So you want to build an investor list.
In theory, the more people you have on this list, the easier it should be to sell deals.
In practice, though, it’s not the quantity, but the quality that matters. Are the people on your list serious about property investing?
The truth is that there are a lot of investors out there who aren’t quite ready yet.
As a result, they are going to waste your time, which is why you need to avoid them.
You only want to work with people who are serious, have the required funds, and are ready to invest in property.
That’s why it’s so important to know which questions to ask property investors to qualify them before you agree to source deals for them.
We have a two-stage process to qualifying investors:
Here are the five key questions to ask property investors before you agree to work with them…
You may have heard this saying: “The best predictor of future behavior is past behavior”.
That is why we want to know how many properties the investor currently has in their portfolio.
Someone who already has at least one property in their portfolio is more likely to go through with the deal than someone who doesn’t own any properties.
Of course, this doesn’t mean that you should never work with new investors, but the current status of someone’s portfolio gives you valuable information.
When an investor doesn’t own any property, you need to be extra diligent about qualifying them.
Also, when an investor says that they do own property or properties, you shouldn’t just take their word for it.
Ask them for proof of ownership (insurance documents, etc.).
Someone who has previously bought a deal from a property deal sourcer is more likely to buy a deal from you.
Moreover, they are also more likely to understand the process and have realistic expectations, which makes working with them much easier.
Again, this doesn’t mean that you can’t work with investors who have never bought a deal from a property deal sourcer before, but you need to be extra diligent about qualifying them.
An investor who doesn’t have any previous experience with that particular investment strategy may not realize what they are getting into.
They may be enthusiastic about it, but this lack of experience means that they may also be biting off more than they can chew, which is bad for everyone involved.
For example, let’s say that we have a rent-to-rent HMO or a rent-to-rent multi-let deal, but the investor has no experience in managing a multi-let property.
Moreover, they want to manage it themselves, meaning that they are not interested in working with a property management agency.
We are not going to work with them. Why?
It’s simple: what we are offering to the landlord is a solution to their problems.
In this case, giving a multi-let rent to rent deal to a complete novice investor would likely also mean giving the landlord new problems, which we don’t want.
Moreover, we wouldn’t be serving the investor well either, because they would likely struggle with managing that multi-let property, pull out from the deal, etc.
All this may lead to a situation where the landlord has a problem and comes to us asking us to fix it.
Now, they don’t have a right to demand that we solve their problem, but…
We have built a relationship with them, we have brokered the deal…
Which means that we would likely feel obliged to help them out.
Can you imagine what a waste of time all this would be?
That’s why we avoid all that headache by refusing to work with investors who don’t have any previous experience with the investment strategy that they are interested in.
Of course, this doesn’t mean that an investor who doesn’t have any previous experience managing a multi-let rental property will necessarily struggle with it.
However, we know that managing multi-let properties can be incredibly difficult, especially for those who haven’t done it before, so we would rather not take the risk.
You need to know if the investor actually has the financial means required.
If they intend to pay with cash, do they have that cash?
You need to ask for proof of funds such as a bank statement.
Now, a lot of people say that bridging finance is like cash, but it’s only like cash if the investor gets it. But what if they don’t?
Then they won’t be able to go through with the deal.
FREE downloadable resource: Property Investors Questionnaire Click here to download
That’s why if an investor intends to use bridging, we ask for proof or a letter of intent from the lender so we can be certain they’ll actually receive the funds.
If they intend to take out a mortgage, are they eligible for that mortgage?
You need to ask for a mortgage agreement in principle that is no older than a month.
It’s important to be aware that mortgage products can be withdrawn at the last minute, so the agreement in principle is not a guarantee that they will indeed get it.
However, it at least provides some reassurance, because it demonstrates that the investor has applied for financing and wasn’t rejected outright.
We have already mentioned the documents that we ask for when we are qualifying an investor.
But to summarize…
Here are the documents that you want to see:
And don’t feel awkward about asking for these documents.
Think about it:
If you were an investor and a sourcer asked you to provide them, would you refuse this request?
Of course not.
…unless you didn’t have the funds.
Keep in mind that if an investor refuses to provide these documents, it’s likely that they don’t have the financial means required, therefore you should not work with them.
Be strong and confident in your deals!
You are the one with the deal, so you are the one in control.
If you have an excellent deal, but the investor refuses to comply with your terms and conditions, guess what?
Just move on to another investor.
And you will find another one if your deal is great.
You just need to be strong, confident, and stand your ground.