5 Important Facts To Consider When Dealing With Property Sourcers

5 Important Facts To Consider When Dealing With Property Sourcers

Just finished off a private Skype consultation with a client who has a few properties, but is relatively new to the industry.Part of his strategy involves using property sourcing agents and / or packagers.Now, there's absolutely nothing wrong with that whatsoever, just so long as we are happy and understand the service they provide, and know what we are getting into.I guess the most important thing is for us to DO OUR HOMEWORK! Both on the SOURCER and the DEAL itself.In terms of the DEAL, let's have a look at some key points to consider:1) DUE DILLIGENCE, DUE DILLIGENCE, DUE DILLIGENCE! (That's a mouthful!)Just because we are provided with facts and figures relating to a given opportunity, doesn't mean we should not conduct our own research. Much like anything that is for sale (a second-hand car, for example) the salesperson (and remember that is who we are dealing with at the end of the day) will show us all the good bits, and be less forthcoming with the not-so-good bits. If in doubt, we must get someone who is experienced to assist us with our research.2) Yield Schmield!One of the biggest concerns of newbie investors is the yield that a given property returns. The yield is basically the gross rent per annum, divided by the value of the property which is then expressed as a percentage.In terms of investment yield' particularly Gross Yield' is a fairly amateurish' concept. In fact, it is a bit like the average or mean in mathematics, which of course has the power to distort our figures.What a (Gross) Yield will not tell us, is how much it's going to cost us to operate the property, and what we'll be left with (all things considered) at the end of every month / year.3) Watch out for hidden / unknown costsAs property investors, we will always be exposed to the risk of interest rate increases (unless of course we own our property outright). With that in mind, is it not bad enough being susceptible to one unknown variable, without failure on our part to take into account other important factors thereby leading us to take even bigger risks?An example here would be looking at say a 2-bed apartment in a block of 20. Perhaps it's being portrayed as a BMV acquisition, with a 30% discount or whatever. Maybe it is our research will determine this.What the particulars might not indicate, is that the property is in fact leasehold, meaning that we'll need to contribute (by way of services charges and ground rent) to the upkeep of the development / plot.Such an arrangement has the potential to eat considerably into our net profit, and as such is indicates that it is likely not to be such a great deal after all.4) CompetitionBuying a property is said to be one of the most stressful of life events. As professional investors, this needn't be the case for us, as long as, once again, we do our homework. But when we are first starting out, it's obvious we're going to feel a little fearful or lacking in confidence. The last thing we need then, upon talking a gigantic leap' onto the (investment) property ladder, is to find ourselves lumbered with a property that just won't rent.We must use the various property research tools out there to look at supply and demand for the type of property in question, and if the market appears saturated, perhaps it might be an idea for us to give this one a miss!5) Ever considered DIY?There is much to be said for getting out there and becoming an expert. Such a strategy also means that there is likely to be more meat on the bone' for both us and our prospect.The fees associated with sourcing, both in terms of BMV acquisition / Lease Option deals can often be quite high, and if we can become proficient at finding these deals ourselves then there are significant savings / profits to be had.I have literally had a deal turn up in my inbox a moment ago where the net monthly cash flow is 270, and the fee for the deal is around 5k. Now, all things considered, that is a pretty good deal. If all we actually pay is 5k, and we are receiving 270 per month, then our GROI is going to be 64.80% after the first 12 months!But, if we become the expert ourselves, and thus bypass a large proportion of this cost completely, what sort of return will we then be seeing?Logic dictates, if we expend (limited) capital consistently in order to acquire properties, that eventually, we will run out!At Freedom TGIM, we have always operated using an OPM / OPT (Other People's Money / Time) mentality, and by doing so, we have created strategies which are not limited by annoyances' such as running out of money!

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