It’s time to give some thought as to how to find the right property deals; but before we do this, it’s important to give some consideration as to what it is that you are really trying to achieve. The reason for this is that when you know what you are trying to achieve, you can then devise the right strategy to help you achieve this – and this will help you decide upon the right type of deals to make it all possible.
As such, let’s think about this at a very basic level with vanilla buy to lets.
In my opinion, the best way to find deals for a buy to let strategy is to head to the estate agents. This may surprise or even shock you as I can imagine that you might be thinking that the best deals with agents are those that are locked in their bottom drawers. Perhaps you share the view of many that most agents only hand over deals (or at least, the “good” deals) to their preferred buyers. Well, here’s the thing – this is not strictly speaking true.
Let’s think about why. Just because one investor (i.e. the “preferred investor”) wants a particular type of property, this doesn’t necessarily mean that it will be the same type of property or the same type of deal that you are considering yourself. You might presume that there’s only one type of deal and that the agent will identify what this deal is – but, this might not be the case. To give an example, let’s assume that your strategy is to “buy and hold” property to let out to tenants. Now, the other investor – or the agent’s preferred investor – might be looking at properties which they can flip. These are very different types of deals!
Or, perhaps you are looking for a property in a lower value area to rent out. Perhaps the “other investor” is looking for property in a higher value area to do up and sell on to an owner-occupier. Again, these are both very different types of deals.
Whilst it is understandable, there is a lot of confusion around the concept of estate agents holding deals back. However, the reality is that there are plenty of deals to be done through agents in your local area or chosen investment area that will fit your strategy, and so you should brush aside erroneous thoughts of agents holding deals back. After all, their preferred investors may be looking for something different altogether.
I would also like to allay any misconceived thoughts that any deal that comes through an estate agent is a deal “not worth doing”. Many believe that if a deal is through an agent, then it’s not going to be a very good deal or is not going to be very creative – largely because they will be unable to negotiate hard, or to negotiate a deal that’s below market value. Again, this is not true.
When a property comes on to an agent’s books, the agent won’t know what deal is to be done – and nor will you. And this is why as property investors, we have to put in the time and effort to ascertain why type of deal COULD be done.
In my experience, most deals come down to the motivation of the seller – and this is something which an agent may not fully know. Yes, some vendors do openly state that they are looking for a quick sale and will therefore be open to offers, but in my experience, 9 times out of 10 the agent will be unaware of just how motivated the seller really is. Quite often they simply take an instruction from a vendor without actually knowing the history behind the property – and this is where our work and due diligence comes in.
As property investors, we earn our money by doing the digging, groundwork and research to find out what IS going on, so that we can figure out if there really is a deal that’s worth doing. By this though, I don’t mean just going into the estate agents’ offices, browsing the “For Sale” signs, viewing properties and putting in offers of e.g. 5% below market value. Instead, I’m talking about conducting thorough due diligence whilst having a plan of action in place that will allow us to find deals within our strategy – and then following up by acting on our “plan” to make it happen.
We’ll go into how to do this in more detail next time.
Peter Jones B.Sc FRICS
By the way, I’ve rewritten and updated my best selling eBook, The Successful Property Investor’s Strategy Workshop, which is an account of how I put together my multi-property portfolio, starting from scratch and with no money of my own, and how you can do the same. For more details please go to ThePropertyTeacher.co.uk