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Do property sourcers work and get genuine BMV deals?


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I'm in the position to make another couple of investments and just planning how I do that. 

With a full time busy job, young family , to apply a serious amount of time to sourcing is , on reflection , unrealistic. What I would like to understand is;

- The area I want to invest in is quite hot due to good capital gain prospects thanks to big investment going into the area. Is it realistic to think that a sourcer will still be able to get me a BMV deal in this area?

- In a relatively buoyant area, what % of BMV would you expect a sourcer to get for you in return for their fee?

- I know everyone is obsessed with "recycling money", getting a bargain etc etc. Does it really happen for us long term "on the side" investors? If you are investing for the next 15 years, in an area with good capital prospects and a steady annual 13% ROI, does it really matter if your deal is BMV?? I kind of feel if i dont get going on it, theres a good chance I'll miss the ROI in the short term and prices will be up another 5% when I do!!

Thanks

 

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Good question and (not being an expert) i would say 'no' - in a hot market at the middle end of the segment especially. There will always be some situations where a sourcer does indeed get a great deal but i would say its the exception rather than the norm. I tend to use auctions but even there its rare to get much below market due to the intense competition and, as you say, i end up buying 5-10% BMV at best as the only wa to secure a deal to avoid never buying anything

I can't say I have used sourcers in anger so don't want to do them a dis-service but i remain un-convinced that they can get me the sort of deal i want. I guess it may work with new builds where someone buys a block at a discount and then sells them on but not sure the bmv is in the order of 10-20%

Hopefully someone more knowledgable can provide input as I am also very interested in this topic

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I guess i'm just questioning hitting the button on go really, some may call it procrastination :0). I've just re-financed a property so I know what the true value is.

Is there anything wrong with paying what something is worth if you are 100% confident in capital gain and the ROI yield is good. Again this is based on actual experience of owning a property in the area, not surfing rightmove. Suppose I'm want to live the BMV / re-finance dream, but just cant see it happening, so my plan is to rely on the ROI from my two properties, plus capital growth and a bit of savings over two years to re-finance them both to put a deposit down on a 3rd.

 

 

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The way its worked for me is buying at near market prices but doing a full refurb plus some sort of small extension and then refinancing after a year. Its allowed me to get probbaly 90% of my cash back and a second refinance after a few more years will easily mean i have all cash out. You just have to find a model of BRR that works for your circumstances

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18 hours ago, ayns said:

I'm in the position to make another couple of investments and just planning how I do that. 

With a full time busy job, young family , to apply a serious amount of time to sourcing is , on reflection , unrealistic. What I would like to understand is;

- The area I want to invest in is quite hot due to good capital gain prospects thanks to big investment going into the area. Is it realistic to think that a sourcer will still be able to get me a BMV deal in this area?

- In a relatively buoyant area, what % of BMV would you expect a sourcer to get for you in return for their fee?

- I know everyone is obsessed with "recycling money", getting a bargain etc etc. Does it really happen for us long term "on the side" investors? If you are investing for the next 15 years, in an area with good capital prospects and a steady annual 13% ROI, does it really matter if your deal is BMV?? I kind of feel if i dont get going on it, theres a good chance I'll miss the ROI in the short term and prices will be up another 5% when I do!!

Thanks

 

99% of the time, you can do a better job than a property sourcer. People go to property courses, and get told to become a sourcer if they don't have enough money for a deposit. Most people that self describe as property sourcers, are actually clueless about property. 

Recycling money is possible, but you need to do a more complex deal. If you are buying 1 bed flats in the city centre, then you won't get a big discount. 

I wrote an article about how to invest in property from afar. Most of the advice is also applicable if you're short of time

 

_______________________________________________________________________________________________________________________________
Vin Gupta
Property Investor and Developer
UK Property Blog: https://evolutionblogger.com/article/uk-property-articles
Travel Blog: https://soulfultravelguy.com/

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3 hours ago, haf1963 said:

The way its worked for me is buying at near market prices but doing a full refurb plus some sort of small extension and then refinancing after a year. Its allowed me to get probbaly 90% of my cash back and a second refinance after a few more years will easily mean i have all cash out. You just have to find a model of BRR that works for your circumstances

yeah i guess it depends on what you want out of it doesn't it. For now I think really I just want to get a few more places in the area that I know well and I know that capital gain is coming (mines gone up 20% in the last 4.5 years and lots more investment and travel links are coming). I know that may not be the "smartest" way of investing, however with time challenges for the next few years , i feel like I would prefer to do that and get the regular income and get a few more footholds in that area with strong capital gain, than wait till I have more time and the perfect deal comes up and potentially miss 18 months of rental income (£23,400 across two properties)  plus a bit of growth over that time (£7k + based on 3% growth). 

Maybe after these next busy years have passed, I will have some good capital growth to look at refinancing for something a bit more chunky and smarter 

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Ayns - opportunity cost is a real thing and can have a huge impact on your long term investment returns. It's good to see you factoring it in because many don't even think about it. Your money is losing money sat in the bank when it could be making money when invested so it's not just costing you the missed income it's also depreciating in value and therefore purchasing power.

There's nothing wrong with not being a BRR investor either. Just because no money left in deals are what's plastered all over social media doesn't mean they are necessarily the right way to do it for everyone. If you work a well paid job and have accumulated investable capital then there's a strong chance that all the headaches that come with BRR won't be cost effective for you because your hourly at work beats your hourly as a project manager or more hands on investor.

I run two limited companies. One which makes significant profits and a property investment company. I filter profits into the property company and buy unencumbered so that I can get the full benefit of the cash flow from the portfolio. Percentage wise my returns are sub 10%, after fees, pretty much always. I could refinance these and treble or even quadruple the amount of properties I own (and have a bigger bottom line in the process) but it wouldn't be time effective because I can make more money doing something else.

Are you looking for an investment or are you looking to run a business. These are two different things and in my opinion there isn't quite enough discussion out there which factors in anything other than no money down mania.

One word of caution... you can never be 100% sure you're going to get capital growth. Look at 2007/08. Just make sure if you're buying with finance you've got enough margin to cover a changing environment and any property upkeep.

Don't think you're not smart just because you're not doing BRR.

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1 hour ago, the_dave said:

Ayns - opportunity cost is a real thing and can have a huge impact on your long term investment returns. It's good to see you factoring it in because many don't even think about it. Your money is losing money sat in the bank when it could be making money when invested so it's not just costing you the missed income it's also depreciating in value and therefore purchasing power.

There's nothing wrong with not being a BRR investor either. Just because no money left in deals are what's plastered all over social media doesn't mean they are necessarily the right way to do it for everyone. If you work a well paid job and have accumulated investable capital then there's a strong chance that all the headaches that come with BRR won't be cost effective for you because your hourly at work beats your hourly as a project manager or more hands on investor.

I run two limited companies. One which makes significant profits and a property investment company. I filter profits into the property company and buy unencumbered so that I can get the full benefit of the cash flow from the portfolio. Percentage wise my returns are sub 10%, after fees, pretty much always. I could refinance these and treble or even quadruple the amount of properties I own (and have a bigger bottom line in the process) but it wouldn't be time effective because I can make more money doing something else.

Are you looking for an investment or are you looking to run a business. These are two different things and in my opinion there isn't quite enough discussion out there which factors in anything other than no money down mania.

One word of caution... you can never be 100% sure you're going to get capital growth. Look at 2007/08. Just make sure if you're buying with finance you've got enough margin to cover a changing environment and any property upkeep.

Don't think you're not smart just because you're not doing BRR.

Hi Dave, great thanks for posting that, its a much comfort if anything! and you are right there is a difference between running an investment / property company and investing , as I said I would be more in the investor camp short term however if / when my life evolves and I decide not to chase the rat race, I could allocate more time to property if i decided that was right and would then expect the returns etc to adjust accordingly. 

Yes i have a bit of experience which helps me see a longer term view. I bought my first place in 2006, at the peak of the bubble at that time. 18 months later it had fallen by 15% , couldn't  remortgage without putting more money into it to increase the LTV. Over time it  started to tick up and up slowly , now its gone up by 66% in value since that 2006 day I bought it.

Any investments I make now are with a long term view, on the basis that i know things can go up and down . I also base it on 0% Capital growth over 15 years, so ask would I still be happy with the monthly / annual yield based on the ROI if it lead to nothing in the future (unlikely but possible), as you said, capital growth is in my case a very educated, punt!

 

 

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Great thread. Agree with all the comments above. I'm currently extremely time poor so have been looking at some completely 'hands off' property sourcing companies who can manage the full refurb for you, thus still deploying the BRR model but in an outsourced way. Typically their deals result in approx 15-30% of your money left in but I believe thats realistic in today's market and still good value considering they're doing the all the heavy lifting. I haven't actually taken the plunge myself yet on a deal as I have a residential move on the horizon which is the focus, but I think if you look hard enough and network, there are good sources out there who can help (for a well earned fee of course). 
 

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however if / when my life evolves and I decide not to chase the rat race, I could allocate more time to property if i decided that was right and would then expect the returns etc to adjust accordingly. 

 

The extra comment I'd make here Ayns is in relation to this conundrum in your quote above. Are you buying in LTD company? When you reach the point of deciding to switch to full time property investing, how do you plan to potentially change your investments to suit your goals? Thinking that selling houses etc for different strategies later on adds in or the complication of CGT/Sales costs etc, but maybe that's just accepted. Sometimes we're brainwashed to sell a property is a bad thing lol, need to step back!

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I'm new to this, only on my second investment property in my portfolio. But I'm very sceptical of anything I haven't put together myself. There seems to be too many chancers out there who've swallowed whole the fantasies they've seen on Youtube, and are trying to present themselves as 'deal sourcers' asking for large fees off the back of dubious numbers on a cheap house on rightmove.

I inherited my first property, and am currently renovating my second. When I was looking to purchase my second I did get a few contacts from deal sourcers after mentioning it on a facebook group, but it just felt very underhand, and like I would end up getting stung somehow.

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19 hours ago, tomo222 said:

Great thread. Agree with all the comments above. I'm currently extremely time poor so have been looking at some completely 'hands off' property sourcing companies who can manage the full refurb for you, thus still deploying the BRR model but in an outsourced way. Typically their deals result in approx 15-30% of your money left in but I believe thats realistic in today's market and still good value considering they're doing the all the heavy lifting. I haven't actually taken the plunge myself yet on a deal as I have a residential move on the horizon which is the focus, but I think if you look hard enough and network, there are good sources out there who can help (for a well earned fee of course). 
 

The majority of large property sourcers in the UK focus on new build and student apartments. They go to developers and offer to sell 20 properties at a 5% discount. 

It's a great business model for them, as they get paid a fee from 20 clients for very little work. The reality is that you could probably get the same deal by approaching the developer yourself 

Doing a BRRRR is a lot of work. I don't see how a company could offer a hands off service and make money. 

If the companies are so good at BRRRR, why don't they borrow the money and keep hold of the property themself? 

 

_______________________________________________________________________________________________________________________________
Vin Gupta
Property Investor and Developer
UK Property Blog: https://evolutionblogger.com/article/uk-property-articles
Travel Blog: https://soulfultravelguy.com/

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Hi Matt. These are all smaller companies (<10 people) who leverage their networks.

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If the companies are so good at BRRRR, why don't they borrow the money and keep hold of the property themself? 

I think because their investors want to build portfolios themselves, so they aren't all content with simply providing investor finance and getting a % return. As a sourcing/turn key offering outfit you can scale your networks of trades to achieve better pricing and build good relationships with agents due to your volumes. Plus, once you've sold 5 or so deal packages then voila you have a deposit yourself to go. 

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28 minutes ago, tomo222 said:

Hi Matt. These are all smaller companies (<10 people) who leverage their networks.

I think because their investors want to build portfolios themselves, so they aren't all content with simply providing investor finance and getting a % return. As a sourcing/turn key offering outfit you can scale your networks of trades to achieve better pricing and build good relationships with agents due to your volumes. Plus, once you've sold 5 or so deal packages then voila you have a deposit yourself to go. 

I'm extremely skeptical of companies claiming to do hands off BRRRR deals. I don't think anyone would go to the trouble of refurbing a property at a massive short term profit, all for a small fee. Then they hand the keys back to the investor, so they can enjoy all the upside 

Doing profitable BRRRR deals really isn't easy (it's a lot easier in North America, where the strategy originated). If someone has that skill set, they would spend their time trying to find funding, and building up their own portfolio. They won't be building my portfolio or your portfolio for a small fee.

BRRRR is a buzzword now. Who doesn't like the idea of recycling your deposit forever?! So these companies are probably using it as a marketing tool. 

I'm sorry if I'm coming off as stubborn here, it's just what I think! 

I'm sure there are some good sourcers out there. It's just that it will take effort to find them. I think it's better to spend that time, to find the property itself rather than a sourcer. 
 

_______________________________________________________________________________________________________________________________
Vin Gupta
Property Investor and Developer
UK Property Blog: https://evolutionblogger.com/article/uk-property-articles
Travel Blog: https://soulfultravelguy.com/

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I hear ya but I think you'll be pleasantly surprised, as I think you have the cliche sourcers in your head rather than the smaller more bespoke sourcers. When they can source, provide the refurb and even get it let if you wish to, I think its good value. Especially when investing for the first time, or investing from a far (e.g. from London investing in North) when they have all the facilities/trades/contacts in place. 

I'm planning to invest myself with one of them this year so guess I'll find out how successful it is and will be sure to keep you posted, good or bad.

Cheers

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Can you share the details of the firm you are working with? It would be great if they offered that service 

_______________________________________________________________________________________________________________________________
Vin Gupta
Property Investor and Developer
UK Property Blog: https://evolutionblogger.com/article/uk-property-articles
Travel Blog: https://soulfultravelguy.com/

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On 2/5/2021 at 4:31 PM, tomo222 said:

Great thread. Agree with all the comments above. I'm currently extremely time poor so have been looking at some completely 'hands off' property sourcing companies who can manage the full refurb for you, thus still deploying the BRR model but in an outsourced way. Typically their deals result in approx 15-30% of your money left in but I believe thats realistic in today's market and still good value considering they're doing the all the heavy lifting. I haven't actually taken the plunge myself yet on a deal as I have a residential move on the horizon which is the focus, but I think if you look hard enough and network, there are good sources out there who can help (for a well earned fee of course). 
 

The extra comment I'd make here Ayns is in relation to this conundrum in your quote above. Are you buying in LTD company? When you reach the point of deciding to switch to full time property investing, how do you plan to potentially change your investments to suit your goals? Thinking that selling houses etc for different strategies later on adds in or the complication of CGT/Sales costs etc, but maybe that's just accepted. Sometimes we're brainwashed to sell a property is a bad thing lol, need to step back!

I'm buying personally for the next 3 or so properties and will re-assess my goals after that really. Happy with the prospect of a mix of personal and ltd in the future as personal is long game for pension etc and if i went Ltd it would as you mentioned progress to cover 50% of my income ideally.  

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