What is Property Sourcing and How Does it Work?
Written by SWG’s guest, Sophie at Seven Capital
Investing in property can be time-consuming. For those of you that don’t have the time or resources to go through the entire process by yourself, property sourcing and deal packaging can be a way of mitigating your involvement while still providing the end product.
Generally speaking, property sourcing is fairly self-explanatory and involves working with someone that can find your ideal investment property for you. This person – or company – will usually identify investment hotspots and align these with your goals, finding the ideal asset to fit your needs.
On the other hand, deal packaging comes after the property sourcing stage and involves selling a package to a client. This avenue can be beneficial for both property investors and those looking to start a career in property, but how exactly does this work?
SevenCapital, a leading UK property investment and development company, explores property sourcing, deal packaging and the role of property developers:
What is Property Sourcing?
Property sourcing can be the ideal support for someone that doesn’t necessarily have the time to find their own investment asset or needs assistance with local market research. While the fundamental investment process remains the same, it can be incredibly useful to have someone support you during your investment journey.
Further to this, using a property sourcer is also preferable for high net-worth individuals and celebrities. For those who want to remain anonymous and maintain their privacy, investing through a property sourcer can be a way to achieve this, with companies such as Aldersley London offering the service.
When you consider property sourcing, you can expect the person carrying out the process to help with:
-Deciding on an investment strategy
-Generating leads (either via estate/letting agents or direct to the developer)
-Finding a suitable asset that fits your strategy
What is Deal Packaging?
Those who offer deal packaging will be responsible for everything throughout the property investment process. Not only will they source the property and carry out the tasks that go alongside this, but they will also liaise with the developer.
A deal packager will act as the ‘middleman’ between you and the developer/agent, and will discuss the property to eventually finalise a deal. This is the packaging process which is then delivered to the property investor, who will just have to sign on the dotted line to complete.
As a deal packager is sourcing on behalf of an investor, they’ll need to follow compliance regulations and have the suitable insurance. Amongst other things, this is a key difference between deal packaging and property sourcing.
Property Sourcing vs. Deal Packaging
Property Sourcing and Deal Packaging are essentially very similar but cover different levels of involvement from the initial investor.
Property sourcing is the process of introducing a potential investor to a property that suits their needs, using research to identify potential locations and property types. At this point, the investor will pay the person sourcing the investment a fee and the investor will continue as normal in finding their own ‘deal’.
Deal packaging represents a more complete service and is for those that want a fully ‘hands-off’ process – where the property is sourced and the initial deal is set up for them, leaving the investor to simply decide on the deal and sign if they want to invest.
The main difference between the two is how much involvement you want and how much you’re willing to pay for the service. As always, working with other professionals can be useful for expanding your research but it’s important to remember that working with a deal packaging service will require looking into more extensive compliance regulations and insurance.
How Does This Work with Property Developers?
Whether you’re property sourcing for yourself or packaging a deal to sell, property developers play a key part in the entire process. More often than not, you’ll be able to carry out the majority of your area research via the developer, through the use of exclusive guides and content on their website.
Once you’ve explored the local market, including past performance and forecasted growth, you’ll then be able to see the track record of the property developer. By looking at completed developments and time scales, you’ll be able to determine whether the property is suitable for either yourself or your client.
The final stage of completing on the property remains the same regardless of whether the property is being sourced directly or packaged in a deal. After liaisons with the developer have been made and a price has been agreed on, the transaction will then complete. However, if the property is being packaged in a deal, the property sourcer will then add on their sourcing fee and the investor will be required to pay.
Sourcing is arguably the most important part of investing in property, with research and analysis often at the heart of a successful investment. Anyone can source a property, but deal packaging is the process of carrying out these activities and later selling the property to an investor for an additional fee.
For those who are keen to invest in property, but don’t have the time to conduct research and liaise with developers, deal packaging is often a popular route. While this comes with additional costs, the reassurance that the investment property has been thoroughly researched by a professional is usually more than enough to compensate for this.
‘This guest post was provided by Sophie at Seven Capital. The opinions expressed by the guest writer above and those providing comments are theirs alone, and do not necessarily reflect the opinions of Savvy Women Group or any employee thereof. Savvy Women Group is not responsible for the accuracy of any of the information supplied by the guest writer.’