If you are involved in the property sourcing sector then, unless you earn money from training programmes, you are most likely either an investor that buys property deals from property sourcers, or you are a property sourcer who sources deals, packages them and sells them on for a fee to a property investor.
But what exactly is property sourcing? Tina Walsh, at Property Sourcing Compliance, explains: “To me, property sourcing is the finding of property related investment opportunities that provide a ‘win, win, win’ situation for the investor, seller, and sourcer. It is vital that any sourcing agent bring their knowledge of the area, investment types, and negotiation skills together to ensure that they acquire the best deals possible for their clients.
“To obtain a property or site that offers a good financial return for the investor, the seller must, at least to some degree, be in a distressed state. In general, the level of the distress will directly relate to the level of discount on purchase price that you might hope to achieve. For example, a seller that has no mortgage on a property and is merely testing the market to see how much they might get is certainly not distressed; however, a seller who is in debt, divorcing or moving areas for work could be highly motivated to sell the property or site at a greater discounted purchase price.”
In her book entitled; Property Sourcing Compliance: Keeping on the right side of the law, Tina explains that property sourcers pretty much do the same as estate agents, but in reverse. An estate agent first signs an agreement with the property seller, then finds a buyer and matches the two together, taking a fee from the seller. Meanwhile, a property sourcer will sign an agreement with a buyer, then finds a willing seller, matches the two together and takes a fee from the buyer (however, they can also source a property first and then find an investor in the same way as an estate agent does).
This is crucial to understand because in the eyes of HM Revenue & Customs, the two professions are the same and if the property sourcer is not aware of this, then the penalties can be severe. And, according to Tina, many ‘deal packaging’ (where the sourcer also arranges the refurbishment using local builders etc.) and ‘property sourcing’ courses are including very little, if anything, on compliance.
If you’re thinking about setting up a property sourcing business, one of your biggest concerns should be how to set up your business legally and properly. If
you don’t do this correctly, there could be consequences for your business and for you personally as the business owner.