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How Best To Analyse Returns When Packaging A Deal That You’ve Sourced

What is deal packaging?

Deal packaging is simply sourcing properties on behalf of investors and earning income through sourcing fees. This definition applies to all of property strategies.

Sourcers find profitable investment opportunities for investors. A deal packager, on the other hand, offers all services, including research of the area, price comparisons with competitors, suggestions for the most profitable investment types in the region, and management-related recommendations. They save time for investors, by carrying out the property search and doing the due diligence.

Deal packaging is all about building cashflow, with the potential to start investing yourself. It is a method that can set you up for a long and colorful career in real estate. Here are some tips on how best to analyse returns when packaging a deal that you’ve sourced:

Key Figures

There are multiple ways to calculate your returns in deal packaging and I’m sure some of these are familiar, which include:

  • ROI

ROI or Return on Investment, is very frequently used to work out whether a property investment is going to work. It also allows you to compare that property to other investments. To calculate ROI, divide the profit earned on an investment by the cost of that investment and multiply by 100.

  • Return on Capital Invested (ROCI)

This method of assessing a rental investment takes into account the pre-tax profit (rent – expenses) as a percentage of the amount of capital (e.g. cash deposit) that you are going to have tied up in the investment.

  • Yield

Yield is only used to calculate the rental return on the property and there are 2 kinds: Gross Yield and Net Yield.

The Gross Yield does not take the costs off, so this can be an inaccurate number to show how much you will earn.

The Net Yield, on the other hand, takes all the costs off, giving you a much more accurate figure as to how much money you are making.

As a sourcer, you should clearly display your costs, because they can be misleading sometimes. If you present your figures and it’s unclear how they have been calculated, then you have to explain yourself over and over.

Uniformity

If you are a deal packager and you work with numerous investors, you want to structure the way you package your deals with uniformity. Give investors the same key figures all the time to avoid confusion. For example you use ROI on one deal then you should definitely use it to the next deal.

No Sugar Coating

Your aim is to not sugar coat an investment and you want to be as transparent as possible. You want to keep it simple and straightforward. Your investors can quickly evaluate the deal if it is of interest or not.

Deal Packaging is about people and arithmetic. Building good relationships with potential investors, suppliers and professionals requires talent and skills. In addition, you need to be able to analyse and understand when you have found a great deal.

You don’t need a lot of money to get started, all you need is good training, determination, and constant action to reap significant financial benefits.

Sourced Head Office team assess deals for franchisees, making sure all figures are in place and correct. We also market their deals for them, generating thousands of investor leads.

Download our franchise prospectus to find out more about how Sourced can help you with your sourcing business.

 

Monika Romanik ACIM

Marketing Manager