Real Estate Investor Magazine July/ Aug 2020 July 2020 | Page 47

I
n the second article in this series, we looked at how to
recycle money by buying UK property and adding value
thereto. It sounds simple enough – but how does one
choose property living thousands of miles away? Investing
at a distance may make you anxious, especially if you can’t
meet estate agents or view properties.
In my third article, I will explain the ins and outs of
building a property portfolio at a distance. It is perfectly
possible, but you need a reliable sourcing agent on your
side. You may wonder what a sourcing agent is – in fact,
it’s simply someone who acts on your behalf, as the buyer,
instead of on the seller’s behalf (as an estate agent does).
A good sourcing agent is invaluable for growing your
portfolio, particularly if you are looking for undervalued
properties in areas where there is a supply shortage. They
also know which areas are being regenerated, which means
a property can be sold at a profit fairly easily.
For a fee, your sourcing agent will use a variety of
marketing strategies, like visiting estate agents, attending
auctions, advertising and social media. He or she will
view multiple properties every week, carrying out due
diligence and negotiating the best below-market-value
price should you wish to put in an offer. Once a deal has
been made, they issue a deal sheet that sets out all the
figures, the agreed-upon price, photographs, evidence of
due diligence, and so on.
Choosing a sourcing agent
Always choose a sourcing agent that meets the necessary
UK compliance criteria, as certain standards must be in
place before they can accept a commission.
Ask your sourcing agent the following questions:
• Do you have professional indemnity insurance in
place?
• Are you registered with The Property Redress Scheme
(PRS)?
• Are you registered for Anti-Money Laundering (AML)
supervision?
• Are you a member of The Property Ombudsman (TPO)
Scheme?
• Are you registered for data protection supervision?
(The UK General Data Protection Regulation (UK GDPR
came into effect on 31 January 2020, superseding the
EU GDPR.)
Sourcing agents must be fully compliant before they
broker a deal, so ensure you are working with a professional
agent from a reputable company before taking any further
steps. You should also request testimonials from previous
investors, as you can learn a lot from their experiences –
were they able to verify the accuracy of information they
were provided with, and were they satisfied with the entire
process?
It isn’t easy to find good, trusted sourcing agents, and
one can be misled by misdirection and glossy brochures.
Education plays a vital role in due diligence, and it also pays
to get referrals from a trusted network before you kick off
your property journey in the UK. As with estate agents, there
are some good sourcing agents, and some who are happy to
offer deals that aren’t what they appear to be. When I train
South Africans who want to invest in the UK market, this is
something I go over thoroughly.
Building a profitable portfolio
I strongly believe that there are three secrets to building
a profitable property portfolio:
• Be able to recycle your money.
• Conclude a deal that creates immediate cashflow.
• Have a professional team on the ground that can help
you to execute your strategy
For me, recycling money was key. I used other people’s
money to get started, so having money tied up in a deal for
ten to 15 years just wasn’t an option. I was advised to stay
away from new build developments as I would not be able
to add value to them or sell them at a profit. This is a very
important point.
If you rely on long-term growth to make money, you
should be prepared for any eventuality. The Covid-19
pandemic is a prime example of an event that can throw an
investor off course. You could also be at the mercy of the
economic model of supply and demand. If 50 flats are sold
to 50 investors, who then try and rent them out, rental prices
will be affected. If 50% of them then try to sell because they
cannot rent their properties out, values will also be affected.
Ultimately, the only person making real money would be
the developer.
We all know that cash is king, so concluding a deal that
guarantees cashflow is the preferred approach – along with
having a reliable team in place to help you achieve your
goal.
A final word
The true measure of building a successful portfolio is
finding a repeatable process that works, rather than buying
a half a property with money you have saved up every ten
years. The UK market gave me the perfect foil to do this: buy,
add value, tenant, refinance and repeat, using a variety of
ways to finance the purchase creatively. If you follow these
principles, and engage the right team, you, too, can succeed
in the undeniably attractive UK property market.
Next month, we will look at how to get funding in the UK
as a foreign national or expat investor, as well as some of the
key concept in the UK market, and how they differ in the
South African market.
Sean Thomson
Sean Thomson started his
property investment career in
June 2004 after working in the
financial field for four years.
He helps investors stop their
wealth being eroded in South
Africa, by mentoring them to
buy UK property.
SA Real Estate Investor Magazine JULY/AUGUST 2020 43