and running companies Then max gives me a link to that article Then he says johnny. I thought that's funny Take new york the supposed epicenter of trade in the us is currently closed right now And even when it wasn't you'd have to jump through a million hoops just to get a license to braid hair Meanwhile here in yukatan mexico It seems like everyone and their uncle is opening up a cafe restaurant bakery, whatever right out of their homes That would never be allowed in the us I thought of you because johnny you always seem to preach that the us is a bad place to be economically

[23:55] Because of the tax man and because of the difficulty of doing business and practically anything else there that has to do with dealing With the government or bureaucracy. So johnny, what do you think about that report? Maybe you'd like to discuss it a bit on your show PS johnny you are an f and a hole for calling me a newbie Signed your friend max. Well, thanks for that max And i've always said if I was going to live in mexico The only place i'd live is in the yukatan and that too is being targeted by narcos and bad guys now because hey That's where the gringos are right? That said max at my expat insider seminar I go through a whole section when i'm talking about doing business in latin america Stating exactly what it costs to open a brick and mortar business in the us As opposed to doing business in mexico panama guadamala peru honduras columbia

[24:45] El salvador and a few other places In short just to give you a little rundown if it costs two hundred thousand dollars to open up your average brick and mortar place In the united states it'll cost between 30 to 50 grand to open up the very same thing here in latin america Unless you're buying into a first world franchise and you'll pay exactly the same franchise costs as you pay up in the state However, your profit margins will be massive For example the pre-covidiot net profit margins in the us for for example small manufacturing businesses Was around 15 for us equipment and supply businesses about 25 For a us food franchise 10 to 15 percent. We're talking about average net expected profit percentages For us small hotel operations around 12 percent net profit margins at a small mom and pop restaurant

[25:35] Average net profit margin 10 to 20 percent So why is doing business so much cheaper here in latin america? It's because in the first world labor costs are 25 to 60 percent of your overhead In latin america labor costs are from five to ten percent of overhead So it's a 60 to 80 savings to you if you hire employees Then there's the rent saving here in latin america You got a 50 to 85 savings over us rents and you also get a 50 to 80 savings over us corporate taxes, too Same thing with your personal tax rates here in latin america You get a 50 to 80 savings over what you pay in the states The thing is though when you actually are starting up a brick and mortar business If you don't hand over most of the job to your latino lawyer You'll be standing in lines and banging your head against the wall for months

[26:23] Whereas if you give that job to your latino lawyer You'll know all the angles and shortcuts and you should have your business up and running or at least have all your licenses and permits Within 30 days, so it might be true You get the proper permit certificates and plans approved in the united states in quick order But when you actually open your doors, that's when the trouble begins Notice in that report max sent don't talk about multiple yearly sometimes even monthly inspections by government bureaucrats Always looking to find defects and faults to justify their jobs. Well, you don't see any of that here in latin america But you knew that already, right? All right before we close out today I like to once again mention that I have a male and a female a lady and a guy Looking to hook up with a roommate for my expat insider seminar I've already hooked up some people as roommates, but now as we get closer to the seminar

[27:12] I've got two more loose ends to tie up So if you plan on coming to the january seminar and you're looking for a roommate I'll still honor the early bird discount. You can save 750 bucks off the price of coming down as a single So if you're a male or female looking for a roommate, send me an email the expat files at gmail.com You've been listening to the expat files living in latin america If you need some help with your own plan b we can schedule a one-on-one phone or skype consult Just send me an email the expat files at gmail.com And if you want to get on the waiting list for my next week-long expat insider seminar in central america Where you're guaranteed to get a two to five year head start on your plan b send me an email the expat files at gmail.com nos vemos