Property Sourcing & Deal Packaging:
The Ultimate Guide
by Mark Dunsmore | Published 28th December 2020
There’s been a lot of confusion around property sourcing and deal packaging.
What’s the difference between the two? How do you become a property sourcer and/or deal packager? What would ensure your success?
In this guide, we’ll run through everything you need to know including the legal bits, the expenses to consider and the skills you need to develop and by the end, we hope you’ll have enough information to decide if property sourcing or deal packaging is right for you.
Table of Contents
- What is Property Sourcing?
- What is Deal Packaging?
- Why is it important to differentiate between Property Sourcing & Deal Packaging?
- How to get started with property sourcing
- Starting your deal packaging business
- Property sourcing compliance – the legal bits
- Finding & working with property investors
- Sourcing to order versus building an investor list
- Is property sourcing / deal packaging right for you?
- Your free Property Sourcers Toolkit
What is Property Sourcing?
Property sourcing is the activity that all property professionals undertake to find, analyse, negotiate and complete on property deals. This definition applies to all property investment strategies, traditional and creative, which we will talk about later.
Property sourcing activity includes:
- Area research
- Choosing an investment strategy
- Generating leads (either via Estate / Letting Agents or Direct To Owner)
- Analysing deals
- Making & chasing offers
- Progressing deals through to completion
- Completing deals (for yourself)
- Building your property network
As you can see there is no mention of working on behalf of property investors here. You can do all the above activity without the need to be a compliant property sourcer.
What is Deal Packaging?
Deal packaging is the service of sourcing property, on behalf of property investors, for a sourcing fee.
This is where compliance comes in. As soon as you start deal packaging or sourcing property on behalf of investors, you must follow compliance regulations in that you must have the right insurances in place, be registered with HMRC for anti-money laundering regulations and more which we’ll discuss later.
All in all, the cost of becoming a compliant property sourcer is around £1000 so you need to ensure deal packaging is what you really want to do and you’re not considering it because of the false promises, from other “property gurus”, of life-changing fee income in 30 days!!
It’s fun and rewarding being a deal packager, but it’s hard work and don’t let anyone tell you otherwise!
What’s the difference between property sourcing and deal packaging? Why is it important to differentiate between the two?
If you have seen some of my videos, you’ll know that a pet peeve of mine is the use of the term property sourcing when someone’s really talking about packaging deals for investors.
This misunderstanding can lead to confusion around compliance (which I’ll come onto later) which can stop people from moving forward confidently on their property journey.
Even more importantly, this misunderstanding can lead to people spending money on becoming a compliant property sourcer, only to decide this isn’t the path they wanted to take.
It is crucial to know the point where property sourcing activity becomes a deal packaging business, so you can avoid the unnecessary expense of being compliant and instead invest your time and capital into lead generation activity – one of the most important aspects of EVERY property business!
KEY TAKEAWAY: If you’re considering deal packaging as a business, start by generating some leads, analyse some deals and work on growing your property network in your area. You don’t need to be compliant to do this. Once you’re confident that you’re doing the right thing, you can start looking at having conversations with investors and explore the requirements of becoming compliant.
How to get started in property sourcing
We always start with time management.
In over 5 years of helping people get started in property investing, the majority are in some form of full or part time employment (to begin with at least). This means they need to balance their property sourcing activities with their job, as well as their home life.
It’s important to be realistic when it comes to how much time you can dedicate to your property business.
You don’t want to burn out trying to spin too many plates.
It’s better to start off small and increase the activity as you become more confident.
Try to bite off too much and you’ll quickly find yourself choking and likelihood is you’ll not enjoy it and quit!
There are costs associated with property sourcing, whether doing it for a fee or for yourself!
You will have fuel costs, lead generation costs, phone bills and other hidden costs a lot of people forget about.
It’s imperative when building any property business that you have solid financial discipline.
Not only will this help you short term, but you will also ensure you give yourself the best chance of successfully funding deals when the time comes.
Allocating some of your disposable income per month to your lead generation will give you a head start over those who don’t.
There are many different lead generation tactics you can employ, the costs of which vary from completely free to quite costly.
Generally, the cheaper the tactic, the more competition you will have which makes lead generation a bit more difficult.
Lead generation can take time to gain momentum.
A common mistake I see with inexperienced property sourcers is that they expect results almost instantaneously.
When the results don’t happen as quickly as they thought, they run the risk of being distracted by a new “shiny penny” and lose all the momentum they’ve started to build.
Property sourcing activity compounds on itself.
The more consistent you are, the better your results will be.
Stopping and starting or trying to find shortcuts will only lead to disappointment.
Focus on ONE strategy and ONE area
The best results come with continued focus.
Whether sourcing property deals for yourself or investors, you need to stay focused on one strategy in one area.
Your mission is to become the go-to property expert in your area.
You want agents to think of you first when they take on a new instruction, property owners to feel confident in you dealing with their property problems and your local team (i.e. builder, mortgage adviser, solicitor, property manager, etc.) on hand ready to deal with anything you throw at them when things get a little more challenging.
Aspiring deal packagers often make the mistake of sourcing deals for every strategy anywhere in the UK thinking that it’s the way to quicker, more frequent deals but this is rarely the case.
Imagine how difficult it is to network and build relationships across the whole of the UK! Or become the go-to property sourcer for every UK town and city! It just won’t happen! The lead generation costs would be huge too!
If there’s going to be one thing you take from reading this today, please let it be this – Focus on ONE strategy in ONE area!
Leads – The lifeblood of any property sourcing business
Without leads you have no deals, without deals you have no property business!
There are many skills you will learn on your journey as a property sourcer, but none will be more important than the ability to generate leads.
Of course, it’s important to know how to analyse deals, estimate refurbishments, understand your exit strategy but all of this is useless without leads.
I’m not going to go into too much detail on lead generation here as it’s a whole separate topic but what’s important to understand is that you can get leads through agents (Estate Agents, Letting Agents, Property Management Agents, etc.) and you can have leads which put you directly in front of the property owner.
The skill is generating high quality leads using the right methods, specific to the strategy you have chosen to focus on.
The more leads you generate, the more offers you will make and the more deals you will complete. It really is as simple as that!
Ok, so we’ve covered some of the basics that apply to property sourcing in general (as it applies to everyone who is looking for property deals), but what if you’re looking at setting up a business packaging the deals you find and charging a fee to investors for doing so?
In this next section I’m going to run through the key considerations for you to think about when setting up your deal packaging business.
Starting your deal packaging business
Imagine a business where you can do all the fun bits of property investment, but instead of having to find the capital to do it yourself, you charge an investor a fee for doing it on their behalf!
Well, this dream of a business does exist, and it’s called deal packaging – property sourcing on behalf of property investors for a sourcing fee.
There are a few important questions I’m sure you’re thinking about so I hope I can answer them below.
How much can you earn sourcing property for investors?
I should really start with the legalities but I know the main question you’re asking is, “Can I replace my job income sourcing property for investors?”.
The short answer is yes, but as I mentioned before, it’s hard work!
Property sourcing fees vary massively and how you charge for your property sourcing services is up to you but the amount you can charge is usually relative to the service that you offer.
Simply pass a lead to an investor and the fee you can charge is usually quite low (if anything at all).
Negotiate that deal a little bit, get an offer accepted and then pass it onto an investor, you can charge a little bit more.
But take that lead from start to completion, managing every step of the process, all whilst ensuring customer service is amazing and you can charge the higher fees.
“Give me some numbers, Mark!”
I always avoid giving out numbers if possible, because of the variables I’ve just run through but, on the basis you offer the full property sourcing service from start to finish then you should realistically expect fees of no less than £2000 per deal and then operate on a sliding scale depending on what the numbers of the deal allow.
The better the deal, the better the fee.
Right, back to the serious part (not that making money isn’t serious, but you know what I mean)…
Property sourcing compliance – The legal bits
Like I mentioned earlier, to be able to package and sell property deals to investors you need to be compliant.
In the eyes of the law we are considered “Property Agents” which means we fall under the same rules and regulations as Estate Agents laid out in the Estate Agency Act.
Property sourcing compliance therefore requires the following as a minimum:
- Professional Indemnity (PI) insurance
- Public Liability (PL) insurance (this is optional but we highly recommend it being included with your PI insurance)
- Membership of a property ombudsman (2 to choose from)
- The Property Ombudsman (TPO)
- The Property Redress Scheme (PRS)
All the above MUST be in place as soon as you are operating a deal packaging service.
This is important as you could be liable to substantial fines and criminal action should you be found to be practising without all the above in place.
Apart from insurances, and depending on which Ombudsman you choose to go with, the costs are fixed.
Insurance costs will vary depending on various factors including your previous experience, the provider and your estimated turnover.
We recommend speaking with a specialist property insurance broker to ensure you get the right products for you.
However, as a guide you will be looking at around £1000 to get your business fully compliant.
Finding and working with property investors
Just as quality leads are essential for all property businesses, quality investors are essential for a successful deal packaging business.
But how do you find quality investors?
It all starts with your chosen strategy and area of focus. You need to ensure you’re working with investors who are aligned with what your focus is.
Too many deal packagers are led by their investors, often being asked to find “unicorn” property deals (i.e. deals with numbers that simply don’t exist).
This means you focus your time and energy looking for a needle in a haystack!
When you’re the go-to expert for your chosen strategy in your area then you can tell investors what a “good deal” is in your area.
If they’re happy with the numbers you’re talking about, they have potential to be a great long term investor client.
If they’re not happy then you need to move on and find someone who is.
Unfortunately, a lot of property investment training companies are churning out investors telling them all to look for “recycle all your capital back out on refinance” deals with a “one hat fits all” approach which just isn’t the reality in the property investment world.
Important considerations when sourcing property for investors
To ensure you’re not going to encounter issues down the line, you need to build a solid relationship with them and ensure they are who they say they are, can do what they say they can do and you’re comfortable you can work with them on an ongoing basis.
Here are a few things you need to check when carrying out your investor due diligence:
- Proof of ID (identification)
- Proof of address
- Proof of funds (cash for deposits, refurbishment etc)
- Proof of finance (where a mortgage or other finance is required)
But why would an investor be prepared to give you all of the above before you’ve found them a property deal?
Well, I’m glad you asked as it segues nicely into our next point…
Sourcing to order vs. Building an investor list
At Goliath Sourcing Academy we have always advised people to source to order only for a select number of VIP clients (usually no more than 5 at any one time) rather than building a large list.
This allows them to choose who they work with, ensure deals are going to be packaged up and completed as quickly as possible and ensure that (and their network’s) time isn’t wasted by working with the wrong type of client.
There are those out there who claim that having a large list is a positive thing but we certainly don’t advocate that unless you are able to manage every individual on that list, know everyone on that list and most importantly trust everyone on that list.
We believe that’s an impossible task and therefore would advise to source only for a carefully selected few who we know, like and trust to move forward when deals are sourced.
Another benefit of operating this way… better sourcing fees! Because we can operate a VIP service, we can charge higher fees and the investors we work with have no issues paying them as they see the value.
Is property sourcing / deal packaging right for you?
If you’ve got this far my guess is that you’re still interested and this “warts n’ all” run through hasn’t put you off.
When people ask me whether property sourcing and / or deal packaging is right for them I always answer the same way. As long as you are getting into property for the right reasons, you understand the reality and you’re prepared to work through the challenging times it can throw up then property sourcing / deal packaging is absolutely fantastic to be a part of.
The relationships you will build, the skills you will learn and the money you can potentially make are amazing.
Of course, everything comes with a risk and as long as you’re aware of the risks and you always ensure to operate within your means then you’ll enjoy a life in property sourcing.