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Written by Ruban Selvanayagam
Ruban Selvanayagam
Ruban Selvanayagam is a professional cash homebuyer, private rented sector landlord, auction specialist, blogger and media commentator.
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Edited by James Durr
James Durr
James Durr is a passionate property entrepreneur with a strong foundation and background in business.
If you’re interested in making money in the property market, you may have come across the world of property sourcing.
Property sourcing offers a potentially lucrative opportunity for those who don’t have the funds needed to start a property portfolio of their own but want to get involved in real estate.
To help you decide whether it’s the right choice for you, this article will run through everything you need to know. This includes how to start a property sourcing company or become an agent, ways to find investors and legal considerations to be aware of.
What Is Property Deal Sourcing?
Property deal sourcing is the practice of landing property deals for investors as a third party.
Property sourcers seek out the best investment opportunities using their skills and knowledge of the property industry, liaising directly with sellers.
Then, they present these opportunities to buyers, saving them the time and effort involved in the transaction while giving them the chance to meet their investment goals.
Because property sourcers act as intermediaries, running a business in this area offers the chance to make a cut from deals without being a direct participant. If you know what you’re doing, it can be a profitable venture.
How do I Become a Property Sourcing Agent?
To start a sourcing business, there are first a few basic steps that apply to any company.
You’ll need to register with HM Revenue and Customs (HMRC) as either a sole trader, a limited company, or a limited liability partnership.
It’s important to obtain business insurance so that, if you face any legal issues, you’ll have coverage. Professional indemnity insurance protects you from reports of faulty work or negligence, while public liability insurance covers accidents that result in harm to the public (such as damages or injuries).
Then, to ensure you comply with relevant legislation, you’ll need to register with some specific industry bodies. These are outlined below.
The Property Ombudsman
The Property Ombudsman (TPO) oversees all professionals and companies in the property industry. It ensures that, if customers or clients are unhappy with the service provided, they have a way to raise complaints.
All property sourcers must sign up with an authority that can act as a complaints intermediary to reassure clients they’re legitimate and committed to providing a good service. TPO is perhaps the best-known of all such intermediaries.
Property Redress Scheme
An alternative intermediary is the Property Redress Scheme (PRS). This provide the same service as TPO, liaising between property companies and customers who raise complaints.
You may wish to sign up for both, which offers clients even more security and may encourage them to work with you.
Information Commissioner’s Office
The Information Commissioner’s Office (ICO) is an authority that protects information rights and data privacy. It’s a public body that reports to parliament.
Property sourcing companies collect data from sellers, landlords and the buyers they work with. When they do so, they must comply with ICO requirements and the Data Protection Act.
These legislations mandate that data use must be transparent, fair, lawful, limited to necessary uses, not kept for longer than necessary, and for a specific purpose.
You have to be especially careful about data related to race, ethnicity, religion, health, and politics.
Obtaining a license from the ICO ensures that you’re processing the information while respecting private data, making it essential for a sourcing company.
You can get a license by filling out the ICO’s form and paying a fee.
Anti-Money Laundering (AML) Regulations
HMRC now considers property sourcers to be estate agents in the eyes of the law. This means they must comply with the same legislations as estate agents, including anti-money laundering (AML) regulations.
As a sourcing agent, your contracted client is the buyer (since they almost always pay the fee to the agent). Therefore, you must carry out ID verification and client due diligence on them prior to the business relationship forming.
You should also carry out due diligence on the seller to the best level possible, which usually involves downloading the title register to verify the owner’s name is the same as that which the estate agent provides.
Property sourcing businesses must carry out their own business risk assessment, client risk assessment, and controls and procedures for sellers and buyers – whether they’re individuals, companies, or trusts.
Online tools like Credas and Landmark can help with this process.
Also, you should register with the Financial Conduct Authority, the UK’s main regulator for financial services.
The responsibility of reporting suspicious transactions lies with you, and failing to comply with regulations could result in expensive fines.
National Association of Property Buyers (NAPB)
Although not compulsory, the UK’s leading homebuying companies often become members of this professional body.
The NAPB serves as a not-for-profit business and trade body that brings together UK-based sell house fast companies.
The core objective is to create more transparency and a place where seller clients of these firms can report any practices that warrant further investigation.
NAEA PropertyMark
At Property Solvers – again, although not mandatory for other property buyers (and sourcers), we decided to join this well-respected body as a means of adhering to their strict standards.
NAEA undertake an annual accounts audit and ensure that properties are being marketed in the correct manner.
Our Interview with Tina Walsh of the National Association of Professional Sourcing Agents (NAPSA)
Ruban Selvanayagam speaks with Tina Walsh – CEO of the National Association of Professional Sourcing Agents (NAPSA), author of the book “Property Sourcing Compliance: How to Stay the Right Side of the Law” and professional deal sourcer.
Tina provides some key insights into legislation + regulatory frameworks that govern the property sourcing sector, how some operators are operating illegally, reaching minimum standards, the relevant trade bodies that sources should be registered with, Anti Money Laundering (AML) regulations, Client Due Diligence / Know Your Customer (KYC), HMRC guidance and how to minimise costs whilst remaining compliant.
Property Sourcers Are Effectively Estate Agents
It’s often not realised that property sourcers need to comply with the same regulatory frameworks and legislation as estate agents. These include:
- Estate Agents Act 1979 – ensuring that property sourcers work in the best interests of both buyers and sellers and they are treated honestly, fairly and promptly
- Consumers, Estate Agents and Redress Act 2007 – protects home sellers and buyers from unscrupulous practices
- Data Protection Act 1998 – protect personal data stored on PCs, mobile / tablet devices or in organised paper filing systems.
- Unfair Terms in Consumer Contracts Regulations 1999 – protect buyers and sellers against unfair terms in contracts and other forms of sourcing agreements
- Competition Act 1998 – prohibits anti-competitive agreements between property sourcers and their buyer or seller clients
- Consumer Protection from Unfair Trading – control unfair practices used by sourcers when dealing with buyers + sellers (and create criminal offences for sourcers that breach them).
Should I Create a Property Sourcing Company?
While there are no particular qualifications or requirements needed to become a property sourcer, it’s a specialised field that not everyone can succeed in.
Property sourcers need certain soft skills, including:
- Relationship building (with estate agents, auctioneers, property developers)
- Negotiation to secure the best possible deals
- Research (to find the best property investment opportunities)
- Presentation of deals related to property investments
- Attention to detail needed to assess legal and financial considerations and handle administration
- Ability to take charge of situations
In addition to these soft skills, property sourcers will generally need a solid network in the industry to find clients. The best candidates are those who already have some experience working in the property market. It’s especially useful if that experience lies in marketing and sales, as lead generation is so crucial for the role.
Make no mistake, this isn’t easy work. Property sourcing agents are busy professionals who may need to work long hours, especially in the beginning.
Pros of a Sourcing Business
By becoming a property sourcer, you will have access to properties and opportunities the public don’t, which is one reason it can be a great opportunity.
As other types of property investing in the UK have started to become more challenging, such as buy to let, sourcing may seem more appealing to some.
Property sourcing is also a way to profit from the benefits of the property market for those who lack the cash needed to make investments.
Cons of a Sourcing Business
Not everyone can start sourcing successfully. You’ll need a certain skillset, and property sourcing is a competitive market. You’ll be up against others who are also trying to network with wealthy property investors and spot the best deals. What makes you stand out?
Then there are the legal and financial risks. You shouldn’t face issues if you comply, but the field does require some due diligence.
How to Find Investors for Property Sourcing
As mentioned, establishing a network and finding clients is one of the toughest parts of being a property sourcer.
Those who have experience in the industry have an edge here, but if not, there are ways to get ahead. If you adopt a few of the methods below, you will begin to build momentum and generate leads organically through word of mouth.
Networking Events
Networking events are one of the best ways to meet potential investors. Search for local business networking events or check out apps like MeetUp for upcoming events. You don’t necessarily have to go to a networking event tailored to property professionals (although it doesn’t hurt).
People with wealth are everywhere, and you never know where you may encounter property deals. Take the time to build the relationship and understand what your investor client is truly looking for. For example, some investors may only be seeking out rent-to-rent opportunities only – whereas others may be looking to build a larger portfolio.
Social Media
Social media can be a goldmine for creating connections. Most platforms have groups tailored to specific industries, such as property or property solving.
Facebook and LinkedIn are two of the first places to look since they both have a “groups” feature.
Don’t expect to go straight to a group, make a post saying you’re looking for investors to work with, and attract a queue of people wanting to make deals with you.
But if you manage to write content people are interested and establish yourself as an authority, investors may start to think you’re someone they’re interested in working with and contact you.
Some people go one step further by establishing a full personal brand online. This could mean making their own posts on sites like LinkedIn for organic traffic or even starting their own blog, YouTube channel, or posts on other social media sites like TikTok or Instagram. This is time-consuming, but it can reap the highest rewards.
Property Forums
Forums often get forgotten in favour of social media, but they can still be a great resource for connecting with people.
Since most people join forums to share their thoughts and educate themselves, sharing relevant content on these sites can be a great way to build a reputation for yourself.
Set Up a Property Sourcers Website
As mentioned above, as you become more established, it can be worth launching a simple website where you can:
- Explain a little about yourself and how you adhere to the relevant regulation / legislation
- Talk about what you do as a property sourcer
- Showcase the properties you’re marketing
- Add YouTube videos + other social media channels (and vice versa)
- Provide your full contact details.
These days, it’s reasonably easy to build a decent looking website using template builders like Wix or Squarespace.
Build a Property Investors List
The Property Solvers Investor List provides investor profiling. When investors sign up to the list, they are asked to fill in details that include:
- The types of property investments they’re interested in
- The regions they’re interested in investing in
- The amount they plan to invest
- Percentage of market value they’re willing to pay
- Available cash funding and proof of funds
- Investing experience
If you also sign up to our list, we can put you in contact with potential leads.
Work with Property Solvers Auctions
As with anything, property sourcing has its challenges. The primary obstacles are establishing a network and ensuring you comply with regulations, especially those regarding data security.
Property Solvers Auctions can help you overcome these challenges by giving you access to opportunities for deals based on who we have on our books already. Joining our list only takes a few minutes, and it could be the missing ingredient you need.
