The Truth About Deal Sourcing

I've helped thousands of people like you become successful investors. Once you know how to find great deals, and that really is the most important thing that you should learn, you will probably find more deals than you will want yourself. So you should keep the very best deals and the deals that you don't want, you should think about selling onto other people.

Now, there are some rules around Deal Sourcing. Obviously they have to be good deals in order to sell them onto other people. I want to dispel some of the myths and explain some of the truth about deal sourcing in this blog.

Firstly, let's go through the definition of Deal Sourcing. So what that means is you go out and find a great deal and you will do some work, you will add some value. So you won't just go and find a property for sale on Rightmove and try and get a fee for that. That's not how it works. You need to speak to the owner, negotiate a deal, probably secure the deal and that's sourcing a deal, and then you can package it by selling it to someone. What packaging means is that you actually do all the work.

So the person who comes in to buy that property, is just signing the mortgage, signing the legal documents and the property becomes theirs. So you're doing all the due diligence, you're doing all the work, all the negotiation. If the person buying the property has any sense, they will obviously sense check the information you've given them and they should absolutely check your figures. They should make sure they check your information because they are making a significant investment decision.

This brings up the next topic, are there any qualifications to be a deal sourcer in the UK? The answer is no, there's no qualification to be an Estate Agent or to be a Deal Sourcer. Very often people think that Deal Sourcers are like Estate Agents. I suppose in a way they are similar. However, there's one major difference. As an Estate Agent, you'll have a client come to you, they will contract you to sell their property for them. There is a relationship between the estate agent and the property seller.

As a Deal Sourcer, you may have no contract with the owner, they could be someone who you found, who might well have property listed for sale with an Estate Agent, and that Agent's been unable to sell the property. Maybe they've also tried to sell it, and the sales fall through a number of times and are really frustrated. They just need to sell it quickly. They've come to you in response to some of your marketing and advertising. Finding these people will be done through leaflets, through newspaper adverts, letters to landlords, word of mouth, social media, there are lots of different ways you can find potential deals. You need to assess that deal, work out if it's a good deal. And if it is a good deal that you don't want, you can then sell it to someone else.

If you are selling deals to other people, there are some issues around compliance. So it's not law, but it's recommended you are compliant to make sure you're not doing things in an incorrect way.

So let me run through some of the compliance you should have in place if you are looking to sell deals to other people. By the way, if you're just looking for deals for yourself, there's no compliance, no really regulation required at all. This is just if you want to sell deals to other people for money. So first of all, it's a good idea to be a member of one of the Property Ombudsman. So there's the PRS or there's the TPO, the Property Ombudsman. It'd be good idea to join one of those. So if you have a dispute, that's a way of that being resolved, that's the first thing.

Secondly, you should have Professional Indemnity Insurance. If you make a mistake and you described a property as a full bed property, and it was only three bed, and they try and sue you, you want to have insurance in place. Next thing is, as a property investor generally you should be registered with the Information Commissione. This is important because you will be holding details of potential tenants, potential sellers, as private information you need to make sure you look after that information and have a privacy policy, and also a security statement in compliance with GDPR. You can find out more about that at the information commissioner website. It doesn't cost much to register, but you should be registered there.

Also, if you are accepting money from people who are buying property from you, you need to carry out your anti money laundering checks, AML checks. You can vote simply register, there are companies that can do that for you. You would need to be registered with HMRC as a property deal seller, they don't really have that classification. So it's kind of like an Estate Agent, as I said, you are not an Estate Agent because you don't have a contract with the seller to sell their property on their behalf. If anything, you have a contract with whoever you're selling the property to, and they are paying you a fee for finding that deal and putting it all together for them.

So there are some subtle differences here. It's very similar to being an Estate Agent, but you're not actually in the state Agent. One final comment to make is, a lot of people don't want to accept money deposits and reservation fees from their investors who are buying properties. Many people will use their solicitor and they will encourage the person buying the property to use that solicitor. They can then lodge a reservation fee with that solicitor and the solicitor will take care of all the anti money laundering checks. So that's what many people do as well. But obviously the checks do need to be carried out and you should know people who you are working with. So that's a little bit about regulation.

Next thing when I talk about the truth about deal sourcing. How much can you actually make being a Deal Sourcer? Well, typically in the UK property deals might sell for between three and £5,000 per deal. It very much depends on the nature of the deal, is it a big discounted deal? Is it a Purchase Lease Option? What's the Return on Investment? So the amount that you can earn will depend on the nature of the deal. If you were sourcing development deals, for example, the fees you might make could be tens of thousands of pounds. So it's very profitable thing to do. But typically three to £5,000 is how much you can charge.

Personally I don't like it where people charge upfront fees. I think that kind of tends to go wrong. I think the best way is to get good at finding deals, simultaneously find people who don't have the time, the knowledge or the inclination to find deals themselves, and they're really happy to pay you a fee. Then when you find a good deal, you can quickly match it up with the buyers. You do need to make sure that buyers are in a position to go. i.e they've got deposits, they can get mortgages, they're set up with your solicitors or registered. This is because the nature of the Motivated Sellers with whom you're working, you're buying properties from is they need speed and certainty. So you've got to be very quick doing this. If you find a great deal and then take four or five months to find someone to buy it, that's not really going to work for everyone. You've got to make sure you're doing this properly. And that's one of the biggest problems with deal sourcers. Many Deal Sourcers, frankly don't know what they're doing. I think the reason for this is that often people are attracted to Deal Sourcing who don't have any property experience. They see it as a good way to make money, and the money they make, the fees can be used as deposits for the property they want to buy. That makes a lot of sense.

The only problem is the people who are new to property, don't actually educate themselves as to what makes a good deal. And so they don't educate themselves on that, well, they're wasting their time and everyone else's time. So if you are sourcing property, it's really important you educate / find out how to do it properly. What makes a really good deal? If you are buying deals from a sourcer, just because someone says they're a Deal Sourcer, don't assume they know what they're doing. I'd want to check, well, are you compliant first of all, are you registered with the Property Ombudsman or POS? Are you registered with the Information Commissioner? Do you have your Indemnity Insurance? Are you registered with HMRC? If someone can't answer yes to those questions, I would suggest they probably don't really know what they're doing and maybe you don't want to work with them.

So if you want to do Deal Sourcing in the UK, please make sure you do it correctly. I actually have some in depth training about this, which you can access completely free of charge. If you look in the link below this blog, you can register. I've got a whole load of video training that goes into detail about how you can actually do it, a step by step. I do hope that you understand just how much money you can make from Deal Sourcing.