Property Sourcing Tutorial

Property sourcing is about finding deals for yourself or others that are keenly priced and present great opportunities to purchase for rental or development purposes.

Sourcers may look for opportunities both on and off the market – properties that are already for sale, as well as ones that are not.

They may look online through websites such as Rightmove, Zoopla, and local estate agents (the list can be long) with a view to uncovering or negotiating great deals; as well as seeking bargains at auction: including pre-auction, at-auction or post-auction.

The aim is to find properties that present a fantastic opportunity, and this can be easier if the property is not yet on the market. The advantage in searching for off-market properties is that there is little if any competition to deal with. Marketing for such properties may be more, or less targeted. Advertising in a newspaper is less targeted than leafleting in specific postcodes or to specific property types, which in turn is not as targeted as writing direct to owners of carefully selected properties or even parcels of land.

If you are simply looking for any well-discounted properties to pass on to investors, your range could be wider than if you are looking in a very specific location for a narrow type of property such as a commercial conversion, or a particular type – such as offices.

You may look for residential or commercial properties, or mixed-use. Sourcers normally focus on a given geographical area that they get to know well and may keep those deals that suit their own strategy if they have the capacity and funds available, while passing on the rest to investors for a fee.

For some people, sourcing may be their primary business, often alongside another chosen strategy, for example rent-to-rent, HMOs or serviced accommodation (all of which will be looked at separately in this series).

For others, sourcing can be a means to an end – to find their next project, whether for development, buy-to-let or other strategy, which then becomes their main focus.

The skill of the sourcer is in both identifying and negotiating great deals and presenting them in a professional way to investors.

A property sourcer searching the internet for good deals on properties

In the case of residential properties in particular, it is common practice to gather evidence of comparable property prices by looking at what other properties nearby have sold for, or are on the market at. The aim is normally to secure a property deal at a discount to the open market value (or retail value), for a below market value price or BMV, sometimes also called the wholesale price.

Whilst simplistically, it makes sense to aim for as great a discount as possible – percentages such as 15 - 20% BMV often being cited – in practice, this should always be considered in context. For example, if there are few such properties coming to market, or conditions are rapidly changing, then that needs to be taken into account.

Commercial properties and land can be harder to value, particularly if they are unique or not yet on the market, and it is likely you will need expert help such as from a surveyor to arrive at a valuation. The value of a commercial property to either yourself or your investor, should always be considered relative to its intended development value, purpose or use. (This will be looked at further in the development tutorial but spoiler: you will need expert help!)

When assessing potential deals, it is worth repeating the importance of due diligence, due diligence, due diligence! Getting the valuation right and carefully assessing the state of the property will make all the difference between buying a great property, or ending up with a bad deal!

In addition to the above points, before you set-up as a sourcer you need to think about the following key considerations:

  • Getting Organised
  • Getting Compliant
  • Getting Results

Let’s look at each of these in turn...

Getting Organised

Getting your property sourcing business well-organised is vital, as you could have a lot of enquiries and it can soon become a challenge handling so much information. It’s important to keep on top of your leads and adequately follow-up, as well as keeping track of your marketing efforts. When you are starting out as a sourcer, you may wish to use simple spreadsheets such as Excel to help you keep track. As your business grows, you may want to progress to using Customer Relationship Management (CRM) tools.

You should always test and measure your marketing and advertising campaigns, to ensure efficient use of your budget.

Getting Compliant

Being compliant with regulations is a serious matter for property sourcers. When presenting deals to others, you are legally deemed to be acting as estate agents and are subject to the same regulations accordingly. If you intend to do this, you must get compliant. Get professional indemnity insurance, register with a property redress scheme and data protection, and with HMRC for money laundering supervision.

Getting Results

In order to get results and succeed as a property sourcer, you need to build a list of investors and develop a solid reputation as an honest and reliable person. So get out-and-about meeting potential investors and sellers through networking; and network online too, via Facebook and other social networks.

Get marketing! Find what works for you in your area, in your niche: whether that is newspaper advertising, leafleting, targeting properties and so on. When looking online, don’t limit yourself to the top sites such as Rightmove and Zoopla, but try looking for private sellers on Gumtree for example.

Try advertising online for properties wanted too. You may have a website to help introduce your company and explain more to potential clients about what you can offer.

You never know who might know something or someone that could lead to the deal of a lifetime, so tell everyone what you do!