The Property Danger Zone

0:02Hey everyone, it's Rob B here and with Rob D. And today we are going to take you right into the property danger zone, the highway to the danger zone, right into the danger zone. No, I must stop. But there is a danger zone and you need to know about it.

0:20Yes, welcome to the property podcast. Thank you for joining us. In case you don't know, we run a business that buys more than 100 million pounds worth of property every year for our clients. You can find out about that at propertyhub.net slash invest. And from the process of working with so many clients, working with hundreds of investors every year, we know that there is a property danger zone. So in this episode, we'll tell you what it is, why it's so dangerous. And if you are there right now, we'll tell you how to escape it. So for our new story of the week, and this week's new story comes courtesy of The Guardian.

0:49The headline reads, rental deposit scheme in the UK puts millions in the pockets of landlords. Rob, I must be missing those pockets. Where are they? I want the millions. Oh, this has annoyed me, Rob. I'm a calm person. You know I'm a calm person, but this one really wound me up. You are a very calm person, Rob. You've worked with me for over 10 years. Well, more tricky than you is dealing with Generation Rent, who need to have a grievance every week to keep themselves in the news. And they've done it because they're in The Guardian. But according to them, the official rental deposit scheme is ripping renters off.

1:17So get this, according to them, almost half of renters, 46%, did not know that they could challenge deposit deductions that they deemed to be unfair. They didn't know. Even though by law, as a landlord, you have to serve a leaflet at the point of moving in or point of renewing a tenancy saying, here's how you rent a property. Here's how this works. Here's how that works. Here's all the terms and conditions of the scheme. And if you don't do that, you can't use section 21. So if that's not enough, I really don't know what is. And then it goes on to gripe about the scheme more generally. But for me, there are lots of problems with renting property in the UK.

1:46Absolutely tons. But the deposit scheme is not one of them. It seems to be something that actually works pretty well. And it works because it defaults in favour of the tenant. If there's no photographic records, you can't prove anything, it always goes in the tenant's favour. But whenever I've made a claim, I've never had a problem with that either because I've been able to show evidence and it's all good. So there's nothing very constructive to take away from this, Rob, except this has annoyed me. That's basically the news this week. I got annoyed. Well, it doesn't happen very often, Rob, so that is newsworthy.

2:13You are annoyed. And it's no surprise you're annoyed because this is typical of what we report on in this segment of the show is a very misleading headline missing important detail and then people being led by those headlines are going those blooming landlords they're evil aren't they because you would if you're just a passerby you've scanned that article it wouldn't be unfair for you to think oh landlords raking it and what are they like that's the problem with the stories it's misleading it's not balanced at all but that's why we have the podcast that's why we bring you new stories that's why we get beyond the headlines and that's why we'll keep doing this segment at the show because it does keep you updated but it also helps you understand how you need to go beyond headlines not just in property but in most areas of life when you read the news but we'll do our little bit and you continue to be vigilant as well there is a hidden danger zone in property and you yes you listening right now you might be living in this danger zone right now without even realizing it and what makes it so dangerous is you go into property because you dream of financial freedom and security and a more stress-free, relaxed kind of life.

3:18But there's a stage where you don't just not have those things yet, you have the exact opposite. And we've been doing this for a long time. We've spoken to a lot of investors. We see people at this stage, so we know just how common and how dangerous it is. So in this episode, we're going to tell you what this trap is, why so many people get stuck there, and how you, if you're there now, can escape it fast. Well, that highway to the danger zone exists when you reach a portfolio of one. This is the riskiest time when it comes to your property investment journey. And there's going to be some obvious reasons, but there's really some non-obvious as well, and they're important to discuss.

3:59And it can apply to more than one. It can apply to a small portfolio, but it really is exaggerated at the point of you having one property. And you might be thinking, well, Rob and Rob, you've been banging on for years about just get started, get your first one under your belt. And now you're telling me that's the most dangerous part of the journey. It is, but that's why we're talking about it. Because so many people get stuck at this stage or sometimes get overconfident at this stage. Because this stage is the most stressful. It's the most fragile. It's the bit where you do the most learning.

4:30It can be the least rewarding part as well and the most misleading part of your journey. Yeah the core of what makes this such a tough stage is that we talk endlessly about the benefits of property investment and those benefits are all completely true. The trouble is they come with time. All those benefits pay off in the long term but in the short term when you've just got started you're actually more fragile than you were just before you started because yes you got an asset and that asset eventually will do great things for you. But on day one, you've got all these extra financial risks. So yeah, hopefully everything will go well and you'll make some money every month.

5:09But you've also got the risk of voids and you've got the risk of expensive maintenance coming up. And because you don't have scale yet, you don't have profits elsewhere in your portfolio to balance those out. Anything that does go wrong at this stage means it's going to be hitting you. It's going to be coming out of your pocket. It's going to be coming out of other sources of income that you have rather than having a portfolio it where it's like, oh yeah, well, this has gone wrong here, but these other ones are going great over there. So it all sorts itself out. You've also at this stage got more admin in your life, again, without the scale yet to justify it.

5:40So the majority of people who buy property these days do it through a limited company. And for many, many people, that is the right thing to do. But again, it's the right thing to do in the long term. Immediately, you've got all the extra admin and the cost of that limited company without enough properties yet to justify that structure. it's still worth doing it from the start because you can't easily change later but you've still got all that extra cost and hassle and perhaps the biggest danger of all is not the financial not the legal it's you and your mindset because at this stage everything is very emotional and everything feels very high stakes because it's the first time that all this is happening so we've been doing this so long that at this stage it i think would take quite a lot to phase us i routinely get messages about things that happen that are going to cost me a load of money and people who were being annoying about something or other.

6:28And that's just me, Rob. Exactly. Yeah, the property portfolio is pretty good. It's the podcast that's the problem. But when it happens for the first time, it feels personal and it feels emotional. So put it all together, Rob, and you've got this quite intimidating combination where it's like, you're excited, you've bought your first one, you're like, oh, great, I'm a property investor now. But as soon as that high wears off, it's like, ah, my life hasn't actually changed yet. and I've got all these extra problems to deal with as well. I couldn't agree more, Rob. And for me, this is a true danger zone because so many people stop after one.

7:04So many people stop because they think, oh, I can't do this anymore. It is the most misleading part of the portfolio journey, the first property. And it can be misleading in more than one way because I worry for most property investors while their portfolio is at one, even two. Maybe even once you get that third property, I'm still worried. And the reason why I'm worried for you is because your experiences are exaggerated. When you are investing in one, if it's all going wrong, then you think property investment is a disaster. If it's all going right though, you could be misled into thinking it's really easy.

7:46The truth is, neither of them are true. It's somewhere in the middle. It's normally okay, A bit annoying at times, a bit frustrating at times, but in the grand scheme of things, it's all right and it's a great investment over the long term. A brilliant investment with leverage over the long term and that's why you do it. But when you have that first property, everything's exaggerated. A void period feels like the end of the world. A maintenance issue can wipe out your profits for the year. It's so intense during that period that you need to move on as quickly as you can and we're going to talk about how you can avoid that trap but be careful if you have one or two properties and you think property investment's easy I'm just as worried for you because you don't have that experience yet to know that it's ups and downs it's highs and lows and you will have long periods of nothing happening but don't be misled it's not easy it's not hard it's somewhere in the middle but it's worth doing whether you've had a hard experience or an easy experience because of those long-term benefits and that's why we're talking about this danger zone because it could be stealing wealth from you if you think property investment is really really hard because you've only got one in your portfolio and you've been unlucky that then could put you off from going on to do great things that's why we're talking about this now because we've seen so many people give up after one so how can you avoid this trap rob we've highlighted the trap Hopefully awareness will help people, but let's go a step further.

9:18Let's help people avoid the one property trap. Yeah, but let's do that. Well, the most obvious way to do that is to get to your second one as quickly as possible. And the way to do that is to stay ruthless about saving up for that second property. Because for most people, saving up for your first investment property is not easy. Most people never even get to that point. And now we're telling you it's a trap, but most people never get there because it's hard. But part of the reason that you'll have got there is you'll have been financially disciplined Hopefully you're earning well, you were disciplined, you realised that this was an important thing for you to do, and so you made it happen.

9:51The temptation is to see that as the finish line, whereas actually it's just the starting line. What you need to do is keep doing what you did to buy property number one and not ease off. One of the really powerful effects that you can take advantage of is the snowball effect, where each property you buy brings you closer to the next one. but the mistake some people make is they go oh great i've got this property is making 300 pounds a month in profit therefore i can save 300 pounds a month less than i was and still keep going at the same pace and that is true but you don't want to go at the same pace you want to go faster so what you want to do is keep on saving everything that you're saving before plus you've got this extra rental income which means you can get to the second property faster then once you've got the second property maybe you've got two lots of 300 pounds coming in and what you're already saving and maybe you can pull out some equity from the first one and you get to the third one faster.

10:43So you can see how each property that you add enables you to go faster and faster and accelerate away from this danger zone. But the mistake, Rob, like I've said, is easing off, slowing down, taking it a bit easier on your side, expecting the property to do the work for you. And as a result, you never build up that momentum. The next thing you need to be doing is staying engaged with the market. Staying sharp. Just because you're not ready for deal number two doesn't mean you can't keep your spidey senses active. Now you've got hands-on experience, you'll definitely be better at spotting deals because there'll be things that you like about your first investment, hopefully, but also things that you don't like.

11:20And that will guide you for your next investment. Stay on Rightmove, talk to agents, keep networking, listen to the podcast. It might be a couple of years out or longer before your next one, but if you switch off, it just won't happen. By keeping engaged, it'll keep you motivated and keep you pushing towards that next investment. Life is very, very easy at getting in the way of your goals, your hopes, your dreams, because you have to do something more than normal. If you want to do something exceptional financially, you have to do that day-to-day in your life. So keep active, keep switched on, keep looking out for deals.

11:56And at the very least, by keeping your skills, your education, your connections all on point, when you're ready, you'll be primed to get yourself a great deal. It's not something you can just turn off and on. Olympians don't just turn up once every four years and win a medal or compete. They are doing work the whole time leading up to it. It's not just something you do once, stop and then do again. You have to keep on with this, but you will be rewarded if you do stay sharp. You will. And we see this with our clients at Property Hub Invest as well. So some people, most people I would say, will buy a property and then they'll go, well, I know it's going to take me 18 months to buy the next one.

12:32So they pretty much switch off and we don't hear from them. But there are some who, even though they are in that same situation, they're still bugging us to see the details of deals that are coming up, even though they believe they won't be in a position to act, because they want to keep seeing what's out there. They want to know what's happening in their market. They want to keep their skills sharp at analysing deals. And every so often, something might come along where, oh, actually, this is off plan for two years. You only need to put down 10 % now. And this is right for me. So I can actually make progress now when I didn't think I'd be able to.

13:01But even if that last bit doesn't happen. Just staying engaged with the market means you don't have that ramp up period again when you are ready. So again, it's all about momentum. And the third thing, which also very much ties into momentum, which you can do is set a real deadline for your next deal because it's so easy to drift. It's so easy to celebrate that first deal and then lose focus. Life gets busy. Your momentum has gone. So you probably bought that first property because at some point in the past, you would set a goal and you thought about what you wanted your life to be like in the future you realized what property fitted into that you set a goal to acquire that property great at this point a really powerful thing you can do is to go back look at your goals again and get refocused so whatever you did to set that goal in the first place go through the exercise again go back and remind yourself of why you're doing this remind yourself what it is that you actually want and where you want to get to and then work back from there.

13:58Work out what you want. How many properties do you think you'll need to get you there? How often do you need to be buying to make that happen? Are there any other steps? Is there anything else that you need to do to make happen before you can get onto that next property? Get yourself unblocked and going through that process of goal setting again. We've spoken so many times about how powerful goal setting can be. That should give you the motivation to do the other things that we've spoken about, to stay engaged with the market and stay ruthless with your saving. And I hope what you've come across in this episode is you don't want to let yourself drift.

14:28You don't want to be there just hanging around, getting too comfortable in this danger zone for too long. So if you're at the one property stage right now, you're not alone. And you know what? You've done incredible things because getting started is the hardest part. What seems a little unfair is often the next hardest part is property one, which is why this episode exists and why the warning is there. So you just have awareness around this issue. I can't actually believe it's taken us this long to talk about it because it's one of these things that are so obvious to us. We see it all the time.

15:00We see people giving up on their dreams because of this trap, but it's not talked about. So here we are doing our bit, helping you have an awareness and that awareness is powerful. And then by having the awareness, staying switched on, staying motivated, pursuing towards your next property and beyond, and Rob's talked about that snowball and the impact it'll make, you'll get to a point where you have a sizable portfolio. It's all evened out your experiences. Some properties will be going brilliantly. Some will be annoying, but it balances out overall. And that's the beauty of a portfolio. A portfolio that you build up, it's all evened out.

15:37It doesn't feel incredible all the time. It doesn't feel awful all the time. It just feels okay. It feels sometimes great, sometimes annoying, but overall you can see what it's doing for you your family whatever else is important to you financially it's life-changing if you get it right there are certain things you need to do and that's why we podcast every week but if you follow the podcast if you do the things we talk about you have awareness around these things I've got every confidence you're going to absolutely smash it and be a great success but hey that's not enough because we like to bring you more every episode with Hub Extra, the part of the show where we just give you that extra bit more value.

16:17This week, I have no idea what Rob's bringing, but he said he's got something good. So Rob, bring the goods. What do you have? Well, something we've spoken about on the podcast before is being able to use your voice rather than typing, especially in the context of AI, but also writing emails, messages, whatever. And I was reminded of this because I was talking to someone about it yesterday, and we were talking about the tools that we use. And these tools for me have changed and upgraded. I wanted to share a couple of those. The first one I use is called whisper flow the spelling is a bit weird i won't try it but you'll find the link in the show notes but you can use this on your phone you install it as effectively another keyboard and then where normally you would type a message you just hit the button say it out loud and then it transcribes it and the quality is really good and it learns over time the words you use so it becomes more and more accurate you can also use it on your laptop and that kind of dictionary of common words syncs between the two which is quite useful but as an extra resource i don't actually use that on my laptop, I use something called Talktastic, which does the same thing.

17:10But the cool thing about this is that it can effectively see what you've got on your screen at the time. And so it can take that into account as context. So let's say that I'm using it to dictate a reply to an email. If I've got the person's original email on the screen, then it can use that as context, which means if it's ambiguous, it's not sure it can really hear one of the words I used, it's more likely to guess it correctly because it has the context of what it is I'm replying to. And probably the best thing if I say hi, whoever, then it can see the spelling of their name and it's far more likely to get the spelling of their name right rather than butcher it and I have to correct it later.

17:45So those two tools work really well for me. People are far more likely to get a reply from me than they used to because it's so much faster and there's so much less friction. So we'll link to both of those in the show notes. That's it, Rob. Now I know you've got this. I'm going to make sure that you do reply to me or my nags. Yeah, if I don't reply to you, it's only because I'm not interested. There's no other excuse it's not the effort brilliant okay well do check them out i'm going to check them out as well links are in the show notes as always and as always we'll be back on sunday in the sunday times answering more of your questions there and back on tuesday with ask rob and rob giving you an audio version of us answering your questions and of course back same time same place next week with the property pod on thursday so until those wondrous events occur take care have fun bye-bye Bye-bye.