What Is Bespoke Property Sourcing and Why Is It More Effective?
Samuel Leeds here. Today I want us to discuss bespoke sourcing agreements. What are they? And why should every property deal sourcer enter into one with potential investors? By the way, if you invest in property, you should also do a bit of deal sourcing. And not just any deal sourcing, but bespoke deal sourcing, which I think is the most effective and easiest way to source property deals.
So what do I mean by deal sourcing? Deal sourcing is basically finding a lucrative property deal, negotiating the price, packaging it, and selling it to an investor for a finders fee. A typical finder's fee is about £3,000, which means you could source deals for a living. Not to mention, it beats working for someone else, where you do all the work, but they are the ones making all the money.
Now, if you're already a property investor that's well established and doing well for yourself, you will inevitably come across properties that aren't suitable for you. The price tag on a property may, for instance, exceed your budget. So what do you do with these properties, “flush them down the toilet?” Absolutely not! You pass them on to another investor and charge them a fee. And you could put the proceeds towards your next property investment.
And this is where bespoke deal sourcing comes in. One of the problems deal sourcers face is not finding an investor after spending a great deal of time finding a property and successfully negotiating a deal. Or thinking they have a ready investor, but the deal not getting closed due to the investor making up one excuse or another. So how can you stop that from happening? Here's how.
Find an Investor Before Finding a Deal
I'm always emphasizing the importance of finding an investor before finding a deal to my students on #samuel365. Why? When you speak to investors first, they tell you exactly what they're looking for. Consequently, they're more likely to buy the properties you find for them because it's what they had in mind. However, there's still the risk of an investor failing to keep their end of the bargain. The next two tips will help you get around that.
Ask for Proof of Funds
Before you invest your time and money going out to look for deals for investors, ask for proof of funds (POF) and their photo ID. A POF, such as a bank statement, confirms that the investor can afford to buy the properties they outsource you to find for them. While a photo ID serves as proof of identity.
Enter Into a Bespoke Sourcing Terms and Conditions Agreement
Bespoke deal sourcing is where you find an investor, ask for proof of payment, but more importantly, enter into an agreement that states the following:
- The investor pays you a £1,000 are-you-serious deposit.
- The deposit is fully refundable after four weeks if you haven't found any suitable deal.
- If you find a deal that's acceptable to the investor, he/she has to pay you the remaining £2,000 before making the purchase.
- If you don't find any good properties or deals within four weeks, the investor can extend the contract for a specified period of time, say another four weeks. Alternatively, he/she can request a refund of their £1,000.
Now, if you have the skills to find great property deals and an investor has shown you their proof of funds and given you a £1,000 deposit, will he/she make the purchase? Yes!! The reason being, they've proven they’re serious, not talkers like many people in the property industry are.
In a nutshell, with bespoke deal sourcing, you can have multiple investors on your list. And each time you find a deal for one and they pay you the difference, you replace them with someone else or ask, “do you want me to find you another deal?” Either way, wouldn't you rather have a list of four or five people who have each paid you £1,000 than a long list of time-wasting “investors?”
Want to learn more about bespoke deal sourcing? Join us on the #samuel365 community, where you can have one-on-one coaching calls and connect with other people doing bespoke deal sourcing.
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