90% of the problems people have when getting into property boil down to one of two things: finding a deal or funding a deal.
On the funding side my inbox is always bursting with a whole range of mortgage questions, but when it comes to “finding” there's one question that comes up more than any other: “can you recommend a property sourcer?”
Well, full disclosure: I'm a co-founder of Property Hub, which includes a sourcing service called Property Hub Invest. Does that mean you should work with them? You should definitely have a look, but it won't necessarily be right: we offer a very specific service, which will be fantastic for some investors and totally unsuitable for others.
On the assumption that it's not suitable, in this article I'll give you some pointers on finding some property sourcers and doing your research on them.
Companies v individuals
Sourcing is a fragmented market. There are very few brand-name companies: most sourcers are individuals, and many of those are just investors selling properties that don't fit their criteria rather than sourcing full-time.
The advantage of using an established company is that you'll easily be able to find them online, so there's less time spent searching – and crucially, you'll probably be able to find reviews online too. The disadvantage is that they'll usually offer a limited variety of properties – generally new builds or off-plan – which doesn't help if you're looking (for example) for a property where you can add value.
Working with an individual will give you access to more variety, but at the expense of a harder time searching for them and difficulty in establishing whether they're legitimate.
How to find an individual sourcer
There's no central portal or directory of property sourcers (business idea, someone?) so finding them will involve a fair bit of legwork. Rather than putting time and effort into finding a property, you're putting time and effort into finding a person who might be able to find you many properties.
Ultimately you'll need to go local, but you can start online. Search forums like The Property Hub (there are also various property groups on Facebook) for posts mentioning your target area: you'll find local events you can attend, people who invest locally (who might know somebody, or even pass on the odd property themselves) and perhaps sourcers themselves.
Try to meet up with a few of your new online contacts, and also visit the local events you've found. The people you meet might be able to point you towards somebody who sources, and will form the beginning of a useful local network (for tradesperson recommendations etc) once you've started investing in the area.
Another method I've used a couple of times is to approach local letting agents and say that if they help me to find a property, I'll then give it to them to manage. Independent local agents are usually very well connected so this is a handy shortcut – and as they'll be managing the property, they've got a vested interest in finding you something that will let easily. They're often the first to hear when one of their existing landlords is thinking about selling a property, so might be able to point you towards a ready-to-let property that they're already managing.
How much should you pay as a sourcing fee?
Sourcing fees can be anything from £500 to £5,000 or more – so what's a fair price to pay?
For me, it depends on what you're getting. If someone finds me a property that's available for legitimately £15,000 less than I'd be able to find it myself, I'd have no issue paying £5,000 for it. On the other hand if it's the kind of property that I could pick up myself by just going to estate agents (so all I'm saving is time) I might only want to pay £1,000.
There's one simple way to establish whether the fee is worth paying: add it to the purchase price. If the property is still a good deal once you've combined the purchase price and the sourcing fee, then it's worth paying. Even if the person has just stumbled across it, done very little work and is asking for a few thousand pounds, I'm not going to begrudge them their good fortune as long as I get what I want.
Validate everything
There's no shortage of shady people operating in this space, but even if I trusted someone implicitly I wouldn't trust their opinion on a property without doing my own research. Even well-intentioned people can make mistakes, or be motivated to take a best-case view of something they've found (known as “deal bias”).
If I'm offered a property – even by someone I know well – I'll do all the same research as if I'd found it myself. What's the area like? Will it rent? What's it worth now? What will any refurbishment cost? What will it be worth then? What will it rent for? Answering these questions is enormously important: not a week goes by when I don't hear a story about someone who bought a “below market value” property in an area they didn't know properly – only to find out it'd been massively overpriced, or the rent had been overstated, or it needed a load of extra money spending on it, or it would struggle to rent at all.
The way I look at it, using a sourcer doesn't mean somebody else does all the work – it just means doing a different type of work that might suit your circumstances better. Rather than searching for properties, you search for a person. Rather than going and viewing properties, you study the particular properties you're offered.
No easy answers
If you were hoping for an easy answer, you'll be disappointed – but I consider dashing your hopes to be a public service. If you think you can easily find someone who'll do the entire job of investing in property for you with no work involved on your part, there are plenty of people who'll gladly sell you that dream – but you're putting yourself at huge risk.
Do the work of finding the right person or company, validating that they can do what they say they can, then doing your own deep research on any opportunity they present to you. Don't see using a sourcer as a shortcut, just an alternative: by going in with realistic expectations, you're more likely to stick with it until you find the right person who can bring you the right properties.