PROPERTY SOURCING PROFITS- Part 5: WHAT CAN YOU EARN?By John Stokoe
STEP FOUR – PRICING THE DEAL
What can I expect to earn?
How you price your deals is completely up to you. It will vary greatly from area to area and depend on the type of property you’re sourcing, it’s current condition, and its potential value after refurbishment. However, there are several ways you might consider packaging your deals:
- One option is to fix prices as a percentage of purchase cost. This provides potential buyers with a very easy way of gauging how much a potential deal will cost them—based on purchase price, but can mean those deals offering an excellent return on investment actually sell for less than those offering an average return on investment. For example, charging a 2% fee, a £120,000 HMO that cash-flows £750pcm in Wales would command a fee of £2,400, whilst a £260,000 property in Reading that cash-flows the same amount would require a fee of £5200. The first offers a far better return-on-investment but costs the buyer less.
- An alternative is to price deals on a sliding scale depending on the perceived quality of the deal. This approach is subjective and doesn’t offer potential buyers a way of calculating the cost of the source fee, but it offers you as the sourcing agent the ability to price deals according to their perceived value and rate of return. For example, a buy-to-let that cash-flows £300pcm with all money out in one year, will command a significantly higher source fee than one which cash-flows £230pcm with all money out in three years. The same applies to multi-lets, HMOs, Flips etc.
How you price is entirely up to you. The best approach is to see which model is most appropriate for your strategy and your prospective buyers.
- with a positive cashflow every month
- House of Multiple Occupation (HMO) (From £3000) is generally five or more unrelated people in a house of three or more stories. (Each local authority has a different opinion of what constitutes an HMO, so check with the HMO Officer first to understand local requirements.)
- Flip When a property is bought with the main intention to sell it, usually after refurbishment Unqualified lead sourcing (From £5) – The most inexpensive, usually a list of details of homeowners who may or may not be looking at selling their homes.
- Qualified lead sourcing (From £50) – These are worth more as this is a list of people known to be selling their property
- Buy to let (BTL) (From £2000) – Investors are looking for single dwelling investments that will provided them
- Land & Development (2% or from £3000) Land that may or may not have planning permission for development
For more details on this process, we run a Sourcing academy: https://www.sourcemyproperty.com/academy/
About the author
John Stokoe was born and bred in South Africa but his urge to expand and grow led him to the UK. Banking technology was hot during millennium and John worked himself into blue-chip Investment Banks where he steadily progressed into the Head Of Service Management and Business Continuity for major Japanese Banks. Detailed profile: Authors Profile