It is often said that Property Sourcing or Deal Packaging is a very low-cost option to get into the world of property investment – it’s something at NAPSA we completely disagree with.
Why do we disagree?
Before you can legally operate any property sourcing or deal packaging business in the UK you have to have in place the following ‘legally required’ items:
- Professional Indemnity Insurance (PI)
- Required Registrations
- Professional Agreements/contracts, Risk Assessment(s), Policies and Procedures
- Legally Required Training
The costs are variable dependent on which body you are registering with, the level of insurance purchased and of course where you purchase it from. It also depends on whether you write your own policies, risk assessments and procedures, or where you purchase them, and also the level of training completed.
To join a Property Redress you will need a minimum of £100,000 of Professional Indemnity (PI) Insurance cover.
You will need to find an independent insurance broker who has an in depth understanding of the Property Sourcing sector as not all insurance policies are fit for purpose.
As a guide a business has the basic requirement of £100,000 cover for which the cost will be in the region of £300.00 to £350.00, if you get yours for less that is obviously a bonus.
Insurance Cost Initial: £350.00
2. Property Redress Scheme Registration
Regardless of which Redress scheme you choose to join, The Property Ombudsman (TPO) or Property Redress Scheme (PRS), the initial registration fees are similar, although the service provided can differ as they operate in different ways.
Initial Registration per business (approximately): £285.00
3. Data Protection Supervision
The initial registration charge to register with the Information Commissioners Office (ICO) for Data Protection supervision is:
Initial Registration per business: £40.00
4. Anti-Money Laundering Supervision
The cost of initial registration for Anti-Money Laundering supervision with HMRC is quite complex and breaks down as follows:
- Per premises: £300.00
- Approval Charge (per person): £40.00
Total Initial Registration Charge: £340.00 (single premises + 1 Person)
5. Professional Documents, Agreements, Policies
This is where the cost to your business could vary significantly. The reason for this is that there are really only four options open to you for getting these documents in place in your business:
- Use an experienced commercial contracts solicitor to write them for you (very expensive) – Cost: £3,000+
- Obtain basic agreement and policies from a site such as www.simply-docs.co.uk & adapt for your own use. (Some document types not available) – Cost: £80.00 + VAT
- Obtain copies of these documents from a training programme – Cost: Professional Sourcing Compliance (PSC) £795.00
- Research and write them yourself. (The cheapest option but not for everyone) – Cost: £0.00 (except for your time in research and writing)
6. Training – Required
- Data Protection
- Anti-Money Laundering
Costs: Vary with online courses from free to around £100 per person per course. Make sure that any course you attend covers either subject in sufficient depth and that you are not confused by attending a course aimed at estate agents which is not accurate for sourcing agents or deal packagers.
Professional Sourcing Compliance (PSC) provide bespoke online 24-hour access courses in Data Protection & Anti-Money Laundering – Cost: £95.00 per person
Total cost to set-up in region of £1,900.00
Low-cost can mean different things to different people. Based on previous experience talking to new sourcing agents, they tend to have very little cash and £1,900 would not be easily accessed – especially if some training courses on ‘how to source’ had already been funded.
Our recommendation would be to review this estimate cost before starting your new business to make sure it’s something you can cover.
If you have any questions or unsure how to get started, please reach out to our team via the Contact Us page and we’d love to help!
The NAPSA Team