What is Deal Packaging and is it Profitable?
Deal Packaging has gained huge traction over the years as a business strategy many people can get into, with little or no money or knowledge to allow them to earn enough money to invest in property themselves in a very short period of time.
There are many, many courses in the UK covering how to become a successful deal packager, and from research carried out by NAPSA - The National Association of Professional Sourcing Agents - it's estimated there are at least 15,000 deal packagers or sourcing agents in the UK.
Not all of these are operating of course, however it should give you an idea of just how big this market actually is.
But what exactly is deal packaging? How does it differ from other approaches like deal or property sourcing? And, most importantly, can it be a profitable business strategy?
What is Deal Packaging?
Deal packaging is the process of connecting property sellers with property investors. Essentially, a deal packager acts as a middleman, identifying what may be considered to be attractive investment opportunities, such as off-market properties, opportunities to add value or discounted purchase prices, that they believe would be of interest to an investor.
They negotiate and secure the deal with the seller before packaging it up and advertising key information about the potential deal on social media channels or to an existing email list and then send a more detailed presentation to any investor who expresses an interest; often asking for a reservation fee to be paid before the 'full details' will be provided.
1. Find a potential deal either on market or off market.
2. Negotiate a purchase price and secure the deal (off market only)
3. Advertise key deal facts on social media channels or to an existing email list
4. Expression of interest made by a potential investor
5. Reservation fee or deposit often requested to be paid at this stage
6. When payment received, full property deal presentation provided
7. Full ID verification and client due diligence (CDD) should be completed at this stage
8. Investor indicates that they want the deal
9. Deal handed over to solicitors to progress with the conveyancing process (only if ALL ID & CDD completed)
10. Deal sale completes and deal sourcing fee is paid.
A deal packager may take several different types of fees at different stages, a registration fee (payment to work with them), a reservation fee or deposit (to receive full details of the potential deal), the final deal fee (usually upon exchange of contracts or completion of sale).
How is it Different from Deal or Property Sourcing?
The main difference is that deal packagers will research and find the deal first, often without knowing who the investor is that will buy it from them and then once the sale is completed simply move onto the next deal.
A property sourcer will already know the investor, have built up a relationship with them, know exactly what they are looking for and then go out and find it. Property sourcers often also offer other services, such as refurbishment management or property reports, over and above the basic sourcing service,
No matter whether your are a deal packager, property sourcer, deal sourcer, deal finder, property search agent - or any other description that you give yourself, where you 'find opportunities' for a client - you will need the same compliance in place.
Is Deal Packaging Easy?
Deal packaging might sound straightforward, but building a successful business involves effort and clear strategy. Whilst it doesn't require significant upfront capital, it does demand a strong understanding of the property market, property investment strategies, property assessment, compliance with regulations, and excellent communication skills.
Most enter this sector believing they can complete the sale of a deal in a month. This isn't realistic (unless only dealing with Rent to Rent) - especially when the average property deal takes on average 16 weeks to complete right now, and thats from the time that it's handed over to solicitors for the conveyancing process to start.
You have to account for the time to find a potential deal and then find the investor, then complete all anti-money laundering risk assessments and ID checks - before even handing over to a solicitor to start the purchase process.
We would suggest reviewing these before deciding if deal packaging is for you:
- Market Knowledge - are you passionate about property in your area? Can you identify market trends and spot undervalued properties?
- Regulatory Compliance - are you willing to follow the rules and not cut corners on compliance? You must follow strict due diligence processes, much like an estate agent, before you onboard a new client or complete a deal.
- Networking - are you a good communicator? Success in property more often than not relies on building relationships with property sellers, estate agents, and other property professionals.
- Patience - you'll need plenty of it for deal packaging!
- Passion and Drive - it's those who don't give up go the furthest. There will be set backs, learning curves, but if you can stick with it, many go on to build successful businesses.
Many agents fail in their first year of deal packaging as they were often sucked in on flashy courses, selling the dream of making millions in just a few months. Speak to any agent with experience and you will quickly learn this is very much not the case.
There is a lot of hard work involved, more time commitments than most full-time jobs, learning curves at every level - but when done right and professionally - you can build a credible and successful property business.
Can You Make Money as a Deal Packager?
Yes, Deal Packaging can be a very profitable business strategy. The amount you can earn depends on your ability to find potential deals, assessing the potential of any deal, your marketing skills to attract potential investors and how professional you are at progressing the deal to completion.
The key is linking and building relationships with recurring clients, which means that, at least in part, you progress from 'deal packager' to 'property sourcing agent'. Most investors won't just want to buy one property, they will want to build or increase a portfolio. This is where you can help them find the deals that work for their particular calculations and goals, it is a well known fact in the marketing sector that...
"It's much easier to sell multiple items to one client, than keep trying to sell one item to multiple new clients'!
Depending on your current full-time salary or circumstances, you could earn enough to deal package full-time eventually, by completing multiple deals throughout the year - averaging between £2,000 and £5,000 per deal.
Despite the profit potential, your success hinges on offering value to both property sellers and investors. Delivering thorough due diligence, presenting accurate and timely information, and building trust are essential.
How to Start Deal Packaging?
If you are still interested in Deal Packaging, this would be our recommendation to get started:
1. Get Educated
Complete a property sourcing / deal packaging course and make sure you understand how the entire process works and what is expected of you, from marketing, finding investors, onboarding, compliant business set up and day to day operation, securing sellers, and completing a deal.
The right course should break down the entire sourcing process for you:
- AML Training (including proof of certificate)
- Data Protection Training (including proof of certificate)
- Teach you the entire process of sourcing (including due diligence, compliance, essential skill-sets)
- Provide you with the 18x legally required documents you need to operate compliantly
Please do not do anything else with your business until you have this understanding, training confirmation and documents in place. You will only be wasting time and money.
We offer our Complete Sourcing Programme, which will provide you with everything you need to know and have for your sourcing business, as well as receiving one year of NAPSA Membership to access 1-2-1 compliance support - giving you that peace of mind.
This course costs just £1,198 - significantly less than the majority other deal packaging and sourcing courses out there in the marketing, for the simple reason that we want to give you the chance from the beginning to do this right.
2. Set Up Your Business
This includes Companies House (Ltd Companies), insurance, ICO, property redress (TPO or PRS), and HMRC.
Please be wary of 3rd parties offering to set these up for you. We've encountered numerous issues where this has occurred, such as not the right coverage, names spelt incorrectly or even no cover at all.
When it comes to regulatory bodies, it is your responsibility to register currently - it will fall on you if the information provided is incorrect, inaccurate and does not accurately reflect how your business operates.
3. Join NAPSA
Either for free through the Complete Sourcing Programme, or for just £195 +VAT (£234) for the year. Access 1-2-1 support from the team, to make sure your business is set up correctly and won't put you at risk.
Not only that, once approved, you'll receive a business profile for investors to search and contact you directly - at no extra cost.
It's an incredibly useful platform for starting and growing your business, plus you get access to a raft of resources both compliant related, marketing and business development.
4. Network and Build Relationships
Establish connections with sellers, estate agents, investors, and solicitors. You can do this in a variety of ways, but usually attending local networking events, council meetings, and property events will help get you out there. You never know who you might meet!
If you're not sure whether you're ready for the commitment, we strongly advise you research before investing or starting anything. We speak to too many agents who have spent thousands and thousands in training before even getting anywhere.
Try our Introduction to Sourcing course here for just £1 - it will give you more information on what's involved so you can make an informed decision.
