Choosing The Right Property Sourcing Company: Insights For Investors
Growing a successful property portfolio can be a daunting and demanding process, with many steps, lots of pitfalls, and often conflicting options, opportunities and opinions.
But if you spend a moment to break down the steps, you can create a much simpler path. Utilising expertise from experienced and knowledgeable contacts at each step of the way.
The first step for many investors and buy-to-let landlords is choosing the best property investment locations and finding the right opportunities. This can be time-consuming.
This is where a sourcing company steps in, offering a valuable service to investors looking to grow their portfolios efficiently and effectively.
Just as a skilled accountant or financial advisor pays for themselves through expertise and saved costs, a professional property sourcer should deliver value that exceeds their fees. They act as your property detective, leveraging their expertise, local knowledge, and industry connections to secure deals that would be difficult to achieve independently. Unlike estate agents who work for sellers, property finders work exclusively for buyers, focusing entirely on your investment goals and requirements.
So the question is, how do you choose the right property sourcing company, and what should you expect from this partnership?
In today’s article we will walk you through everything you need to know about working with property sourcers in the UK, from the perspective of a property buyer and what is important to you to find the right properties and sourcing agent.
Contents
- The Basics of Sourcing Properties
- Finding and Evaluating Property Sourcing Companies
- The Types Of Properties Available
- The Process and Timelines
- Working Effectively with Property Sourcers
- Evaluating Deals
- Legal and Ethical Considerations
- Maximising Return On Investment with Sourced Properties
- Property Finder Fees FAQs
- Conclusion
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by Robert Jones, Founder of Property Investments UK
With nearly two decades in UK property, Rob has been investing in buy-to-let since 2005, and uses property data to develop tools for property market analysis.
The Basics of Sourcing Properties
Simply put, this is the process of identifying and securing profitable property deals.
A property sourcer, also known as a property finder or deal packager, specialises in finding properties that meet specific investment criteria set by their clients.
As a buyer, you can hire a property sourcer to help find you tailor-made deals or provide you a selection of ready-to-go, vetted and sourced houses or apartments.
The benefits of working with a property sourcer are numerous. Perhaps the most obvious is the time-saving aspect. Sourcers do the legwork, allowing you to focus on other aspects of your investment strategy or your primary career. They often have access to off-market deals through their extensive networks, giving you opportunities that you might not find on your own. Houses with better return on investment, bigger equity discounts, or simply researched tenant demand, so you know you are spending your valuable time only looking at properties that meet your criteria.
Experienced sourcers also bring in-depth knowledge of specific areas. Providing a deep local knowledge on what streets to avoid and which postcodes show the most potential for capital growth.
Their negotiation expertise can often secure better deals than an individual investor might achieve on their own. Either through contacts, experience of true market valuations, or simply skill.
Property finders often specialise in specific niches, such as:
- Purpose-built student accommodation
- Short-term and holiday lets investments
- Social housing developments
- Professional buy-to-lets
- Portfolio structuring and management
This specialisation means they can offer invaluable market insights for particular investment strategies. For example, a sourcer focusing on student accommodation will understand local university expansion plans, student demographic trends, and specific licensing requirements for student lets.
Finding and Evaluating Property Sourcing Companies
When it comes to finding the right property sourcing company or agent, there are several key qualities you should look for.
- Experience and track record are paramount – you want to work with sourcers who have a proven history of successful deals in the exact properties you are interested in. Look for companies that specialise in the property type, property strategy and location that fit your property investment checklist.
- Transparency is another crucial factor. Reputable sourcers should be open about their processes, fees, and any potential conflicts of interest. They should be able to clearly explain how they find and evaluate deals, and be willing to provide examples of past successes.
- Communication skills are also vital. A good sourcer should be responsive and able to explain deals clearly, keeping you informed throughout the process. They should be patient with your questions and take the time to ensure you understand every aspect of a potential deal. A good sourcing company won’t simply find a property, but will also help be your agent acting on your behalf throughout your purchase and even post completion to help ensure your asset has a management company and plan to achieve the best long term tenant match.
While looking for these positive qualities, it's equally important to be aware of potential red flags.
- Be wary of sourcing agents who make unrealistic promises or guarantee specific returns. Property investment always carries some level of risk, and anyone claiming otherwise should be viewed with scepticism.
- Pressure tactics are another warning sign. A reputable sourcer won't rush you into making decisions – they understand that property investment is a significant commitment and will give you the time you need to make informed choices.
- Lack of proper documentation is also a cause for concern. All deals should be properly documented and legally sound. If a sourcer is hesitant to provide paperwork or seems disorganised in their approach, it's best to look elsewhere.
- When evaluating a property sourcing company, it's wise to conduct thorough due diligence. Start by verifying their credentials – are they members of the Property Ombudsman? These affiliations can provide some assurance of their professionalism and commitment to ethical practices.
- Ask for case studies or examples of past sourced properties. This will give you a concrete idea of the types of properties they source and the returns their clients have achieved. Inquire about their sourcing process and how they find deals. A good sourcer should be able to explain their methods clearly and demonstrate how they add value beyond what you could find on your own.
- Understanding their fee structure is crucial. Make sure you know exactly what services are included in their fees and when these fees are due. Some sourcers charge a percentage of the purchase price, while others may have a flat fee structure. There may also be additional fees for services like project management or tenant finding, so make sure all of this is clear from the outset and be wary of handing over a sourcing fee in full at the beginning of the process. Many sourcing companies fees are payable on completion. This provides a clear incentive for all parties. Some may charge a small deposit which is fair to ensure that the level of work to provide the sourcing has some commitment from the buyer client.
- Asking if they have professional indemnity insurance is worthwhile, to provide an additional level of comfort they have everything setup correctly.
- Do they know the latest landlord legislation and how do they stay updated. The UK rental market is subject to frequent regulatory changes, and a good sourcer should be on top of these developments to ensure the deals they're offering remain compliant and profitable.
The Types of Properties Available
The types of properties and deals typically sourced can vary widely depending on the sourcer's speciality and your specific requirements. Buy-to-let properties suitable for long-term rental income with yields of around 6-8% gross rental yields are a common offering, as are Houses in Multiple Occupation (HMOs) or Serviced Accommodation (holiday lets) which can offer higher yields, upwards of 10-15% gross rental yields, but come with more complex management requirements.
Renovation projects are popular among investors looking to add value to a property. These might be properties requiring cosmetic updates or more substantial refurbishment.
Below Market Value (BMV) properties – those offered at a discount to their true market value – are always in high demand among investors and the right sourcing agent will know how to secure these properties off-market for their clients in any market.
Some sourcers also deal with off-plan developments, allowing investors to purchase new build properties early and at great prices before they're completed.
This can offer the potential for capital growth even before the keys are handed over and allows investors to acquire a brand new development completed to the latest tech and energy efficiency requirements.
Understanding how property sourcing agents find deals can give you valuable insight into their methods and help you evaluate their effectiveness. Many sourcers rely heavily on networking, building relationships with estate agents, auctioneers, and other property professionals who can provide them with early access to potential deals.
Direct marketing is another common strategy. Property deal sourcers may reach out to homeowners who might be interested in selling quickly, perhaps due to financial difficulties or a need to relocate. This can often lead to off-market opportunities that aren't available to the general public. If your sourcing agent has a regular supply of homeowners and property developers contacting them to sell their homes directly, this can be a great sign that the deals they have access to are unique.
The Process and Timelines
When it comes to timelines and expectations, it's important to understand that the property sourcing process can take time. After your initial consultation, which might take an hour or two, the actual deal sourcing can take anywhere from a few weeks to a few months, depending on your criteria and current market conditions.
Once a suitable property is identified, the due diligence and offer process might take another week or two. If your offer is accepted, the time to completion can vary significantly depending on whether you're a cash buyer or need to arrange financing. On average, you might expect the entire process from initial meeting to completing on a property to take anywhere from 6 to 16 weeks.
Working Effectively With Property Deal Sourcers
To get the most out of your relationship with a property sourcer, effective communication is key. Be clear about your investment goals and criteria from the outset. The more specific you can be about what you're looking for, the better your sourcer can target their search. At a basic level this can be deciding on your budget and if you are looking for a victorian terrace house in a local town or a new build apartment in an affordable part of Manchester.
Building Long-Term Relationships
The most successful property sourcing partnerships extend beyond single transactions. Look for sourcers who:
- Take interest in your broader portfolio strategy
- Have established networks of preferred professionals (brokers, solicitors, contractors)
- Provide ongoing market insights, local property data and opportunities
- Can help structure deals for maximum long-term value
- Consider both immediate returns and future exit strategies
However, don't try to put a square peg into a round hole. If you are looking for high yielding holiday lets, working with a sourcing agent that has an established pedigree and experience in land developments or property refurbishments won’t be a fit. They simply won’t have the niche experience you need, the contacts or the deal flow to get the best opportunities.
It's a good idea to establish regular check-ins to discuss progress and any changes in your requirements. The property market can move quickly, and your own circumstances or goals might shift over time, so keeping an open line of communication is crucial.
When your sourcer presents potential deals, try to respond promptly to queries or requests for decisions. In a competitive market, delays can sometimes mean missing out on good opportunities. That said, never feel pressured to make a decision before you're ready – a good sourcer will understand the need for due diligence and careful consideration.
Setting clear investment criteria is another important aspect of working effectively with a property sourcer. Consider factors like your preferred locations, the types of properties you're interested in (residential, commercial, HMOs, etc.), your budget range, and your desired yield or return on investment.
Think about your preferred tenant profile – are you looking to rent to professionals, students, or families? Consider whether you're open to properties that need renovation or if you prefer ready-to-let condition. Are there any specific features you're looking for, or any absolute deal-breakers?
The clearer you can be about these criteria, the more effectively your sourcer can work on your behalf.
However your sourcer can’t perform miracles so if you are looking for a discount of 30%, rental yields of 12% and a property that has recently been refurbished in the best part of town, this is unlikely.
Having some flexibility to your criteria helps, but don’t be afraid to stick to your plan. There is always another ‘deal’ around the corner, so it’s important to make the decision to buy only when you are confident it aligns with your property portfolio strategy.
Discuss the payment terms upfront. When is the fee due? Are there any circumstances where the fee might be refunded, for instance if a deal falls through? Some investors like to negotiate performance-based incentives, offering bonuses for deals that significantly outperform the agreed criteria.
Remember, while it's natural to want to minimise costs, the cheapest option isn't always the best value. A skilled sourcer who charges a bit more but consistently finds great deals can be well worth the investment.
Evaluating Sourced Deals
When your property sourcer presents you with potential deals, it's crucial to evaluate them carefully. While a good sourcer will have already done significant due diligence, as the investor, the final decision – and the risk – is yours.
Start by looking at the key metrics. Yield – the annual rental income as a percentage of the property value – is a fundamental measure of a buy-to-let investment's performance. But don't stop there. Consider the potential for capital growth: is the area up-and-coming? Are there any planned developments or infrastructure improvements that could boost property values?
Cash flow is another critical factor. Look beyond the headline yield figures to understand what your monthly income will be after all expenses – mortgage payments, management fees, maintenance costs, and so on. A property with a high gross yield might not be as attractive if it comes with high running costs.
Consider the overall return on investment (ROI), taking into account both rental income and potential capital appreciation. If the property needs work, factor in the cost of necessary renovations or improvements. A property that needs some TLC might offer a better long-term return than a more expensive, ready-to-let option.
When analysing a deal, it can be helpful to conduct a comparative market analysis. How does this property stack up against similar properties in the area? Are you getting a good price? What are typical rents for comparable properties?
It's also wise to create a detailed cash flow projection. Estimate your monthly and annual cash flow, taking into account all possible expenses. Don't forget to factor in potential void periods – times when the property might be empty between tenants.
Your sourcing company will be able to help you with this, but always, always do your own due diligence and triple check the figures. Is the rental comparison and sale comparisons correct ? Don’t be afraid with checking with other local agents to make sure you are comfortable with the figures being presented.
Stress testing is another valuable technique. How would the investment perform if interest rates were to rise? What if the area experienced an economic downturn and rental demand decreased? While you can't predict the future, considering different scenarios can help you understand the level of risk you're taking on.
Always consider your exit strategy. Even if you're planning to hold the property long-term, circumstances can change. What's the likely resale value? Would the property appeal to other investors or owner-occupiers? Is there potential to add value through renovations or extensions?
While it's exciting to find a promising deal, it's equally important to know when to walk away. If the numbers don't add up – if the projected returns don't meet your investment criteria – it's usually best to keep looking. The same is true if there are too many unknowns or if the risk factors seem too high.
Legal and Ethical Considerations
When working with property sourcing companies, it's crucial to understand the legal landscape and ethical considerations that govern this relationship. In the UK, property sourcing is not as heavily regulated as some other aspects of the real estate industry, which makes it all the more important for investors to be well-informed and cautious.
Firstly, any reputable property sourcer should be registered with HMRC for anti-money laundering supervision. This is a legal requirement for businesses involved in estate agency work, which includes many property sourcing activities. Don't hesitate to ask for proof of this registration – a trustworthy sourcer will be happy to provide it.
Another key consideration is the use of proper contracts and agreements. A professional property sourcing company will always use written agreements that clearly outline the terms of their service, including fees, the scope of work, and any guarantees or warranties. These contracts protect both parties and help prevent misunderstandings down the line.
It's also worth noting that property sourcers must comply with consumer protection regulations if they're dealing with private sellers. This means they need to be transparent about their intentions and avoid using any high-pressure sales tactics.
Protecting Your Investment
When engaging with property sourcers and property finders, protect yourself by:
- Asking about escrow services for any required deposits
- Getting proof of funds requirements in writing
- Ensuring clear documentation of all agreements
- Understanding exactly what services are included and what is the property finders fee
- Confirming their professional insurance coverage
Warning signs to watch for:
- Sourcers not interested in verifying your proof of funds
- Requests for large upfront fees without protection
- Lack of interest in your long-term investment goals
- Pressure tactics or unrealistic promises
- Reluctance to provide professional references
Ultimately, while the legal and ethical landscape of property sourcing can seem complex, working with a reputable, professional sourcing company can help navigate these waters. They should be able to explain clearly how they comply with relevant regulations and operate ethically. Don't be afraid to ask questions – a trustworthy sourcer will appreciate your due diligence and be happy to provide reassurance.
Maximising Return On Investment With Sourced Properties
Working with a property sourcer can significantly enhance your return on investment (ROI) if done correctly.
Consider property A vs property B
In the same part of the city. Property A has been selected by a sourcer. It’s market value is £300k, but they have secured a purchase at an agreed price of £270k, as they noticed it had a recent sale fallen through, they attended a viewing the same day and agreed the price within 24 hours.
Vs Property B, a new property that comes on the market for £300k, looks good, attracts early interest and the buyers get competitive and bid up the price. It eventually sells for just over asking price at £310k.
This is a £40k swing in value and happens way more than you might think.
Homeowners and investors can get very emotional when buying (and selling property).
Having a skilled property sourcing company manage the process on your behalf can be time-saving but also really provide a benefit to your bottom line and return on capital invested,
The key is to leverage their expertise and network while maintaining a clear focus on your own investment checklist.
Property Finder Fees FAQs
Let's address some frequently asked questions that investors often have about working with property sourcers:
Q). How much do property sourcers charge / how are property sourcing fees typically structured?
A). Fee structures for a property finding service can vary based on property value:
- Properties under £100,000: Could be up to 5% of purchase price
- Properties over £1 million: Typically around 1%
- Standard sourcing fees: £2,000 to £5,000 for typical buy-to-let properties in most areas
- Package deals: Higher fees for additional services like refurbishment project management, help with house flipping or property management
Q). Should I pay a deposit to a property sourcing agent?
A). Not all property sourcing agents charge deposits, however, it is common practice, if working with an agent that has already carried out a significant amount of work on securing an off-market property. The deposit ensures commitment from both the buyer and seller, helping secure the deal. Typically, deposits range from £500 to £1,000, depending on the specifics of the agreement. It is important to fully understand the terms of the deposit, such as when it should be paid and how it is protected. Some deposits are refundable if held in escrow, but if paid directly to the agent and the buyer pulls out for no fault of the seller or the agent, then the deposit may be forfeited. Always confirm how the deposit will be handled to ensure it's securely stored and you are happy with the terms before proceeding with an property sourcing company.
Q). Can I trust the valuations provided by a property sourcer?
A). While a good sourcer will aim to provide accurate valuations based on their market knowledge and comparable properties, it's always wise to do your own research or get an independent RICS valuation.
Q). What if I'm not happy with the properties being presented?
A). Communication is key here. If you're consistently being shown properties that don't meet your criteria, it's important to have a frank discussion with your sourcer. It may be that your expectations need adjusting based on market realities, or the sourcer might need to refine their search criteria. In some occasions in can be that it is simply not the correct fit and you are best suited to finding a new sourcing company to help.
Q). How quickly can I expect to be presented with suitable sourced properties?
A). This can vary depending on your criteria and market conditions. In some cases, a sourcer might have suitable properties available immediately. In others, especially for specific requirements, it might take several weeks or even months to find the right opportunity as they provide a tailored property search for your exact requirements.
Q). What happens if a deal falls through?
A). This should be clearly outlined in your agreement with the sourcer. Some might offer to find a replacement property at no extra cost, while others might charge a reduced fee for subsequent deals. Make sure you understand the terms before you start working together.
Q). Can a property sourcer help me if I am a first-time investor?
A). Absolutely. Many sourcers are happy to work with first-time investors and can provide valuable guidance throughout the process. However, make sure you choose a sourcer who is patient and willing to explain things clearly. Don’t feel pressured in to going for the first property you see and clearly understand what happens post-purchase. Many first-time landlords and buy-to-let investors get a little lost on their first property as everything is new, so make sure you have a clear understanding of the support provided for ongoing management and maintenance of the property for you. Think of it as building a long-term relationship not simply a one-off property transaction.
Q). Should I work with multiple sourcers?
A). While there's no rule against this, it can sometimes lead to confusion or duplicate efforts. If you do work with multiple sourcers, make sure they're focusing on different areas or property types to avoid overlap or even competing on the same property and needlessly bidding up the prices against each other by accident.
Access our selection of exclusive, high-yielding, off-market property deals and a personal consultant to guide you through your options.
Conclusion: Make Sourcing Property Work For You
Working with a property sourcing company can be a game-changer for unlocking growth with your chosen investment strategy, providing access to deals you might never find on your own and freeing up your time to focus on other aspects of your business or life. However, the key to success lies in choosing the right sourcer and establishing a productive working relationship.
Remember, a good property sourcer is more than just someone who finds properties – they should be a trusted advisor, guiding you through the complexities of the market and helping you make informed decisions. Take the time to vet potential sourcers thoroughly, looking for those with a proven track record, in-depth local knowledge, and a commitment to ethical practices.
But remember, it doesn't absolve you of the need for due diligence. Always do your own research, seek independent advice when necessary, and don't be afraid to ask questions or voice concerns.
There is risk in any investment and property is no different. Caveat emptor is very true with property.
Though with a plan and a clear outline of expectations, you can build a very successful portfolio using a property sourcing company and other experts (surveyors, solicitors, accountants, refurbishment teams, management teams and mortgage brokers).