I want to share with you a very interesting telephone conversation that I had with one of our investors the other day, during which I learned something that I was just not aware of….
…But first I am going to highlight a couple of aspects of sourcing that are becoming more and more prevalent in our sector and which, if not stopped, could quite possibly cause serious damage to an investors ability to gain finance.
Are you guilty of one or more of these?
- Sending your deals to a large investor list without thought to potential consequences?
- Claimed to be ‘Direct to Vendor’ when you weren’t?
- Passed a deal onto several other different sourcers’ for them to send to their investor lists?
So, why are any of these a problem?
Let me go back to the telephone conversation that I had with one of our registered investors…
The investor had been sent a potential development deal by another sourcer to assess and told that the sourcer was:
- Direct to the Seller
- The Deal was ‘Off-Market’
The investor carried out in depth due diligence and assessment on the site, the figures were great and so the sourcer was informed that it worked for them and they were going to apply for partial funding for the site.
When the application was submitted the finance company refused to work with them on the deal. Please bear in mind that this investor is very experienced in the development sector and has never had an issue with accessing finance from both major and smaller commercial finance providers before.
When asked why they would not fund this deal their response was…
“…We have seen this particular site before, having been asked to fund it for at least one other investor…if it was a good deal why have the other investors not progressed to purchase…?”
It is clear that some finance providers are getting ‘sensitive’ to deals being passed from pillar to post, multiple investors applying for finance on the same deal.
How long before this translates into the buy to let, HMO or any other property investment sector and the damage that could be caused to serious, experienced investors.
Think very carefully before you send your deal out to lots of investors or use other sourcers lists as well; it could seriously damage your reputation but longer term your investors ability to access finance streams!