Heres a great article from Rob Hubbard our new Ready Made Deals Mentor.
I often get asked by prospective new investor clients or novice investors the question “What constitutes a good ready made deal?” Therefore, this month I’m going to share with you some of the reasoning that I employ when seeking out potential deals.
The thing is with property, each property is different, there is no such thing as “one size fit’s all” and it’s looking for the hidden potential that can make a deal good or even great.
Why should you look at a ready made deal?
Some investors have plenty of time on their hands although choose to invest in an area that is either not local to them or they are unfamiliar with. Other investors are ‘time poor’. Occasionally, Investors just choose to outsource the investigation works as they have no interest is finding property only owning or managing it.
Therefore, unless you can answer positively to all or at least the majority of the following issues then I would suggest that a ready-made deal would be beneficial to you.
- Provide a detailed overview of the property
- Obtain local knowledge of the area
- Identify and advise the probably target market for re-sale or let’s as well as current demand.
- Commission an Independent RICS valuation
- Compare recent sold prices from a variety of different sources
- Obtain comparable re-sale or lettings prices
- Letter from a reputable letting agent confirming the rental valuation and demand
- An overview of the property including a full description of the interior and exterior
- Advise on any refurbishment works and likely costs
By providing this level of information (which is significantly more than you would expect to be provided by an Estate Agent) this allows the prospective investor to make an informed decision on whether to purchase. However, I must stress that it is vitally important that you undertake your own due diligence when investing a property and make sure that the information supplied by the deal provider actually stacks up
Why are you passing the deal on? If it’s such a good deal then surely you would keep it for yourself?
This question almost always gets asks by a new client or investor. A few years ago in the days when ‘No Money Down’ was a legitimate everyday tool and Mortgage Express were offering their same day re-mortgaging package It would have been ‘possible’ to keep the majority if not all of the deals for oneself. If I had done this however and constantly re-mortgaged it is unlikely that I would be sat here typing this now. As due to the property slump It is likely that a portfolio that has a high level of borrowing using these techniques could well be in a severe negative equity situation and only surviving due to the low Bank of England base rate.
An issue that is often overlooked when investing in property is that all investments cost money, property is no different.
By using a reasonable deposit a sustainable portfolio can be built up over a number of years this allows a ‘buffer’ to be built into the property to allow for downward fluctuations in the relative property values. I prefer therefore to continue with this method of acquisition and to trade deals with other investors whilst I steadily build my own cash reserves from small commissions earned on each property deal.
Providing quality deals on a regular basis allows my investor database to grow and to build trust and rapport with my clients. People soon get wise to being ‘ripped off’ and bad news always travels faster than good! As the property industry is quite insular in many ways it is much more sustainable and of course morally and ethically correct to behave in a professional manner and sharing deals in order to maintain mutual healthy growth of our portfolios.
Another reason for passing deals on is to provide help and assistance to the First Time Buyer market. Often, mainly younger people want to get on the housing ladder however may struggle to afford the required deposit in order to fund a purchase via the Estate Agents window.
By approaching a Ready Made Deal Provider, they can often find the sort of property that they could only dream of purchasing in their chosen area at an affordable price and within their budget.
In my next article, I will be going through the process of demonstrating how you can easily check how and if a deal stacks up.