To sort the fact from the fiction, PIT spoke with Rob Bence – one half of the popular Rob & Rob podcasting duo and the co-founder of Property Hub, a property investment and property management company with offices in Manchester and London.
As part of Property Hub’s free educational resources, he co-presents The Property Podcast with Rob Dix, where they look to demystify property investment but also provide honest, real-world, pragmatic advice and information on the potential difficulties it can bring.
What are rent to rent and lease option agreements and are they viable investment strategies for fledgling or first-time investors?
Rent to rent is where you rent a property from a landlord and rent it out to a tenant yourself – so you’re renting to rent and are essentially acting as the landlord on a property you don’t own.
It’s a pretty niche strategy and there are some positives like no mortgages to consider and no hefty deposits or stamp duty to pay, but you’re still exposed to the same risks as if you owned the property – void periods, maintenance fees, etc. So even if you have a month where no income is flowing through, you’ll still need to pay the landlord.
It sounds attractive, but because you don’t need a lump sum to get started, many of the poor-quality training courses will offer this as a starting option to cash in on the promise of a no money down deal.
A lease option allows you to control the property and generate an income, with the right (but no obligation) to buy it at a later date. It’s legally binding and will generally have four principles:
The monthly payment.
The purchase price you’ve agreed on should you wish to purchase it in the future.
The timescale of when you’ll need to give the property back if you haven’t proceeded to purchase it.
The advance payment you’ll give in exchange for the option to purchase the property (which is called a consideration by law).
For agreement to be legally binding, there’ll always be some form of upfront payment, but this can be as low as £1 – which again, makes it appealing for course providers to focus on lease options to get people through the door with the promise of buying a property for just £1.
If a lease option is structured correctly, it can be win-win for both parties. But they’re complex instruments and far harder to actually implement than is generally implied, which doesn’t make it a great strategy for a first-time investor.
What are no money down deals and are they really possible? What are the pros and cons?
You’ll always need money to invest. Whether that’s yours or someone else’s.
Yes, there are strategies that allow you to control assets, manage property and make a profit – but most are hard to do, particularly if you’re new to property.
Ironically, they’re more suited to experienced investors who have the knowledge to implement these structures, even though they’re pitched to beginners. In any case, these are very rarely ‘investments’ because there’s no asset and no capital growth.
Certain property trainers promise people financial freedom in a week and argue that anyone, at any age, can start their property investment journey without any money – is this a responsible thing to promise?
‘Promising’ isn’t responsible at all. Their method is to prey on needs/wants. And people get excited at the prospect of getting rich quick, attend a course in a highly pressurised environment and get caught in the moment.
In truth, there’s more chance of winning the lottery than getting rich in the short spaces of time that’s promoted by most course providers. If it was that easy, the training providers wouldn’t be holding the volumes of courses they do, they’d be reaping the benefits from their property investments.
You can get rich with property over the long-term, but it’s not a quick solution by any means.
What should people be wary of when starting out on their property investment journey? How can they tell the difference between genuinely useful training and schemes peddled by get-rich quick merchants?
Avoid courses that offer big/unrealistic promises. Common sense should prevail; if it sounds too good to be true, it usually is. Marketing can be seductive so it’s important to resist getting drawn in.
Check whether the person running the course has actually done what they’re teaching – not that they’ve paid for training and are replicating the training course.
Reviews are powerful, so check what others have to say about them online. Successful providers will always be more than happy to provide testimonials of others that have had success.
Make sure you understand exactly what’s going to be covered, and get assurance of what skills and knowledge you’ll walk away with.
Don’t ignore your gut feeling. If it feels off, it usually will be. So make sure you click with any provider you’re about to get involved with.
What would be your best piece of advice to people starting out in property investment?
Before you spend hard-earned cash on any course, and even before you dive right into making your first investment, always spend time on educating yourself and doing your due diligence – whether that’s on the education provider, property sourcer or the deal itself.
Give yourself a fixed period of time – say, six months – just to absorb free resources, before you even think about spending any money on a course.
There are so many free education resources available – all that’s required is your time and attention. And you can save the cash in the bank ready for when you’re ready to invest.
Soak up all the free online courses, books and podcasts, and connect with like-minded investors who would be keen to share their experiences.
We’ve also done a video on how to get started in property here.
Is there a responsibility for property investment trainers/mentors to say how it really is so people don’t get their hopes up?
There should be, but they might not make money if they did.
Property investment can be hard. We’ve spent years educating people on the brutal truths of investing in property for this very reason.
There should always be a caveat with any investment, but that’s rarely focused on in training courses. As with any content, there should always be a balanced view so educated decisions can be made.
Is it morally OK to target 16, 17 and 18-year-olds for property investment courses, via platforms like TikTok, as some property trainers do?
TikTok is a great platform for educating the younger generation. However, targeting teenagers with promises of getting rich quickly isn’t something we’d advocate. You’re taking a highly vulnerable audience and specifically targeting them with grand promises in exchange for cash – which isn’t always likely to end well.
Should the property investment training sector be much more regulated? And is it reasonable to charge upwards of £10,000 for courses?
Charging that amount for something that’s freely available elsewhere isn’t reasonable. Of course, businesses are in business to make money, but there needs to be value given and promises need to be realistic.
From the research we’ve done, many courses don’t give you any information you can’t find for free elsewhere or at a far lower cost.
We’ve actually done a video on the ‘8 things property gurus don’t want you to know.’ (You can see this below).
This post has originally been featured in Property Investor Today.