EP 041 - Why Property Is A Long Term Play

[Music] Hello and welcome to your Wednesday Joseph Wealth Wisdom with me, Daniel Kennedy, your host. Today, we're going to be discussing the new topic, which is why property is a long-term play. It's been a while since we've been away. I've had a concussion, a series of illnesses, been travelling, so this is why we're back on and there's been such a large gap in between this podcast and the previous one.

So the reason why I picked this one today was I see forever and a day, and you've all seen them. We all know what's out there. You get sold the dream of property and how it's a real great vehicle for building wealth really, really fast. And the fact of the matter is, it's not. It's really not. It's a very, very slow-term play. You'd be much better off starting a service-based business as opposed to a property-based business, maybe a service within property, because there's no cap. Whereas property, you're sort of like defined by market rents, and you only really visualize your profit three to four months after the deal is completed. And very often, it's quite difficult to get the deals.

So this is why when you get involved in property, I want you to have a think that it's a decade-long play. Can you get rich before ten years? Yes, absolutely. Will potentially, if you do things right? But most of us are just Mr. Average, Mrs. Average. We've got jobs, we've got lives, we've got families, and very few people can replicate that. You know, you've got the pop stars within the property business who just seem to be doing deals left, right, and center, smashing it out of the park. And when you compare yourself to those few, very, very, very in the minority individuals, you can often get disheartened with your progress. And I chat quite a lot of people. I'm a wife, Jack, and coach, so I see people getting really, really down in the dumps about their lack of progress, and it's because they're setting themselves unrealistic expectations. You're not going to get rich in property in the... I don't care who you are, unless you've got big financial money behind you. As if there's a lot of type of money or money's financial, unless you've got big money reserves behind you, you're gonna struggle to turn a profit because you're gonna have to raise finance, do deals, pay back your investors, and usually you leave a bit of money in the deal. You want. Well, if you're a wealth dragon HMO property guy like myself, that's what we do. We need quite a lot of money in our deals, so it takes us a good three to four years before we see any profit. And this is why I believe property is a long-term play.

So I've got a few subjects here and a few questions because quite a lot of people have asked me about this now. What should I be doing in the first year and all sorts? But we're not going to be touching on that. We're just going to stay on this subject. Where is it? Where is it? Where is it? So setting realistic expectations, you need to think very, very long-term. You're not going to quit your job this year. And if you think you're gonna quit your job this year and suddenly you're getting really stressed out of your job because you're still in work, that isn't gonna help your property business. Like for me, it took four years for me to quit my job, and still we exchanged a lot of my time for money. I'm still not living off property income, as I mentioned to previously, it's because we have to pay back investors or a whole portfolio is built from raised finance. So a good realistic expectation is to not buy anything in the first year because you're learning. It's such a dangerous game to rush to buy a deal when you've got that pressure. I need to buy something, I need to buy something, I need to buy at the risk of buying a complete wet dog. There's nothing wrong with wet dogs, but the risk of buying a bad deal, buy tremendously, is basically that the risk is a lot higher. And for me, I didn't buy anything in my first year. I bought my first deal in my second year of property because I was sourcing. I had no money behind me. And in the early days, people say you're gonna raise finance. It's easy to raise finance. It's not easy to raise finance, especially when you've got one, no credibility. Two, you haven't really got a social circle that would trust you to lend you money from. For me, I didn't. Three, you've got no right. No one really cares about your story because you haven't built your brand as much. It's like, make your service the best thing about you. You've got to build a brand for people to invest in you because they need to know about you. This is why social media presence is so important. So you're probably not gonna raise money unless you JV with somebody and they're a key member of the business. But that's not going to happen on day one because you've got no, you haven't got the education, you haven't got the credibility, you haven't got the track record. From a standing start, it's very, very difficult to raise finance. And I didn't raise any finance in the first year, but I talked a lot about what I was doing in terms of sourcing and the deals I sourced. And that sort of some really, really good deals, and some best has made a lot of money off the backs of my labor. And that's just the fact of the matter. You need to be able to source, get involved in some way in property that's sort of like low entry, and not rent to rent. Rent to rent is ridiculous. Don't waste your time. Rent to rent. Source. Learn the art of sourcing because then you can source for yourself. And once you've got the art of sourcing down, you will be the go-to person. And then you can leverage those relationships because everyone will come to you to buy a deal if you're the person who's able to source. And then when you become that, you build up a great network of people who obviously have money. Right, they obviously have money because they're coming to you to buy deals. So then you've got this great list that you can hit up, build relationships with, and build your tribe. I like to call it a tribe. And it takes a long time for them to trust you to power your money. It's like, maybe only a couple of grand first time, but then as long as you pay it back, the amount will increase, will increase, will increase. So what it takes from building a business from nothing. So for me, my situation, if you've been watching the podcast, you all know it, right? I didn't have any property experience. I was a complete and utter novice. And to the point where I didn't know what freehold and leasehold was. I had to go away and learn that. And very often in the seminars, I say you need to get a mortgage. And my next question will be, what the hell is a mortgage? That's how dumb I was. And that's basically because I was in my little military bubble. I had everything done. I didn't even have to buy toilet paper. Like everything was done for me. And that creates a very, very, very light. That's not a good place to be when everything is done for you. And the only thing you need to concentrate on is work and your fitness. And that's what we did. And then you excel for fitness. You didn't excel from going out and building a business and city street while you were in the military. Like they don't encourage that. And you can very often leave the military being completely institutionalized and be like, why do I gotta practice wrong? And that's where so many soldiers struggle at.

So building the business from nothing, you need to obviously accept you're gonna have hundreds and hundreds of no's. I had really, really close friends where I had cracking deals. And because when I first started sourcing, my deals were like, I'd get the RIC survey, which would be like 60K, and I could buy the deal for 27K. And I'd be like, listen, Patton, I here only need for her Ybor ek to do this deal, and I could refinance and pull all the money out and give you the money so we get a property for free. And this good friend was like, and because I didn't know how to negotiate, because my skills were lacking in every single area, every bit needed work. Like the way that I talk now, I've been working on because I've been told that it's too fast. The way that I negotiate was very, very subpar, and I lost many deals because I was rushing the deal and not giving the clients time to talk and tell me about their problems. And same with not raising finance. I was begging. I wasn't offering the opportunity. I was literally like, please, please give me 40K. And he was like, no, just cold as ice. A Chinese guy, a good friend of mine. And if that relationship broke down because when the business took off, but do what gives like, yeah, I'm ready, I want to come in as vice too late. The hard work's been done. Do on me. And that wasn't his fault. That's my fault because I didn't understand how negotiation worked. And so, yeah, like hundreds of thousands of pounds in equity, I had to source. I'd be a lot more wealthy if I had. And that initial pot behind me, but I was a complete idiot with my money in the military. I just wasted it. The only financial advice I got was go get a car and get a loan so you can get a better car. It's looking ridiculous. That's the stuff you get old when you look back at it. It's crazy.

So you need to fully accept that you're gonna be providing a service. You're not going to be buying deals, not from the word go, unless you've got a JV partner. So my advice to you if you're starting out is sourcing. You learn the art of sourcing. That's what it's going to take. You're going to be knocking on doors. You're gonna be pitching to sellers. And focus on one area. Don't, don't like pepper part over the whole country because if you become that go-to person, my agents will call you. What people call you up, and you are hitting the same area. I think that's a real good plus. There are absolutely rock stars who are able to source from all over the country and they've set up systems. And that's way beyond me. Like, honestly, I'm never gonna even attempt to learn what they're doing. And they're earning a hell of a lot more than I ever will from sourcing. But sourcing is exchanging your time for money. Recognize that. Recognize that the real sort of engine for wealth is holding property. And I've chatted to a lot of people who went pop in 2007, and you've just got to de-risk that. Don't be too greedy. Don't keep refinancing. And eventually, you will be a very, very wealthy person as long as you have patience. And this is why I say property is a decade-long play. And one example of that is when we have fixed return finance on a property. After we pay off, we still then divert those profits to the newer HMOs to enable us to get better returns and get the money back sooner from paying off the company. That makes sense. And then also, we never refinance after the second time we find that. So we buy, refurb, find that. We're never going to refinance. We'll pull out more. It's just stupid. Like everyone who went pop in 2007 say, I wish I didn't keep leveraging. I wish I didn't eat leveraging. We might use that equity like to bridge on and then pay off as we expand that way. But we're never going to refinance it and make that the norm. We're just going to keep it and let inflation eat away the debt.

So I want you to source and I want you to be really, really, really, really loud about what you're doing. Every mundane problem, every mundane success, share it because there will be somebody out there who may have money who will want to be where you are and maybe don't have the courage or don't have the tenacity, discipline, or even the desire. But just like look at what you're doing to think, yeah, I could do that. But then they don't bother their ass. And they might have money and they might lend you, or they might partner with you, or you might be able to source to them, etc. And so have a really low bar for what you consider content. So the pitfalls of a standing start, and what is the next subject? And that's gonna be basically, you've got a lack of experience. So people are going to take advantage of you. Yeah, for sure. It's going to happen. So if you can prepare yourself and have this in the back of your mind whenever you meet someone, whenever you like chat to somebody, there's a very few people, like very few, I can count them on one hand, who I would trust wholeheartedly. Everyone is out for themselves. And there's nothing wrong with that. But a lot of people will be wanting to step on others. And I made some mistakes that I tried to cut sources out and stuff. I did really because I was naive before. Yeah, this is the best way to do it. And then I burned those relationships. So just be really, really sort of more realistic in how you deal with people in business. You have to make sure that you are doing what you say you're gonna do. You build that trust. You build that sort of brand behind you. And stuff goes wrong for sure. No deals has ever been smooth. No sourcing like transaction has it ever been smooth for me. But having the ability to see if you stick with it, adapt to the problems, and see a route to the end will do real great testament to your character. And you'll build this as a set loyal tribe. So have in the back of your mind, everyone's groups there to screw you over. So protect yourself in every possible way. So if you're lending money, make sure you do due diligence on the person. If you're wanting to part with large sums of money for a trainer, make sure you run searches on the company house. Are they doing deals? Are the coaches doing deals? And when I say doing deals, I mean doing deals today. The industry changes so quickly. So, so, so quickly. If you, if your last deal was a year ago, you're not current. It has to be like, you have to be doing them. Doing them in the middle of some deals, suddenly in the pipeline, etc. And you won't hear this with many other coaches because most people tend to make quite a lot of money from coaching rather than it's supplementing the property income. So make sure that you're the person that you're investing, the person that you're doing due diligence on, you absolutely assume that they're lying to you until they give you proof. And that's the same with sources. Like never take anything at face value. Always check. Always do diligence. Do due diligence. Always do due diligence. And it just puts you in good stead. I have, we've been burnt for quite a lot of money in the past, just by twisting some money other word. In fact, quite a few times we've been burned, and we know we never do it now. Like we assume everyone's lying. We assume every... And maybe that will turn us into a negative person overall, but we're making a hell of a lot more money now. And that deals are a hell of a lot more successful. So when somebody tells you they're there, go check. When somebody tells you it's done, go check. But like, just don't assume. Right. And you may think, oh, that's gonna be really hard for systemization. I don't care. You need to ensure that stuff is done. You're not going to systemize in property to a grand scale in the early days because you haven't built that team. You haven't got those employees directly for you. So you're going to be using contractors. You're going to be using outsourcing, maybe like agents and stuff. Check everyone, everything, and all the time because the buck always stops with you, the landlord. And that's why starting from a standing start, you need to hit the books, hit the forums, hit the trainers, hit the coaches, hit the network that you're within, and try and learn as much about managing as well as sourcing because it's all, all very important. And the fines can be absolutely astronomical if you don't get this right.

So when should you go full-time into property? So I would say the first goal that you should have shouldn't be to go full-time into property. It should be, if you've paid for courses, or you've paid for education, or you've paid a lot of money for some mentoring, the first goal you should have is to get the money that you paid for teaching back. That should be your first goal. Not the old passive income, not build cash flow, or anything like this. And I'm talking to you who was starting with nothing from a standing start. So that's what I'd like you to do. How can you do that? You do it by sourcing. That's it. Just source and get your money back from how much you paid for training. If that's 15,000 pounds, that might be for deals or five years. But one really good deal. If that's because there's some high ticket items on there, that's like 30, 40K mentorships out there. I think which hey, if it brings value, then go for it. But when you've got those like the wealth dragons, that they're 15K for life. What the would you go anywhere else? It just, it just logically doesn't make sense. But if you bet spent 50,000 pounds or someone, don't buy more courses until you've got that recouped those funds. We have people who are course junkies who just go from mentorship, mentorship, mentorship, mixer, and they've only got one deal. Like stop it, man. Everyone is delivering the same stuff. The only thing they get is different. It's the surface after service. There's like, how many ways can you buy property? There aren't. There's probably maybe 13, 14 ways. And we're all teaching the same stuff. It's only the aftercare and the soil, like the solicitor, the broker, and the coaches and the mentors that are out there that support you and structure these deals for you. And that's the only thing that's different. So stop going to all these courses. And so say, if you do an SA course, don't, which I hope you don't, because they don't mind. Let's try to either. Don't then do HMO course, site development course until you've got the money back from the red SA course. And there were companies out there that will split every single thing up just to try and extract as much money as they can from you. And we, Alan, you don't need it to be splob. You can go into an all-encompassing network. You can get everything that you need. And start small. So don't try and do like a big 10 million pound deal. So we've got like a student that I'm helping out, and it's a cracking deal. It's a great deal, but it's too big. So what's going to happen is we're gonna source her out, which is great. She's gonna get a fee if it comes, and she's gonna get a lot of experience. But those big deals are very, they're very, very rare. So focus on the smaller deals if you can, because then you have a wider market.

Okay, so when to go full-time into property is after you've got all the money back from the course, you've got one buy-to-let in a company. And if you're going down the HMO route, you need one five-bed and you need to have had it for a year because then you've got experience. So you need to have income, gross income of over 25,000 pounds, as my personal opinion, because it will unlock lender. You need to have been a landlord for two years. So after you buy your first deal, you can land enough for two years. And if you do HMO or a bigger development, you need a couple of properties before you go full-time. Don't, not just one. Not just bloody rental rents, because then you're unable to get lending. Like, just you're screwed. You can't get lending. You need to plan and look after this new child that you have, which is your credit file. And when you quit your job, after you've done one rent to rent or a few sorts of deals, you start again in terms of how you're able to get finance because you need to have over 25K. You need to hit a few parameters in the tab. Landlord experience for the bigger deals. You're not going to be buying a 50-bed HMO on your first deal. You're just not. Anyone who tells you that it's probably there to sell you a course. Have a realistic expectation. Start small. If you're going to do HMO, it's gonna be five to six. Then you're gonna jump up to eight. And then maybe you can do some more exciting stuff. But just start with your vanilla buy-to-let. That's what I did. I bought one buy-to-let. It made 3,000 pounds in 10 years. I bought it in 2011, which was the lowest part of the market. So that's when I obviously overpaid massively in 2011 because they didn't go up. I sold it for 90. Gave ridiculous, but it is what it is.

So the timeline of a property business when you've got no money. I've touched on this on stages of a property journey. So I'm only just gonna briefly go over it. Stage one, you're gonna source until you get the money back from your course or whatever education you've got, because it's gonna give you sort of like the milestone. It's gonna give you a goal. And that's what I would hope that you would do in the first year. Its source to the point where you get your money back. Then you're gonna, after you've adopted the skill of sourcing, you're and you're being really, really loud about it, you're gonna jump into trying to raise finance. You might have to JV with one or two deals in the beginning, or you might have to partner with somebody who's got a lot of money but not all that time. And that might be the case. And then you're gonna build. And then you're gonna be sourcing for yourself, but still you're still in full-time work. This is stuff that you do at weekends and anything's in your holidays. Then you get to a point where you've got 25 gross income within the business, within the company, and you're also two years worth of experience. It's just gonna make lending very easy for you. And obviously discuss with your broker if you can still get lending and if you can leave and etc. You don't want to jump the gun before you are able to. And you also want to have that cushion. People talk about comfort. It's nice to have that cushion, especially if you've got families and living expenses. And there's a, you're talking about three, four years into your property journey. This isn't year one. This isn't year two. This is three, four years in. So this is the expectation I want you to have. So don't get disheartened when you're a year in and you haven't quit your job and you haven't got a bloody Tesla in the drive. It's, it's completely. But like, there are going to be people who you're look to and you're so how are they doing so good, so quickly, so fast? Those people are in the minority. Let me tell you. Most of us are just Mr. Average, Mr. and Mrs. Average. And you can replicate what other people do fairly easily just by having patience. Like ten years is gonna pass anyway, right? So we can't stop that. So we're not putting the work now and have an absolutely blinding life at the end of that ten years, rather than just postponing it, getting disheartened, you're copying other people, and you're still not getting the same results. Everyone is in their own lane. So just keep plodding away. Right.

And now you're on the size of the deals that you'd be looking at. You want to expect if you've got no credibility, you've got no history of sourcing deals, you're not gonna have a really big market to sell to. You can announce yourself on a few Facebook groups. You can announce yourself on a public page. But it's going to be quite difficult for you to sell those deals unless you go networking. That's the best place for that. I found people wanting to buy. So get some business cards, introduce yourself as a sorcerer. Don't come free. Maybe put a few. Don't lead ads out because then you get loads of calls from people wanting deals. That's quite an interesting tool. And then go source. Sourcing isn't actually as difficult to sell as you might think, as long as it's a good deal. And you're obviously compliant. Remember the property redress scheme, you've got business, I think it's public liability, no business liability insurance. You've got your code and you've got your anti-money laundering checks because you need to do AML checks on the people who buy your deals. And also, what to expect from sourcing when they say yes, I want to buy. Good. Congratulations. You've sourced your first deal. Give yourself a massive pat on the back. There's no other work. Wrong. This loads of work to do to see a deal from saying yes to fruition. It's also quite a better work. And in that time, you're gonna have to still account for your living expenses before you get that money from the source. And you're still gonna market. You're still gonna build up your pipeline of deals before you source them. And so you're going to be looking at deals under a hundred thousand pounds, I would suspect, just for the first couple until you get one or two over the line and you've presented yourself to the world and to the industry as a sorcerer. Then you can go for like four or five hundred thousand pound deals, maybe in London. And then in the cities, as you build your brand. It shouldn't be too difficult to sell a deal as long as it's good. Not 10% below the market. You need like good, good 25, 30. And you may think, ah, it's very difficult to get those deals. You have to build up this pipeline. You have to build up this big. Yes, I've got an Excel spreadsheet. Uh, but every offer I've made on a property. And every three months, it's connected to my phone. It's like a CRM. I get a message saying, call this person. Glad no, the offer's still there. And very often, it'll be like, yep, sold. I'll delete it. Some of those deals come through. And want the deal that we're working on this very moment in the UK, there's the six-bed. That was the deal that came through. But I wasn't in a position to buy. So I sourced it. I sold it for six grand. And it was online with the agent. It was advertised to the open market. But my offer got accepted. And I sold it for 6K. We're gonna be refinancing at refirming it for the client. He bought it for like two five five. He'll spend about 80 on it. We're 400 at the end of it. And he will get, because he's not getting a mortgage on that, which is somebody, I don't know why he's buying it cash. So that's why his first deal was able to be a six-page, included buying a cash. If it was lending, they wouldn't look at him. And he's gonna get about three grand to two thousand eight hundred of that, which is great for his first deal. And so he's gonna make all this money about pretty much instantly, which is fantastic. But that's the type of deals that you need to be looking at. Is in between the 300 and below for the first deal that you're going to be sorting on. First year, you'll want to be purchasing is a really site, a fairly standard vanilla buy-to-let with potential to extend in the future. You're not going to be doing anything too fancy for your first deal. So just a nice three-bed semi or detached or whatever you wanna go. Maybe it's got suitable uses for HMO in the future. But it's more about getting your foot on the ladder more than it is about making money for the first deal. Though the chunk of money that you're going to make from sourcing, it's probably what you're going to put into this first deal. And it's more about experiments. Buy-to-lets are great. You can get fairly good returns, but it pales in comparison to the HMOs. There's just nothing that comes close to it, unless you buy a bad HMO.

Right guys, since that is the end of the podcast. Thank you for joining me. I thought I'd do a nice backdrop in the apartment that we're in. This is Bangkok. I'm in Thailand at the moment with my the orphans family. So I'll be jumping online now and doing the podcast now I'm healthy and also that I have a good signal. Thanks for your time. Next week's podcast, again, Wednesday. Tune in and I'll be you.