Having been in the sourcing industry for a little while now, I wanted to address the elephant in the room.
Does this sound familiar?
‘I have secured a fantastic deal for you, property Y is valued at X, which is X% BMV, your refurb costs are X and your ROI is XXXXXX%’
Wow - where do I sign? Right?
Unfortunately, not always. If you’ve not come across this, then please do go ahead and stop reading, but being in property long enough you will have. One thing to take from this? Question everything.
This may sound cynical, and even bitter - but I assure you it’s not. For me, it’s where I add value to my investors. By asking these questions before I send information to them.
Let’s briefly analyse the above and in the process see how this Property Sourcing game isn’t all sitting on Zoopla and sending around every email I receive from every Tom, Dick and Harry.
1. Fantastic Deal for you – Is it? How? What are your goals? What is your strategy? Does this fit? For example, if you don’t want refurbs or you want a high yield the re-sale price is irrelevant. If it’s so fantastic, why haven’t you sold it yet?
2. Value – Are these values right? Does this look at sale prices or listed prices?
3. BMV – Below Market Value - Is it really BMV? If it is, why? What’s lurking under the 1970s style bathroom/kitchen? Is the street/area hiding some dark secrets or undesirables?
4. Secured – Is it? How? I cannot tell you the amount of times I’ve seen a secured deal from several ‘sourcers’!
5. Refurb Costs – How true are these? Providing true figures is always a challenge, but these must be as close as possible. Do these costs include warranties, utilities, taxes and all the other weird and wonderful things which comes with property development?
6. ROI – Return on Investment – One thing which is most manipulated, and without the right figures, can never be gauged correctly. I also found that one deal will work for some and not for others, so I’m afraid I don’t have a magic wand or a universal answer. You will have to do your own numbers and tell me what works for you.
At the end of the day, what I have found is that one deal may not work for one person, but may suitable for another. Perhaps I don’t always get everything right, and I am certainly not all knowing - but I am always striving for improvement and any feedback is always most welcome.
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