Right now in the Property Investing Landscape, a few underground investors are making large chunks of cash (sometimes a years’ salary in one deal) buying through property auctions.
BUT a word of warning…
Sometimes you go and the stock is low, the prices are high, and the quality of properties are poor.
Sometimes it’s too busy and too popular, and everything is going over asking price.
Sometimes, like right now, the odd gem pops up, and with the right strategy and knowledge, You can get genuine bargains without Estate Agents.
A HUGE contrarian opportunity for well educated investors, IF You get it right.
So here are 12 tips to do it properly, professionally, & profitably:
1. Do a Trial Run
Before bidding at an auction, go and see how the auction process works, get to see a couple of sales. It will make the property buying process less daunting as You will be familiarising yourself with the process.
2. Request a catalogue
Catalogues are normally available four weeks before an auction. These will provide information on all the properties up for auction. You will then be able to get a feel for the guide prices of the properties You want to buy
3. Identify a property & arrange a visit
It is essential you visit the property rather than buying it based on the catalogue description alone – you will be taking unnecessary risks if you don’t.
Take a builder with you so they can assess how much works the property might need so you can assess your potential profit.
4. Instruct a survey
Treat it as a traditional purchase and make sure the property in question is a bargain and not something you may regret
5. Set a maximum price limit and stick to it
Watch. Observe. Keep your hands FIRMLY in your pockets.
Don’t even scratch!
Just because other bidders are pushing the price higher, doesn’t mean the property is necessarily worth that amount. Know your price limit and stick to it.
6. Have your deposit ready
You will need to put down a deposit at auction of 10pc of the property’s price. If you’re going into the deal with a partner, ensure the funds are present and take at least two forms of identification
7. Get your finance in order
As soon as the hammer falls, you have bought the building and you will be expected to pay the 10pc immediately.
You will then be required to come up with the remaining 90 pc within 28 days or less depending on the condition of the sale.
Quick tip: Never bid on a property at auction unless you are certain you can get a mortgage and complete the deal within 15-28 days.
8. Factor in other costs
As well as mortgage and survey costs, don’t forget to factor in legal’s costs, renovation and refurbishments costs, interest payments for your JV partner/bridging funds and any buyers fee payable at the auction house.
Also remember stamp duty on properties over a certain threshold.
9. On the day
Make sure you read the addendum sheet as this will reveal any mistake or changes that may have occurred since the catalogue was published.
10. Bidding and following up
The atmosphere, the buzz and excitement of a property auction can often lead many investors paying much more for a property. Stick to your “maximum” when bidding.
Remember that the guide price is usually much closer to the “reserve price” - the lowest offer a seller will accept - rather than a guide to what the property will actually sell for. Also, if the property you are bidding on fails to meet its reserve price then it’s perfectly acceptable to approach the owner or agent direct and make an offer (Mark does this a lot)
11. Out of area
The very best deals come when a property in your local area is being listed in an auction in another town or city. The locals won’t be interested, and investors in your area won’t know about it, or won’t travel if they do know about it. This has been our most lucrative gem of knowledge.
12. Subscribe to E.I [Essential information]
E.I is a website that lists all the properties in all the auctions across the UK. It really is essential information for any serious property investor. We have subscribed for almost 10 years, and you get advanced notice of auctions, and a lot of very important price history and data.
Some deals will work, some won’t and some will get away. It’s simply a case of knowing your local area, circling like a tiger and getting ready to pounce when the opportunity arises.
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