Do Property Sourcers Need to be More Professional?

Are you fed up of being sent details of properties from sourcers which do not disclose sufficient information because they just don’t know it?

Recently I received

R2RSA on South Coast

▪ Rental price: £1,900

▪ Refurb costs: £6,000

▪ Annual profit: £17,895

▪ Annual rent: £22,800

▪ ROCE: 150%

Firstly let’s have a look at the figures actually provided -

Rent price quite high but perhaps average for south coast

Initial refurb costs are over 3x rent figure so why no offer of rent free period? Why would you want to invest your capital into somebody else’s investment albeit perhaps only 2 months profit?

Annual profit – very attractive but what is it based on?

Annual rent  - superfluous figure as monthly rent already provided so just need to multiply the rental price by 12 which is what the sourcer has done.

ROCE – 150% suggesting that investment in the deal is around £12000 so perhaps 1 month’s deposit plus 2 months rent up front plus the refurb costs

So let’s look at what is missing/what else we need so we as an investor or rent to rent operator can make an informed decision.  Here is a list of some key details you need to request:

1. Full Financial Breakdown: Detailed explanation of how the annual profit and ROCE (Return on Capital Employed) are calculated. Specifics of all operational costs (e.g., utilities, management fees, maintenance, cleaning, insurance).
2. Property Details: Exact location and features of the property. Current condition and specifications (number of rooms, furnishings, etc.). Number of occupants and occupancy levels that the budget is based on. Any parking facilities or restrictions. Photos of the internal and external of the property
3. Lease Terms: Duration and terms of the lease agreement. Any clauses or special conditions to be aware of.
4. Refurbishment Details: Estimate breakdown for the refurb costs provided. Expectations and plans including timescales for refurbishment. Supporting builders’ quotes.
5. Market Analysis: Comparative market analysis for similar properties in the property location. Demand and occupancy rates for serviced accommodations locally.
6. Legal and Compliance Checks: Ensure all legal aspects, including licenses and permits, are covered. Check compliance with local regulations and any potential restrictions.
7. Exit Strategy & Risks: Information on potential exit strategies and timelines. Any identified risks and mitigation plans.
8. Operational Plan: Who will manage the day-to-day operations? Plans in place for property management, guest acquisition and check-in. Any alternative contingency options besides serviced accommodation

Would you require any other relevant information that a sourcer should be including in their promotions?

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