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  • Deal Finding

    Advice on working with a deal sourcer

    Hello,

    How much would you expect to pay a property sourcer? I have seen posts on here discussing 1% of the price or 20% of the saving.

    What would you look for to ascertain a good sourcer? - local recommendations, registered with the Property Ombudsman, FCA, local knowledge.

    Would you expect to sign a contract? Most likely the answer is yes, but not sure it is the practice.

    Finally the method of payment and criteria - i would expect to generally pay the sourcing fee at completion, however i also recognise the fact that there are a lot of time wasters and the sourcer might want a deposit for his/her work, which I will expect to be refundable should he/she cannot identify a property according to my criteria which is rental yield and ROI% based.

    What happens if a deal falls through i.e. particularly if valuation is lower vs the price ?

    Thank you!

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    Hi there,

    Based on my own experience I'd strongly urge you to think very hard re using a sourcer.

    You might strike lucky but chances are the purchase will be flawed in some way.

    Historical / current rental yield and ROI % are all well and good but nothing beats proper due diligence which many sourcers don't provide / allow for - their prime interest is securing a buyer asap.

    By DD I mean understanding the local market & streets thoroughly, getting 2nd & 3rd opinions from independent letting agents, probing on previous paid prices, viewing several times, understanding local tenant trends plus many other tests.

    Many experienced property professionals don't use sourcers and I always wondered why. Until I tried buying an HMO through one of the most credible names out there - complete shambles but I luckily got my fee back.

    If you do proceed with a sourcer please ensure you attach binding conditions to any agreement, don't just sign their Ts & Cs.

    Good luck

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    i dont use sourcers however i understand why some do

    if i were in a position where i needed to use one id suggest i pay their fee once the purchase is complete and is performing as advised, see how may sourcers are confident enough in their advice to engage on those terms

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    Like with your accountant, using a sourcer should ultimately save you more money than it costs - so their fees will vary, but ultimately you should be better off as a result 

    E.g. a good sourcing company may charge £2k-£5k, but if they negotiate you a (genuine) discount worth £15k then, well, the maths is easy.

    I would look for a long history of trading/track record, Property Ombudsman membership and good reviews. But ultimately you need to be able to assess a deal yourself in order to be able to check a sourcer is carrying out the due diligence you would want, if that makes sense?

    The main reasons investors of all levels use sourcers is ultimately because they are time poor. They may know how to find a good deal, but don't have time to physically do it. This is particularly the case if they are looking to invest in remote areas e.g. an individual living in London who wants to invest somewhere like Manchester (either because they believe that's generally a better area to invest, or perhaps simply because price points there are more affordable for them, or both!).

    Lots of investors use sourcing companies where they want to diversify. They may be very happy investing in their local area, but they already have a few properties in their "patch" and don't want all their eggs in one basket.

    Building up enough knowledge of an area to invest in the right place isn't easy, so again partnering up with a reputable team/company can help Smile

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    I source,

    Local knowledge is absolutely  key I think.  I stick to about 7 square miles 

    Some sourcers spread themselves far too wide and work off a computer rather than get out and about

    Up to a 250K property  I charge £250 upfront to get off my bum and start looking  ( non refundable )

    Then £1750 on completion.

    You can pull out before completion for any reason

    One page contract.

    If the criteria was too strict and limiting  I may not take someone on

    Look for a Redress Scheme, Client Money Protection, Professional Indemnity

    Look for someone who has built their own portfolio as they have the experience

    When I was researching myself I phoned up several  sourcers and several  were rubbish

    But thats because I knew my stuff and I could see the holes in what they offered

    Mainly it was because they lacked detailed knowledge of the area they were sourcing in

    Some wanted 4K up front and you couldn't pull out once committed

    If I hadnt had the knowledge I had I could easily have been lured in

    They often sound very plausible

    Do massive DD on anyone before you even think of signing on the dotted line



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    Jonathan Clarke. http://www.buytoletmk.com

    Agree with Johnathan completely. Charge before you start is the key, ensures a target search is being done. I charge roughly the same.

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    Personally I would not use a one, But If you do ask lots of questions and "what If's".

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.

    I know free sourcers - they are called estate agents!

    They know their area and you can explain to them the type of property you are seeking and they will assist you in finding it.  Let them know that you can move quickly and that they should get in touch with you if a deal falls through, because you could help repair the chain by buying the property, but you would want a discount.

    You can also contact local lettings agents and ask them if any of their landlord clients are thinking of selling up so that you can buy a tenanted property.

    Finally, you can search on the Vesta platform for what amounts to a "ready made deal" - a property with a tenant in situ so that you start earning income from day one of ownership.  You can check the tenant's payment history, how they have been keeping the property, and get an idea of how long they wish to stay.  No additional costs getting the property set up ready to rent, as its already rented.

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    why make something complicated ??

    we all live in a house so we know a little about

    we all know bad streets good streets because we live in an area

    we all know Houses make money long term data is there

    we all know Estate Agents so all the info is there the value of a house and the rent you will get

    All you need to do is buy a house in the area you know and charge the market rent

    This is not complicated

    Once you have the first property you learn what you have done right and what you have done wrong

    Hopefully before some one buys they take time to read the rules and understand taxation and the obligations of being a good Landlord

    You dont in general need a Guru to ask to borrow your watch and tell you the time (and charge you for the Advice )

    BTL is a simple investment in terms of its clarity

    and every bit of info a new investor can need can be obtained for free

    Keep it simple Stupid

    Your views are spot on Fairy Godmother



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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.