Good morning it’s Dr Ro here I hope you’re well.
This is a subject that does come up quite a bit, and the question is should I use a sourcing agent or not?
A sourcing agent is someone who goes and finds properties. It’s not the same as the estate agent, estate agents are like going into a general store and you’re looking for suits. They’ll grab a load of suits for you, put them in front of you and you have to choose, so it is very generic. Whereas with a sourcing agent it’s bespoke, they find property deals that fit exactly what your strategy is.
Why is that important?
Three things first of all. Number one if you are super busy and you don’t have a lot of time, then sourcing agents fit perfectly into your particular style of investing. You kind of want your hands filled they’re going to fill your hands with properties for you, and that’s fine. That gives you the opportunity to clearly state what you’re looking for which is where the strategy comes in. the three things I normally recommend number one, are you busy?
Are you time poor?
Are you challenged from a time perspective?
If you’re brand-new to property you’ve got a lot of time and you get hands on the market go find the deals which is what I did from an early stage of my business, then you don’t need a sourcing agent. In fact, you could actually become a sourcing agent and get a fee for that. And those fees can be two, three, four, five K or more per deal you find.
But if on the other hand, you’re extremely busy which I’m guessing quite a few people watching this might be, then you could do a mixture of finding properties yourself, but also using a sourcing agent to help you find in the area.
We’re talking about a time poor person, or someone that has a very core strategy they’re putting their time into but wants to use a sourcing agent to find deals for them elsewhere. That could be another way you use a sourcing agent.
You’ve got to be clear on your strategy, are you buying properties for income?
Are you buying properties to flip? Do you want a more creative strategy?
There are multiple strategies. I give a list of about 15 to 20 different strategies at least that you can choose from, so you’ve got to decide and there are multiples of those, derivatives of those. You’ve got to decide basically what is your core strategy that you’re looking for to use that sourcing agent for.
How I use them is typically remotely so we are looking at some more local strategies coming into the back of this year into early next year, but at the moment most of my strategies are remote from where I live. Four, five hours away, that’s when I use my sourcing agents to find very specific types of properties that I’m looking for at the moment. Which is where the area comes in number three.
You see if you’re looking and living in an area where properties are abundant, so I’m in Sussex. Prices are high, the type of strategy I’m looking for narrows down whereas if I go north midlands, north-east North West a lot more choices, a lot more strategies in terms of me getting properties cheaper but getting a good cash flow. The area will determine whether or not you will use a sourcing agent.
If you’re living in a marketplace with great opportunities and you’ve got the experience and knowledge, education to do this, then, of course, it might be that you don’t need a sourcing agent and that’s when you could become a sourcing agent.
If you’re watching this and you said to me I’m busy, I live four hours away from my area I’m looking for. I’m clear on my strategy, but I don’t have a lot of time to find properties that are when you most likely are using a sourcing agent.
Things to look for number one, are you educated? If you don’t understand property strategies. If you don’t understand what to look for, how to number crunch property, how to reverse calculate the property to know what the price should be, how to work out the return on investment yields are useful but not hugely valuable. What kind of cash can you squeeze for it?
Can you have multiple exit strategies on this property?
All these types of things. If you don’t know that and I see this a lot.
You go to these property networking events and you walk in and people are just giving out business cards. There are novices going in thinking great, I’ve got someone who will find me a property.
That person doesn’t have any knowledge themselves. It might be just a random person that happens to be living in an area and buys the occasional properties, so there are certain things you need to find out about the person.
Personally, I think they should have been educated in property themselves so they understand the strategies that you might be looking for. You definitely need to be educated and people argue this one well, can’t I read it from a book?
I think if that were the case there would be a lot more property investors out there, so you do need to go learn how to do this properly.
Number two, what funds have you got? A sourcing agent is going to charge a fee to find the property you need the money to do the work and the renovations and do the deposits et cetera and then how many do you want to do? If I’m working with a sourcing agent they usually say what funds are we talking about? How many properties are you looking for?
You’ve got to be really clear on that. You need to know first of all what you’ve got to play with. You don’t want to send somebody off to look at properties for you, they come back and go, these fit your criteria which one do you want?
You say, well actually, to be honest with you I don’t have the money right now. Thank you so much at least I know there are properties in this area. They’re going to get pissed off with you, so make sure you don’t mess people around and make sure you know your funds. Finally, are they registered?
There’s loads of other criteria you could look for but I want to give you the big ones, are they registered? If you go back five, 10 years when I started back 20 years ago, you could find properties and you didn’t have to be registered.
Whereas now effectively you’re acting like an estate agent if you’re a sourcing agent representing you they have to be registered with the property. They need to have insurance in place and you should see proof of this, and officially when they start working with you they should give FAQ finding, a customer type form so they get to know you.
Because that’s part of the fact that they are formally registered if they are not there’s potentially risk on them and you, so this filters down a lot of the crappy sourcing agents that are out in the market.
It’s not being disrespectful to them, but there’s a lot of people out there that genuinely give it a go and of course they don’t have that background that pedigree.
That is really the two key things to get across.
Are you busy? Do you have a strategy? Do you know your area and are you educated? Do you know your funds and are they registered?
The big no is just don’t go rushing into it make sure that you’re clear before you do this. Property investing has lots of amazing opportunities, but if you get it wrong and you don’t know how to do it and you’re not educated, it’s going to be very risky.
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