Should I use sourcing agents to find property deals?

Many of my new students have asked me this question when they were frustrated by temporary lack of results.

‘Could I just use sourcing agents who will get me the deals and I just pay them a fee?’

My answer to them is always ‘NO’.

Why?

I’m not saying sourcing agents are no good. In fact, it can be a very efficient way of getting new deals. However, my point is that not every investor should be going down this route.

New and inexperienced property investors should learn to analyse deals first or even better they should learn to source deals first before considering using sourcing agents.

There are many sourcing agents out there. Every one of them will claim that they can get you great deals (high return, low risk, heavy discount etc.) Unfortunately some of these deals aren’t what they are claimed to be. Having the ability to tell if the deal is a genuine good deal or just dressed up to be one is crucial.

So when should you use a sourcing agent?

-     You are very clear about your selection criteria and you are only going to pick those that meet your criteria. (For example, you want 3 bedroom terraced houses in xx postcode. You know what the market price is at a standard condition.)

-     You are able to source your own properties (or you have successfully done it yourself before) but you are currently too busy to be doing it yourself.
 

-     The process of taking on the deal is fairly standard and due diligence easily done. For example, a below market value property for sale through a sourcing agent in an area that you know very well could be a valid deal (your solicitor will do the conveyancing for you).
 

And when you shouldn’t use a sourcing agent?

-     You just want certain ‘end goals’ such as return over 8%, 20% market value discount, £2000/month cash flow etc. But you don’t have a clear idea of the type of property you want. In this case, you are more likely to be ‘Sold’ a deal that seem good but with many hidden caveats and small prints.
 

-     Where the terms negotiated form a large part of the deal – such as Rent to rent deals in general. Strategies like Rent to Rent can be highly dependent on the agreement and structure of the deal - unlike Buy to let where the purchasing process and conditions are a bit more standard. The difference between a good and a bad Rent to rent deal is sometimes purely the negotiated terms (and not just the numbers). So a sourced deal with pre-negotiated terms can quite often not meet all your criteria.

I hope that clarifies whether you should use a sourcing agent.

Till next time.
Emma xx

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