Deal Sourcing and Deal Packaging can be a great way to find Below Market Value opportunities or monetise surplus deals that are not within your strategy
This is an unregulated market so both buyers and sellers might not get quite what they bargained for. Always undertake appropriate Due Diligence before buying or selling a Deal.
Some of our tips to ensure you always do good business with good people are as follows
1 – Check, check and check again
Check any numbers presented to you and challenge anything which appears optimistic.
a) Is the refurb cost and time frame accurate?
b) Are the rents and resale values realistically achievable?
c) If you got 5% less income or incurred 5% more costs would the deal still work?
d) Are there addition errors in the numbers (Yes we have seen basic maths errors which kill a deal when corrected)
2 – Only buy from sellers who are bound by an Ombudsman
This gives confidence to buyers that they are dealing with a reputable business and if things go wrong an independant body recognised by government can help. Property Investor Reward Club members get an exclusive discounted membership with the Property Redress Scheme.
3 – Ask to see evidence
How are estimates of refurb costs calculated and what recent comparables can they provide on rents / sale prices. Do they have quotes from trades to support their estimates?
4 – Check the vendor has Professional Indemnity Insurance – PI
Get a copy of their insurance certificate in case anything goes wrong. This would cover the risk for example of the sourcer disappearing with your money. Always check the property with a site visit before parting with any cash. A site visit will confirm the validity of the deal and potentially highlight things missed out which might materially affect the deal.
5 – Document Pack
A good deal sourcer will prepare a professional document pack. This will cover all aspects of considering a deal including planning, licencing, contracts and Tenancies. We have seen deals sold as perfect for HMO conversion in Article 4 areas where councils are anti HMO and have not given an approval in years.
6 – Data Protection
It is a legal requirement if you handle any personal data to be registered with the Information Commissioners Office https://ico.org.uk/for-organisations/register a government agency. Property Investor Reward Club is a private members club registered with the ICO as it is a data handling business.
7 -Money Laundering
Deal Sourcing is classified as an Estate Agency business. It is a requirement to register with HMRC and comply with Anti Money Laundering regulations – https://www.gov.uk/government/collections/money-laundering-regulations-forms-and-guidance
8 – FCA Registration
Is the Deal Sourcer registered by the FCA to protect your money and / or assets? Check for qualifiying criteria at https://www.fca.org.uk/firms
9 – Support
A deal is only a deal if the sale completes. Your sourcer should help project manage the vendor and legal process with you to esnure it goes live for you. You should only be paying fees when the deal has exchanged legal contracts or if the sale aborts because of something in your control. I.E. you dont complete because you dont have the money.
There is a legal saying I learnt years ago which in English translates to “Buyer Beware”, in Legal jargon (Latin) this is referrered to as ‘Caveat Emptor’
See our article on how to evaluate a deal to see if it is a good deal or not.
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