What Really Annoys Me About Property Sourcers!
I am sure you have probably seen these types of posts all over the various property Facebook groups. Somebody posts a deal for sale with some very basic information, they do this to gain interest in the deal and hopefully find a buyer. So what’s the issue? Well the big issue usually, is a large percentage of these deals just don’t work. By that, I mean they just don’t stack up!
It could be they have overlooked certain costs, like legals, finance costs, sourcing fees, refurb costs etc or…
It’s advertised as exclusive, and a quick search online proves otherwise.
I’ve lost count the number of times I had to call somebody up and ask about their deal, knowing full well I was direct to vendor and had exclusive selling rights.
I honestly don’t know who is training these sourcers that try and sell properties and deals like this. One story that springs to mind is… I once went on a viewing in Oldham a few years back… the viewing was fine and when I got back to my office, I had an email sitting in my inbox with a list of allegedly exclusive deals – guess what I’m going to say… yep one of those exclusive deal’s was the very same property that I’d viewed. But it was more expensive!
I called the agent and asked if any offers been made and was it still available… she said no offers had been made and yes it was still on the market. She wasn’t best pleased when she knew somebody else was trying to ‘exclusively’ sell it. I forwarded her the email, and she was going to give them a call.
This email I got was from somebody quite big in the industry too. Literally zero quality control being done if their sending out emails like that. I shouldn’t be surprised having been in property for years, but it’s just really poor when you come across this sort of nonsense from sourcers.
Look if you’re a sourcer and you’re pinging out emails to investors and saying your deals are exclusive, but you know there not. Then all your doing is losing credibility. You’re quickly going to be found out, and then that investor tells other investors don’t bother with so and so and your name is mud.
It’s really not rocket science at all to package a deal.
If you source the investor first, you know how they will likely buy the deal so you can factor in purchase costs that are bang on the money and not a guess. You need to factor in all costs… before you’re giving them a figure on return on investment or telling them what the yield is or cash-flow.
If a property needs major refurb work, then go get a quote so you have something to hang your hat on. You have to understand as a sourcer, that you have fixed fees and moveable fees that can mean a deal stacks up or doesn’t. Don’t ever fudge the numbers on a spreadsheet to make a deal work. Who is that going to serve, think about it!
At the end of the day if you want to build a reputation and build trust and credibility you have to make sure you have covered all the costs including costs of acquisition, cost of any works, cost of finance, cost of legals, cost of ongoing management, cost of voids, cost of maintenance, cost of sourcing the deal.
And talking of cost of sourcing the deal… I see this question being debated a lot online. Should you factor in the sourcing fee when crunching the numbers on the deal? Well let’s pretend we are buying a deal from a sourcer… for us to buy that property we have to pay everything associated with the property, but we also need to pay a sourcing fee. For me it’s a cost of acquisition, so yes it should be in there. That way the investors R.O.I. is based on all the costs. The sourcing fee is still a cost for the investor so yes, I’d personally include it.
So if you’re a sourcer and your packaging deals and your unsure on how to present that deal to your investor – you have to give them all the numbers, do your homework and check your numbers over a few times. Be methodical, if your just sat there winging it, write yourself a process of things you should be checking and factoring in. Create your own workflow so nothing gets missed.
It’s so easy to throw some basic figures together but packaging a deal for an investor takes time and effort. You should give your investor a full overview, on the deal, the area, the potential exits, the tenant demand, the potential market growth etc.
Don’t be giving them a few figures and expect them to not come back to you without a dozen questions.
Not doing the numbers correctly and not securing properties and being transparent is what gets sourcers a bad name with investors.
Look… if you’re going to charge an investor a few thousand pounds for a deal you need to at least do the basics… find a good property and carry out a good level of analysis so they can look at it and have an opinion based on all the facts and figures.
Treat it like a business, have a process, be professional and build your investor relationships so they buy from you over and over again or at the very least you want them to be happy with your service and singing your praises to others.
Be transparent with your adverts for deals
Don’t mislead investors saying your deal is ‘exclusive’
Check all the figures twice (create a checklist to work from)
Don’t source deals then look for buyers – it’s a waste of your own time!
Build investor relationships and source to order
Be professional and have set processes within your sourcing business
If you want to learn more about sourcing and packaging deals – we offer a low-cost business in a box. Check out our deal sourcing and packaging online training which includes lifetime access and free updates forever.