Profit is at the heart of property investment, and paying a property sourcing agent to find you the most profitable deals can play a significant role in determining your investment’s overall success. But how can you balance the promise of returns with the investment costs involved and be sure that the fees they’re charging you are fair?
In this article, we’re putting property sourcing fees under a microscope, exploring how different fee structures work, which factors can influence cost, and the average rates for property sourcing in England as a whole and Nottingham more specifically.
Get ready to start making more informed decisions that align with your investment goals!
The true value of property sourcing agents
When you think about it, investing in property is a lot like buying a small business. In the same way that businesses get income through sales, properties generate revenue through rent. They also have expenses (such as insurance and mortgage payments) like businesses have operational costs, and you can calculate investment profit in the same way you calculate net earnings!
When you’re buying an investment property it makes sense to do everything in your power to protect your investment. That’s where property sourcing agents come in!
Much like business consultants who source profitable businesses, the role of property sourcing agents is to identify and negotiate potential profitable investments on your behalf. The difference between buying a property from the open market based on your own knowledge and experience, and buying an investment deal that’s been put together by an experienced deal sourcing company can be huge!
While the sourcing agent plays a crucial part, it’s also your responsibility as an investor to ask the right questions, conduct thorough due diligence and examine the deal yourself. This will help ensure that the property’s potential aligns with your financial goals and that the associated property sourcing fees are justified.
What are property sourcing fees?
Property sourcing fees are paid to property sourcing agents, whose role is to locate and negotiate profitable property deals on other behalf of investors. There are three types of fee structure: upfront fees, success fees and retainer fees. Here’s how each type works:
- Upfront fees: These fees are paid to the sourcing agent before they start work to cover the costs of their services and resources. Upfront fees are often offset against the success fee, but this isn’t always the case. These fees are similar to consultation fees for business acquisition.
- Success fees: These fees are calculated as a percentage of the purchase price and are payable once a deal has been sourced and you’ve exchanged contracts on the property when there is a legal obligation to complete on the purchase.
- Retainer fees: These fees are paid to the sourcing agent monthly for ongoing sourcing services. Paying via a retainer can help to keep your property sourcing agent on track and prioritising your needs. Retainer fees are less common than upfront and success fees in the property sourcing world, but they can be extremely valuable for investors who are serious about growing their portfolios and having priority access to expertise in a competitive market.
Which factors influence the price of property sourcing?
Property sourcing fees can vary widely depending on lots of factors, including location, property type, exclusivity, market demand and expertise. Let’s explore each of these factors in detail to help you determine how much you should really be paying your property sourcing agent:
- Location: Certain areas (e.g. London, Bristol, Manchester) demand higher fees due to greater competition and higher returns potential, just like if you’re purchasing a business in a particularly lucrative market.
- Property type: Complex properties, such as HMOs, require specialised knowledge and therefore cost more to source.
- Exclusivity: Off-market properties usually come with higher fees because they are harder to find and more valuable. Since fewer agents and investors are competing for them, these exclusive deals are more desirable and often cost more.
- Market demand: When the market is hot, sourcing fees increase due to high competition. When there’s less market demand, sourcing fees can go down. Think of it like trying to acquire a business in a booming industry!
- Expertise: More experienced property sourcing agents and those with specialised knowledge or additional expertise usually have higher fees. But be careful! Expertise is sometimes associated with online presence and social media following. Whilst this can be a good indicator, it may not be the case and proper due diligence into case studies is always required.
How much should I pay my property sourcing agent?
At Purseglove Property, transparency is a top priority. To help you on your investment journey, we’ve had a look at the average rates for each fee type in England as a whole and Nottingham more specifically so that you can make informed decisions about who to use for your property sourcing needs.
Average rates for property sourcing in England
- Upfront fees: In England, upfront fees for property sourcing typically range between £500 and £2,000. These fees may be higher if you’re looking for a specialised property, in a high-demand area, or if the property is exclusive to the agent.
- Success fees: In England, success fee percentages generally fall between 1% and 3% of the property’s purchase price. For example, if you’re purchasing a property worth £200,000, the success fee can range from £2,000 to £6,000. If you’re purchasing an HMO and the purchase price is based on the rental yield (following a commercial valuation), this can dramatically increase the sourcing fee.
- Retainer fees: In England, monthly property sourcing retainers typically range from £250 to £1,000 per month.
Average rates for property sourcing in Nottingham
- Upfront fees: In Nottingham, upfront fees tend to be slightly lower than the national average, often ranging from £300 to £1,500. The cost difference reflects the generally lower property prices in Nottingham compared to cities like London.
- Success fees: Success fees in Nottingham typically align with the national standard, ranging from between 1% and 3% of the purchase price. However, given Nottingham’s relatively affordable housing market, the actual fee might be more modest in absolute terms. For instance, with a property purchase of £150,000, the success fee could range from £1,500 to £4,500.
- Retainer fees: Monthly retainer fees in Nottingham are also generally lower, ranging from £200 to £800. This makes ongoing sourcing services more accessible for investors looking to build up their portfolios in the city.
How much is property sourcing at Purseglove Property?
At Purseglove, we charge upfront fees for property sourcing ranging from £500 to £1000 and this is offset against our success fee, which is usually 3%.
Why choose Purseglove Property for property sourcing?
At Purseglove Property, we’re property management experts first and foremost. This gives us a unique advantage when it comes to sourcing investment properties in Nottingham.
Firstly, almost all of the deals we offer are exclusive to us which means we rarely source deals on the open market. Secondly, almost all of our clients go on to use one of our property management services (we have experience managing traditional properties, HMOs and serviced accommodation). Because of this, we pride ourselves on being open, honest and transparent about the deals we offer at the very outset. We are one of the few sourcing agents who have to stand by the figures we’ve used when sourcing a deal, because we also deal with the realities of them when managing the property later!
Since contracts and compliance are a huge part of long-term profitability, we always stay up to date with changing regulations and know a thing or two about watertight agreements that protect everyone involved.
We have a proven track record of delivering profitable deals and helping clients to achieve their desired returns. Just check out our client stories and you’ll see what we mean!
Partner with Purseglove for property investment and landlord support
If you’re looking for a property sourcing agent who can provide you with an end-to-end service in Nottinghamshire, from locating potential deals and renovating properties through to finding you tenants, managing their stay and collecting rent on your behalf, choose Purseglove Property.
We’re always clear and upfront about costs and we’re passionate about offering a seamless investment experience. Contact us today to see how we can help you with your property investment goals!