Should I use a Sourcing Company? This really depends
on the strategy of the individual. Sourcing companies
can free up your time immensely so that you can get
on with the day job, they are for some investors a
necessity, especially for those who are just starting
out and rely on these companies for advice and guidance.
companies are also needed for investors who live out
of the area and have no intention of carrying out
high levels of due diligence. If you want high yielding,
low priced properties then the North tends to be the
place to look and for some southern investors they
would rather rely on the experience and knowledge
of experts in that area.
has been a lot of bad press recently about sourcing
companies and the services (or lack of them) that
they offer, however as with all unregulated business’s
you will find that there will be a small minority
that have the cowboy attitude and don’t care
who they rip off, but I must say that most do have
integrity and work with the investor to find their
preferred outcome. I would strongly recommend that
you carry out due diligence on the sourcing company
as you would with any property deal. Ask other investors,
have they used them before, did they deliver on what
they promised, have they got a refund policy and ALWAYS
read their terms and conditions and then read them
again. Too many times when something goes wrong with
the deal for whatever reason, the investor demands
his money back and the sourcing companies refuses.
You need to be clear on the options you have should
a deal not go the way you planned - Do I get a refund
or is the fee re-credited to another deal? This promotes
bad feeling amongst investors and sourcing companies
and let’s faces it, this industry needs all
the help we can get right now.
not use an estate agent instead?
An estate agent acts the best interest of the seller
regardless what they might tell you. Their job is
to get the highest prices possible as most charge
a percentage as a commission.
Estate Agents are not aware of the creative finance
that investors use these days and I have had many
debates myself with agents as to the legal status
of these deals. A little bit of knowledge is a dangerous
thing and this is true with Estate agents. They are
not investors and mostly deal with residential properties
so therefore have no need for creative financing.
going direct to estate agents you also have the problem
of trying to get the property valued as high as possible.
We all know that private sales are easier to get valued
higher which is the point of the creative financing
they sourced the deal it themselves
There have been too many investors who have had heir
fingers burned by companies who have not sourced the
deals themselves and given what they thought was true
information as to the letting potential, valuation,
area etc but in actual fact the figures were highly
exaggerated and they were left with poor properties
in areas they knew nothing about.
the deal was sourced? Was it from you directly? Do
you have approved sourcers? How long has the deal
been available? All these questions should be asked
and can build up a clearer picture as to the people
your dealing with and to the quality of properties
the sourcing company provide a letting service?
If the sourcing company provides a letting service
or works in conjunction with a local letting agent
then they are obviously backing up what they promote.
It also takes away the potential problem of the sourcing
company being able to wash their hands of the deal
after it has gone through. There are sourcers who
are motivated by the size of the fee they will receive
and do not have the best interest of the investor.
By offering a letting service this reduces that risk;
it also offers the complete service for the investor,
one less thing to worry about.
aware of the sourcing companies who think of quantity
over quality and continually bombard you with properties.
As every one knows sourcing is not a quick or easy
process. In order to find the property, carry out
due diligence, negotiate the price, package the property
it can take quite a considerable time. So don’t
be sucked in by sourcing companies who have different
deals from all corners of the UK on a weekly basis,
it would be impossible to carry out all the due diligence
required even if there were more than one approved
10 Questions to ask
How long have you been in trading as a sourcing company?
(Search on Companies house)
Do you source the properties yourselves, if not who
do you use?
How long have you used them and what is your relationship
What sort of due diligence have you carried out?
Is there a RICS valuation?
Do you have any local knowledge of the area?
What are your terms and condition?
What is your refund policy?
Do you provide a lettings service?
How long has the deal been on the market for?
choosing the right sourcing company it can make property
investing so much easier and dare I say it, enjoyable
even in these uncertain times. By following the above
advice, you are more likely to achieve your property
investing goals, sourcing companies will work for
you if you are willing to work with them
John has written a LHA E-book that is full of tips
and tricks that can be used to improve your cash flow
and understanding of Local Housing Allowance. It will
be a must for any landlord dealing in this sector.