Building a good investor database is no easy task and even the most experienced property sourcing agents struggle with qualifying investors. But separating the good from the bad is a method that you will need to master if you are going to do well. From the years of experience that we have at Goliath Property Sourcing, we can tell you that having unqualified investors is where you will waste the largest amount of your time.
Having investors that are not going to see deals through will leave you frustrated, especially when you have spent ages building the relationship and then it falls apart at the last minute. All that time you invested was for nothing and you have lost out financially, as you need to spend further time finding a new investor and doing the work all over again. We really cannot emphasise just how important it is to refine your list of investors to weed out the people that might be scared of committing to a deal or pull out of deals because they don’t really understand the process.
So how do we get these serious, qualified investors? There are a number of innovative and advanced strategies that we have used to great success that will help you to get more deals over the line. Eliminate timewasters and make more money by following the process that we have curated to perfection at Goliath Property Sourcing.
Stage 1 – Asking the right questions
When we are working with clients one-to-one, we split the process into two stages. First up, we will ask a number of questions that will help us to ascertain how serious the person is in investing. This will establish whether you are able to work with them on a one-to-one basis. Questions to ask include:
- How many properties do you currently have in your own portfolio?
- Have you bought a deal from a property sourcing agent before?
- Are you buying with cash or getting a mortgage? (do they have funds for refurb etc.?)
- How much experience do you have with the particular property investment strategy that you’re packaging that deal on?
In regards to the last question, we are talking about whether they have specific experience in the type of deal i.e. rent to rent HMO or rent to rent multi-let deals, for example. If they do not have that experience then we would choose not to work with them if they were looking to manage the property themselves. This is because we operate by providing solutions for our sellers (landlords) and need to avoid bringing problems to our sellers.
If you work with an inexperienced investor, there is a huge likelihood that problems will arise. This might not always be the case but most investors would struggle with a multi-let if they haven’t done it before. So what you would find is they start to panic and then they will pull out of the deal. Then the landlord will be looking at you to resolve their problem and this will take up time to deal with. All of that hassle could have been avoided at the start if you had determined they were not qualified investors.
Stage 2 – Gather the evidence
Next up, there will be a series of documents that you will want to see that will give you the confidence that the deal will go through:
Proof of funds – It might sound obvious but seeing evidence of funds is really important. Whether it is through a bank statement or otherwise, get evidence of their available finance. A common occurrence is going through a cash purchase and then the investor turns around and tells you that they need bridging finance. Contrary to what investors sometimes believe, bridging finance is not the same as cash. Many deals will fall through due to complications with this; so if they are looking for bridging finance, ask for proof in the form of a letter of intent.
Mortgage agreement in principle – If they are intending on going down the mortgage route, you will want to see a decision in principle from the buy-to-let mortgage provider. This will ensure that the investor has applied for the finance but make sure that it is from the last month or so, otherwise it might not still be available to them. For mortgages, you will also want to see proof of their ability to pay the deposit or any refurb costs.
Portfolio proof – When investors tell you they have properties in their portfolio, you can’t just take their word for it, unfortunately. We would always ask for proof that they own rental properties and that they have been looking after them. We ask for insurance docs to check that they are the landlord/owner of the properties they claim to be.
If potential investors are struggling with providing any of these pieces of evidence then you should be hearing alarm bells. They either do not have the funds or they are not being fully honest, or simply are not as serious as they say. So have the confidence to say you are not able to work with them, or else it could come back to haunt you.
Contracts – An additional thing that we would advise is that you look to use contracts such as sourcing contracts and NDAs, when you a sourcing to a list. We will send them a contract to sign to agree to the T&Cs of our business, get our fee paid etc.
Reservation fees – You can also request a reservation fee to lock down their interest, which will identify the non-serious investors. We don’t do this but that is because we source to order with clients we trust.
Download the free resource below – Qualifying Investors Checklist . If you use this process, you can build a highly qualified list and you will see a much better success rate than if you jump into it without whittling out the timewasters.
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