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.

Cash Flow Strategies for 2010

This is no longer the case: the new investing landscape creates more opportunity than simply buying and holding. Those who are savvy are generating far more leads [online and offline] and there are many ways to monetise them, especially in the recent economic crisis.

Packaging deals and leads, creative finance tools and option strategies are some of the strategies that could significantly cashflow your property business without ever having to take out a mortgage. Of course, if you can and are able to get a 30% + Under Market Value [UMV] property then you will be increasing your long term wealth by building a bigger asset base.

Never before have I seen so many different ways to monetise Property investing. Never before have we generated so many leads  [uQL, QL, MS, LO & TB] though so many different marketing & lead generation strategies

In 2006-2008 over 85% of our deals were through Estate Agents. Still a great way to source, still our highest volume lead generation strategy, but things have changed & in 2010 leads & deals [uQL, QL, MS, LO & TB] have come through [some] previously unproven platforms: facebook & twitter, forums, newspaper adverts, newspaper ageing, WOM, our own agents boards, SEO & online lead gen, leaflets, postcards, online video, YouTube, and some I’ve probably forgotten as we use 33 strategies in all.

Earning £3k -£ 9k+ per Month without a Mortgage

There are a few ways that you can earn and this is in relation to Finders Fees. Although terminology varies the few ways you can do this is:

1] Ready Made Deals [RMD] – The deal has been negotiated and agreed with the vendor and a signed Purchase Option agreement or assignable contract is in place. These deals will usually be packaged and can also be low or no money down [NMD] with all the costs including the Bridging loan. Cash back is sometimes available depending on the level of discount obtained. Fee: £3-7k per deal.

2] Qualified Leads [QL] – The vendor has telephoned and the lead has been qualified. [agreed that in principle they may take 25-30% UMV offer]. The more concrete the agreement of discount, the more you can charge. The lead may not have sufficient equity on the deal to be included in the above category, and may have the deal on with an estate agent. The lead will be confirmed by telephone that they are interested in an Under Market Value offer price and open to further negotiation. It will be up to the investor who you sell this lead on to, to use their skills to convert this deal by whatever legal means they deem reasonable. Fee: £75 -£250.

3] Unqualified Leads [uQL] – The vendor may not have been contacted at all. These are usually leads who have simply filled in a form on a website, called an automated phone number or rejected a significant discount. This can be a really passive way of selling the leads without much work. Fee: £50 +

4] Rent to Own [R2O] – Find unqualified leads from estate agents and sell your Lease Option deal to a tenant buyer/FTB [First Time buyer]. You will need to phrase the concept of this in way that they will understand: Don’t use terms such as Lease Option & Tenant Buyer. Keep it simple and sell the benefits – “How would you like to own your own home with a minimal deposit?” You can charge a 3% deposit upfront: Fee 3-5k.

5] Flip for Commission [FFC] – You’ve found a deal which is out of your area [patch] or not in your investment criteria [decent discount but no cashflow] and so you don’t want to keep it. You can find a joint venture partner [JV] who can get mortgage [MH] or pay cash for the deal, wait 6 months, sell it and split the profits or share the equity and cashflow by holding it.

There are many other ways such as using an Assisted Sale [AS], Shared Ownership [SO], Portfolio Building [PB] MH/DoT, B2S/& many more that will be shared on in our next events on Sat 10th July 2010: “9K in 90 Days: The 7 Way Property Cashflow Blueprint Beginners Event of 2010″

http://progproperty.infusionsoft.com/go/CFBL/a240

Other lead generation strategies that will be revealed on the day will include: Biz Directories, Aggregators, Google Local, Adwords Bing & PPC, Facebook Ads, WOM/Referrals, Med Cards, Affiliates and many more.

It is imperative for your business that you have multiple lead generating systems in place. Did you know that it takes 35 leads to do at least one deal making you over £20,000? How many systems do you have in place?

If you really want to accelerate your cashflow and adopt the new never revealed before 2010 strategies the only and last time we are planning to do this is in July : We only have limited number of seats still available.

http://progproperty.infusionsoft.com/go/CFBL/a240

Rob & Mark

Progressive Property

This really depends on the strategy of the individual. Sourcing companies can free up your time immensely so that you can get on with the day job, they are for some investors a necessity, especially for those who are just starting out and rely on these companies for advice and guidance.

Sourcing companies are also needed for investors who live out of the area and have no intention of carrying out high levels of due diligence. If you want high yielding, low priced properties then the North tends to be the place to look and for some southern investors they would rather rely on the experience and knowledge of experts in that area.

There has been a lot of bad press recently about sourcing companies and the services (or lack of them) that they offer, however as with all unregulated business’s you will find that there will be a small minority that have the cowboy attitude and don’t care who they rip off, but I must say that most do have integrity and work with the investor to find their preferred outcome. I would strongly recommend that you carry out due diligence on the sourcing company as you would with any property deal. Ask other investors, have they used them before, did they deliver on what they promised, have they got a refund policy and ALWAYS read their terms and conditions and then read them again. Too many times when something goes wrong with the deal for whatever reason, the investor demands his money back and the sourcing companies refuses. You need to be clear on the options you have should a deal not go the way you planned – Do I get a refund or is the fee re-credited to another deal? This promotes bad feeling amongst investors and sourcing companies and let’s faces it, this industry needs all the help we can get right now.

Why not use an estate agent instead?

An estate agent acts in the best interest of the seller regardless of what they might tell you. Their job is to get the highest prices possible as most charge a percentage as a commission.

Most Estate Agents are not aware of the creative finance that investors use these days and I have had many debates myself with agents as to the legal status of these deals. A little bit of knowledge is a dangerous thing and this is true with Estate agents. They are not investors and mostly deal with residential properties so therefore have no need for creative financing.

By going direct to estate agents you also have the problem of trying to get the property valued as high as possible. We all know that private sales are easier to get valued higher which is the point of the creative financing system.

Have they sourced the deal themselves?

There have been too many investors who have had their fingers burnt by companies who have not sourced the deals themselves and given what they thought was true information as to the letting potential, valuation, area etc but in actual fact the figures were highly exaggerated and they were left with poor properties in areas they knew nothing about.

How the deal was sourced? Was it from you directly? Do you have approved sourcers? How long has the deal been available? All these questions should be asked and can build up a clearer picture as to the people you’re dealing with and to the quality of properties they offer.

Does the sourcing company provide a letting service?

If the sourcing company provides a letting service or works in conjunction with a local letting agent then they are obviously backing up what they promote. It also takes away the potential problem of the sourcing company being able to wash their hands of the deal after it has gone through. There are sourcers who are motivated by the size of the fee they will receive and do not have the best interest of the investor. By offering a letting service this reduces that risk; it also offers the complete service for the investor, one less thing to worry about.

Be aware of the sourcing companies who think of quantity over quality and continually bombard you with properties. As every one knows sourcing is not a quick or easy process. In order to find the property, carry out due diligence, negotiate the price, package the property it can take quite a considerable time. So don’t be sucked in by sourcing companies who have different deals from all corners of the UK on a weekly basis, it would be impossible to carry out all the due diligence required even if there were more than one approved party involved.

10 Questions to ask

1. How long have you been in trading as a sourcing company? (Search on Companies house)
2. Do you source the properties yourselves, if not who do you use?
3. How long have you used them and what is your relationship with them?
4. What sort of due diligence have you carried out?
5. Is there a RICS valuation?
6. Do you have any local knowledge of the area?
7. What are your terms and conditions?
8. What is your refund policy?
9. Do you provide a lettings service?
10. How long has the deal been on the market for?

By choosing the right sourcing company it can make property investing so much easier and dare I say it, enjoyable even in these uncertain times. By following the above advice, you are more likely to achieve your property investing goals; sourcing companies will work for you if you are willing to work with them.

If you would like to ask John a question click here

When I started property investing 5 years ago I did it the old fashioned way, released money from my home, bought a couple of terraced properties, waited for them to increase in value and then remortgage. Then around 2 ½ years ago I stumbled on No Money Down or NMD. I thought all my Christmas’s had come at once. I couldn’t believe that you could buy property this way. There had to be a catch! But there wasn’t, I just kept buying and before you knew it I’d bought 35 houses within a year.

Then the unthinkable happened, the credit crunch and the demise of Mortgage Express, I was devastated. What I thought was my god given right to buy properties in this way, was snatched away from me, just as I was planning my early retirement (I was only 29 at the time)

Saint

There’s a saying up North, “Owt for Nowt” and not a truer word can be said of NMD. Its only human nature that if we can gain a lot, by not putting much in, we’ll take it.

Myself and my family have done pretty well from NMD so I have to support the idea. Although most of my NMD were done through Mortgage Express and not through creative financing that may or not be ethical.

Sinner

For me NMD has caused a lot of problems for investors. I feel that it has brainwashed investors into thinking this is the only way to purchase investment property and that putting partial or full deposits into a deal is a sin. However for new investors, this is all they know.

My concern is that investors are missing out on great deals because of the mentality that is forced upon us by the property media.

I recently had an investor turn down a deal that produced £305 positive cash flow per month because he had to put 5k into the deal (including ALL fees).

He was a wealthy investor and cash rich, he was just of the opinion that if NMD exist then he’s not going to buy properties any other way.

Now 3 or 4 years ago before NMD, if you were offered a 14.7% yielding property at 15 – 20 % below market value, you would have snapped their hand off and paid the full deposit. Now investors have the mindset that if in order to purchase property all they are prepared to spend is a few hundred pounds or even want cash back.

Don’t get me wrong, if you haven’t got the money you simply haven’t got it, and NMD is the only option you have to purchase properties. However if you haven’t got any cash, should you really be in property investing?

What happens if major repairs are needed or if the tenant decides not to pay? How will you cash flow the situation if you have no savings, you can’t just say ‘I’ll cross that bridge when I come to it’ that’s not responsible investing.

Is it Ethical?

This really is a grey area and I can’t reach a definitive conclusion on this topic in only a few short paragraphs, but I’ll certainly try my best.

Ethics is defined as ‘being in accordance with the accepted principles of right and wrong that govern the conduct of a profession’

Now your solicitor or conveyancer might agree with what your doing, your accountant say its okay and you obviously think its fine, but does your mortgage company? Of course not, hence having to use designated solicitors and all this cloak and dagger stuff. Has any one been totally upfront and honest with the mortgage companies and still been allowed to buy properties in this way? I doubt it. Therefore how can we claim we are being completely ethical if we’re not being honest?

Now before you all start calling me Judas or traitor, I must re-iterate I’m a fan of NMD and as long as it’s legal, I’ll continue to purchase properties in this way. I’m just open minded and not blinded by the media.

I am of the opinion that NMD was good while it lasted and have certainly served its purpose over the last few years, but like all good things it must come to an end. Over the next few years we will see a clamp down, in various forms on the NMD and the return to deposit purchasing. We just need to be more open to the concept that our cash might not go as far as it once did.

“The secret of success in life is for a man to be ready for his opportunity when it comes.”

Benjamin Disraeli

If you would like to ask John a question click here