In this article I'm going to focus on how you can benefit, from passing property deals onto others. Can you really make serious money selling deals and leads onto others? Yes you can. But like anything else this takes time and effort.
To benefit from selling deals, you get paid for finding a motivated seller and putting them together with a buyer. You would then charge a fee to the buyer. The better the deal, the more money you can charge.
You will make the most money if you find the seller and the buyer. Many investors have no problem finding the motivated sellers but struggle to find buyers. This will be my main focus in this article.
“A word of caution here, always check the deals that someone else has sourced. This is to ensure they are good enough to pass onto your buyers.”
To be able to charge a fee, you need to be actively sourcing deals from motivated sellers. Just looking for deals from auctions and estate agents will make it difficult to sell them. This is especially if they are freely available on the open market.
Realistically you should only expect to make money from leads and deals that aren't on the open market. There are many ways of finding these motivated sellers. This includes newspaper adverts, leaflet campaigns, the internet, referrals and word of mouth.
Alternatively, if you have a ready supply of buyers, you could work with other investors who find the deals. You then put them together with your sellers and split the fees between you.
A word of caution here, always check the deals that someone else has sourced. This is to ensure they are good enough to pass onto your buyers.
Why Would Someone Sell a Deal If It Is So Good?
If it is such a good deal, why would you sell it to someone else? One would expect that you are naturally going to keep the best ones for yourself.
However, there are 5 very good reasons why you might consider selling some of your deals:
1. Too Many Deals to Buy Them All
You may reach a point where you have so many deals that you can't physically purchase them yourself. One of the constraints you face is that you can only obtain a certain number of mortgages. If you apply for too many mortgages in too short of a time period, mortgage companies may consider this suspicious. They can then refuse to lend to you.
The problem with having too many deals has happened to many of delegates on my Property Mastermind Programme. They decided that rather than wasting these good deals they should package them up for other investors who can’t, or don’t want, to find their own deals.
2. Selling Deals Creates Cash
You may want to add to your income gained from your monthly rental profits by selling the occasional deal. This is better than purchasing a deal that might tie up too much of your money. You then may decide you would prefer making several thousand pounds by passing the deal onto someone else.
3. Out of Your Geographical Area
If you find a deal that is out of your investing area, rather than creating extra management hassle and potential problems, why not pass it onto another investor? Someone who is looking for deals in that particular area.
4. Dont Have the Resources to Do the Deal
You may decide to sell a deal if it requires too much investment. This is especially if you don't have any suitable Joint Venture partners who could finance the deal for you.
5. Does Not Fit Your Strategy
Most investors have a clear idea of what deals fit their strategy and sell on any deals that don’t fit.
“The property must be in an area with a strong rental demand so that it is easy to find a good tenant.”
What Makes a Good Deal?
Most investors (who attend property networking meetings) are probably looking for a genuine 25% discount off RICS valuation. This means for the property valued at £100,000, investors will be looking to pay no more than £75K.
There are many deal finders who package up deals so that the buyer does not require the normal 25% deposit. In the past we may have purchased like this, but now I don’t think this is a good idea. I feel it is a bit too risky. Some of the ways I see people do it are very close to mortgage fraud. Ultimately, it comes down to personal choice and the level of risk you are happy with.
A more robust strategy would be to use “Momentum Investing”. This is where you purchase the property at a genuine 25% discount. You would be putting in the normal 25% deposit (either your money or JV partners cash) and then in 6 to 9 months later you re-mortgage the property. This would be to recycle the deposit which can be used in the next purchase. If you are using this particular strategy it is important that you obtain mortgages with no redemption penalties. This is so that you are free to re-mortgage when you want.
Please remember that the discount alone is not the most important factor. The property must be in an area with strong rental demand so that it is easy to find a good tenant. There also needs to be a positive cash flow each month after ALL of the expenses have been accounted for. The amount of cash flow required depends on the preference of the buyer.
Who Do You Sell the Deal to?
There are a number of ways you can sell the deals that you don’t want. The quickest way would be to work with a company or another investor who already has a list of investors hungry for these type of deals. You have the deal, they have a buyer, it makes perfect Joint Venture. The fees are also usually split.
If you don't want to split the fees with anybody then you need to build up your own database of deal buyers. One of the best ways to do this is to attend property networking events and seminars. You can then make sure people are aware of how you can help them. This does take some time and persistence, as you need to build up trust with the people you're selling deals to.
It goes without saying that if you are selling deals. they must be good deals. Otherwise word would soon get round and your deal selling business will be over. Yet if you find great deals and you look after your customers, they may come back to you. With just half a dozen buyers who have sufficient funds to purchase two properties each year, you can sell at least one property deal per month. How would that help your monthly cash flow?
“If there is not good enough cash flow, you could sell it to a tenant buyer. Either way you could still get a fee of several thousands of pounds for putting the deal together.”
What If the Deal Does Not Have a 25% Discount?
This is where your specialised knowledge comes in. There are still plenty of ways to make money from selling deals even if you can’t negotiate a 25% discount.
There are many traditional investors who are not familiar with the ways we find and buy property. For these investors, a 25% discount seems "too good to be true". They might wonder what is wrong with the property? These investors, who you can find through estate agents, may be more than happy with a 10% discount. This is as long as there is a good return on their investment.
Alternatively you could sell the property to a first time buyer and give them 5% gifted desposit. This could make the property you are selling more attractive than others on the market.
In both of the above instances you would not actually buy the property. Instead you help the seller to sell their property for which you get very well rewarded. We call this an assisted sale.
After you find motivated sellers who have no equity in their property, you obviously can't offer any kind of discount to a buyer. Yet a lot can depend on how motivated they are and their particular circumstances.
The seller may be happy to grant a purchase lease option on their property. If there is good cash flow, you could sell it to an investor. If there is not good enough cash flow, you could sell it to a tenant buyer. Either way you could still get a fee of several thousands of pounds for putting the deal together.
Your ability to make money selling deals is related to what you know about helping motivated sellers solve their problems. The more solutions you have open to you, the more money you will be able to make selling deals.
I hope this article has opened your eyes to the practicalities of how to make money selling deals. If it has, then I have some great news for you. Did you know that right now is the best time, in this decade, to be sourcing deals?
Whether you are new to property investing or experienced, becoming a deal finder is a great way to earn extra income. Even better, it is all on a part time basis.
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