What is Property Sourcing?

sourcing Apr 24, 2022
 

It was wrong of me to believe that everyone in the property investment sector knew what property sourcing was and I was completely nonplussed recently, when presenting at a live event, when I had not left the first slide when someone asked me; "What is Property Sourcing"?

We often jump straight into compliance and the legal side of our sector, but don't really stop to think about explaining what it is we actually do, especially for those who are new, inquisitive or just never heard of sourcing agents.  

 

So what is Property Sourcing?

In it's most simplest form, Sourcing can be broken down into three key components: 

  1. Buyer
  2. Seller
  3. The Packaged Deal

Sourcing agents are really 'go-betweens', they operate between the seller and the buyer, brokering a deal and working to ensure that the sale completes.

Generally a Sourcer either finds a property that the owner wants to sell, that they feel would be attractive to a property investor to buy and then find a buyer for that deal; or they find the buyer first and then look for a property that exactly matches their investment criteria.  They then monitor the 'deal' to ensure that it progresses, the sale completes and the Sourcer gets paid!

Of course, in the real world, the time it takes from finding the deal to it selling and a sourcing fee landing in the bank account, can be several months apart, and then there are those deals that fail to sell at all.

We believe that Property Sourcing is a people business and all about building relationships. You have to understand your buyers investment criteria and what seller's wants or needs, before you even begin to match them together. 

  • What sort of property is your investor/buyer looking for?
  • Where do they want to buy?
  • Why is your seller selling their property?
  • Is the seller distressed - Financially or may be divorcing? 

This is where the best sourcing agents spend time to really get to know their clients (both buyers and sellers), listen to their wants and needs, and take everything into consideration to ensure that the agreed deal works for everyone. 

It's not always plain sailing - as we've certainly found over the years - but when it works, it's a great feeling and can be a great way to earn chunks of cash that the sourcing agent can eventually use to invest in property for themselves. 

 

Many, Many Names

We've lost count of how many different names are used for what is essentially the same thing, a sourcing business.  Often these different names are used to try to avoid the requirement for compliance; which, by the way is absolutely not the case and no matter how you describe what you do, full compliance is always required.

Below are just a few examples of those we have come across:

  • Property Sourcers
  • Deal Packagers
  • Deal Sourcers
  • Deal Introducers
  • Portfolio Builders
  • Property Introducers

 

Are you good at networking?

A big question is always, how do you find all of these buyers and sellers?  Marketing will certainly help, advertising your business and skills may well get some attention - but you still need to get out there.

The best Property Sourcers know their 'patch' -  The ability to understand the best areas for, first time buyers, down-sizers, hot spots for rental income, HMO's or Serviced Accommodation; understanding their local market can get them ahead of the game and attract serious investors wanting to use their services!

Property Sourcers need to build connections, a 'Power Team' from developers, estate agents, builders, solicitors, finance advisors - anyone who may be able to help you find your seller, your buyer or support you in providing a more professional service. This all means that you have to get comfortable talking to people and build those relationships.

It is also very important to stay up to date, not just around compliance, but also spotting potential changes in market conditions.  You can do this by attending industry events, and of course these are opportunities to connect with other property sourcers, potential investors or even sellers. 

 

Not a 'get rich quick' scheme

We've heard so many times you can get up and running and earning thousands quickly - while this may happen for a lucky few, for many it can often take 6-12 months+ before you even have an established network of buyers and find suitable deals to send out to them to assess. 

Sourcing should always be considered to be a business and so think about it like this... 

Just as an example, if you need to get £30,000 per year income to leave your current job, how many deals do you have to sell to earn that?  If we agree to charge £3,000 per deal, that is 10 deals every year.

So, to sell 10 deals per year how many leads would you need each month?

How many of those would convert to viewings per month?

How many of those viewed would you make an offer on?

How many of those would your buyer agree to buy?

How many of those would actually complete and you get paid?

We know from experience that you can have 20 leads in a month, only 10 are worth viewing and of those you only make one offer.

And of course there are other costs to running your business so that £30,000 income to your business will reduce as you will have to allocate costs to its running; in reality you would need to bring in closer to £40,000 in order to cover tax and other running costs!

Sourcing can be used, even on a part time basis to earn chunks of cash and eventually enable you to be able to invest in property yourself, you just need to be realistic about how much effort and time it can take.

 

Want to know more?

Based on LinkedIn alone, we believe there are over 15,000 Property Sourcers in the UK alone (although they don't always call themselves that). Many of these have undertaken extensive training in how to be a sourcer, often spending thousands of ££££ before even starting their business. 

This is why we've developed our super short course (you can complete in less than 2 hours), which will give you a deeper understanding into Property Sourcing, and more importantly an insight into the time and cost of setting up - as well as what's required of you legally. 

From there, you'll have a pretty good idea if it's the right move for you, before investing your hard earned cash. 

As ever, if you're unsure we offer a free 15 minutes to chat through and we can give you our recommendations - just click via box below this post. 

Looking to get some questions around your business answered? Arrange a free 15 minute chat with Tina to see how we might be able to help.

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