What is property sourcing?
Property sourcing is the process of finding, evaluating, and securing investment properties on behalf of investors.
In most cases, people like to hire a property sourcer, who is a middleman connecting property sellers with investors who are looking for profitable deals.
Property sourcing can be of three major types based on property type-
- Residential: Here, the focus is on properties intended for residential use, such as single-family homes, apartments, and condos.
- Commercial: Commercial properties are like offices, retail spaces, industrial buildings, and warehouses.
- Land: This involves sourcing undeveloped land for potential development or investment.
Based on sourcing technique, there are three other categories as well, like-
- Off-Market Sourcing: This is a technique in which you or the professional identify properties that are not publicly listed. It is often done through networking and relationships.
- On-Market Sourcing: This is the method of finding properties through traditional channels like real estate listings and portals.
- Auction Sourcing: In this method, properties are sourced through auctions.
How does property sourcing work in the UK?
Property sourcing is almost the same across the globe. However, the UK’s property market has its own unique characteristics.
How it Works
- Investor profile: A property sourcer first understands the investor’s goals, budget, and property type preferences (e.g., buy-to-let, development, flipping).
- Market research: The sourcer identifies areas with potential for high returns, considering factors like rental yields, property prices, and local economic conditions.
- Property search: Sourcing happens through various channels:
- Off-market deals: Building relationships with estate agents, landlords, and distressed sellers to find properties not listed publicly.
- On-market properties: Using online portals like Rightmove, Zoopla, and OnTheMarket to identify suitable properties.
- Auctions: Attending property auctions to find undervalued properties.
- Property verification: Various aspects of the property are checked, such as the legal and structural documents.
- Negotiation and deal finalisation: Based on the financial assessment, the best price is proposed, and both parties then negotiate to meet their expectations. If you hired a property sourcing agency, then the agency would present you with a final package and details like projections and potential returns.
Pros and cons of hiring property sourcing agents
Hiring a property sourcing agent comes with a set of pros and cons. Let’s have a look at both.
Benefits and Pros of hiring property sourcing agents
The benefits of hiring a property sourcing agent include:
1/ Time-Saving
Agents have the resources and networks to quickly identify potential investment properties. Plus, based on your requirements, they can shortlist properties. It will allow you to focus only on the properties you are looking for and not get brain fatigue by looking at too many options. Besides, agents will handle most of your paperwork regarding property transactions, which will be the biggest time-saver.
2/ Expertise in the field
Real estate is a quickly evolving field, and agents possess in-depth knowledge of local property markets and are always up-to-date with trends, prices, and rental yields. As a non-real estate person, this can be too much information for you to process. Plus, with their knowledge and expertise, they can help you develop a suitable investment strategy based on your goals and risk tolerance.
Property valuation is also something that requires a lot of experience to calculate accurately, and a professional property sourcer can help you with that, too.
3/ Finding off-market deals:
Sourcing agents are always well-connected with contractors, project developers, and other property investors. Which is why they can help you find deals that are not publicly listed yet. Gaining early access to properties can increase your chances of securing a good deal.
4/ Negotiation skills
Agents are skilled negotiators who can secure favourable terms on your behalf. They can help you negotiate the best possible price for the property.
5/ Risk management
Before finalising any deal for you, agents conduct a thorough check on the property to spot any potential issues that might arise. This also requires a lot of knowledge of both the structural and legal aspects of a property. Outsourcing these tasks might require you to hire more than one person.
Cons of hiring property sourcing agents
Here are some downsides of outsourcing your property hunting from a professional.
1/ Cost
You’ll need to pay the agent a fee, which can vary depending on the agent and the service provided. There might be other costs associated with using an agent, such as out-of-pocket expenses for property viewings or reports.
2/ Lack of personal involvement
You might not have the same level of involvement throughout the property selection as if you were searching independently. You are most likely to be presented with a handful of choices after multiple shortlistings.
3/ Limited options
The agent will only present you with properties that are in their knowledge. Plus, assuming they are managing multiple clients, they might allot only a fixed amount of time in finding property options for you.
What are the risks associated with property deal sourcing in the UK?
Here’s a table summarizing the main legal risks associated with property deal sourcing:
Legal Risk | Risk description | Potential Consequences |
Regulatory Compliance | Failure to register with HMRC and comply with regulations. | Fines and loss of credibility. |
Anti-Money Laundering (AML) | Non-compliance with AML regulations and failure to report suspicious activities. | Severe penalties, including fines and criminal charges. |
Insurance Requirements | Lack of necessary insurances, such as professional indemnity and public liability insurance. | Exposure to financial risks and potential lawsuits. |
Data Protection | Non-compliance with the Data Protection Act and GDPR regulations when handling personal information. | Hefty fines and legal action. |
Misrepresentation and Liability | Providing inaccurate information about a property can lead to legal action from investors. | Lawsuits and financial liability for damages. |
How to become a property sourcer in the UK?
If you are confident about being able to source properties yourself, here’s a step-by-step guide on how to work like a property sourcing agent.
1/ Learn the basics
The first thing is to understand the basics of property sourcing, including terminology and processes. Familiarise yourself with terms like deal sourcing, deal packaging, wholesaling, and flipping. Also, understand that property sourcing involves finding undervalued properties, negotiating a discount, finding a buyer, and charging a fee.
Once done with all that, you also get an idea of different property investment strategies like buy-to-let, development, flipping, and other investment models.
To begin with, you can check out our blog section, where we have listed some of the best property investment books you can learn from. We have also covered how you can get the books for free.
At Pluxa Knowledge, we have dedicated property investment courses to help you become a better property source:
2/ Get compliant and insured
Next, you need to be compliant and insured to avoid various problematic circumstances. It safeguards you from potential legal issues, such as claims of negligence or misconduct. Plus, being compliant and insured enhances your reputation in the industry and attracts more business.
You can start by researching insurance packages that cover ICO, PRS, and other relevant areas. Get quotes from multiple places and choose the most suitable one. Ensure you comply with all relevant regulations, such as data protection and anti-money laundering laws.
3/ Build an investor base
Next, you need to build a list of investors and learn about different property strategies and areas. This will help you find suitable deals for yourself or your investor base and understand the market better.
To do that, you can start by attending industry events, joining online forums, and connecting with potential investors on social media. While doing that, gather information about investors’ preferences, budgets, and investment goals to create investor profiles.
4/ Source properties
For sourcing properties, search for the ones with potentially high returns. You can use online listings, estate agents, or off-market sources to find properties.
If you are new to this, Pluxa’s property listing can be a great place to start with. There, you not only get the pricing of the properties but also the profit projection of it.
As a sourcing agent, you can aim for a fee of £2,000 to £3,000 for rent-to-rent deals and £5,000 for purchase deals without additional services.
5/ Learn about property laws
Lastly, to be a property sourcer, you need to be aware of UK property laws. Without knowing the ins and outs of property laws, you might end up acquiring properties with legal issues.
Plus, with knowledge of property laws, you get more confident with your negotiations.
Some of the key property laws you need to be aware of as a property sourcer include (but are not limited to):
How much does property sourcing cost?
Most property sourcing agents in the UK will charge you 1% to 5% of the purchase price. And it is less common to find a sourcer who is willing to charge a fixed fee.
However, at Pluxa Property, we have a policy of charging a fixed sourcing fee. Our fee is typically in the range of £2000 to £5000. Having a fixed sourcing fee allows you to reap better ROI in case the property prices increase.
Even in such cases, you won’t be charged more than what you were quoted.
Work with the best property sourcing company in the UK
If you are looking for good property sourcing services in the UK, Pluxa Properties can help. Pluxa is one of the most trusted property investment firms in the UK, and it has an extensive catalogue of properties from which you can choose.
Not only that, even if you are planning to work with a certain investment strategy like buy-to-rent or BRRR, Pluxa can even show properties specifically suitable for that.
Pluxa Property also has a collection of overseas properties in the growing Spanish market. So, with us, you can even expand your property portfolio on an international level.
Here are some core benefits of choosing Pluxa as your property sourcing agency.
- The sourcing fee is a fixed amount and not a percentage, so you can save money.
- Get a monthly and overall ROI projection on each property for a clear understanding.
- Get other important information already researched and presented, like the occupancy rate of the area and distance from important amenities like stations and entertainment spots.
Find the Best Professional Property Sourcing Company in UK
As experts in accommodation and portfolio sourcing, we’re able to work with clients across the UK. When only the best property servcies is needed, choose our UK-based property investment company for efficient property sourcing . The team at Pluxa Property Ltd also specialise in Rent2Rent and Rent to serviced accommodation for investors.
Whether this is your first unit or you’re looking to make your portfolio more manageable, we can take care of everything for you. Typically, this work is time- and money-consuming, and this is why we’re here to take all the pressure from your shoulders.
What We Do
As a company, we offer simple sourcing for the right property for you. Our fees and deals are bespoke to you, and our services can include:
- Finding a Property
- Refurbishment
- Resell or Rent
- Dealing with Agents and Solicitors
- Managing Tenants and Units
Contact our property investment experts and learn about property sourcing opportunities.
FAQs on reading property investment books and investing
Is property sourcing worth it?
Whether property sourcing is worth it or not depends on your skill sets and experience in the UK’s property market. If you have a knack for finding deals, negotiating, and building relationships, property sourcing can be highly rewarding. However, it requires a lot of time and effort, and the profitability of property sourcing varies depending on market trends and competition.
What is the average property source fee?
The average property source fee in the UK ranges from £2,500 to £5,500. However, this can vary significantly based on various factors like the property’s value, the complexity of the deal, other services provided by the sourcer and even the agent’s reputation and experience.
Is property deal sourcing legal?
Yes, property deal sourcing is legal in the UK. However, you need to comply with the Estate Agents Act 1979. This act regulates estate agency work and has many principles regarding property sourcing. If you don’t comply with the law, you could be banned as an estate agent. If you ignore the ban, you could be prosecuted or fined heavily.
Here are some key points about the legality and process of property deal sourcing:
Legality of Property Deal Sourcing
There are no specific qualifications required to be a property deal sourcer in the UK.
However, it’s recommended to have certain compliance measures in place if selling deals to investors, such as:
- Membership with a property ombudsman like the PRS or TPO
- Professional indemnity insurance
- Registration with the Information Commissioner’s Office (ICO) for GDPR compliance
- Proper legal contracts should be used between the sourcer and investor to protect the sourcing fee, rather than just using a basic NDA
What are the benefits of hiring a property sourcer?
Hiring a property sourcer comes with benefits like access to off-market deals, time-saving, market knowledge, negotiation skills and reduced investment risks.