The experts at Belvoir answer your key questions about buying an investment property at auction…
Q: How can I find a property auction in my area?
A: “The best place to find auctions in your area would be by doing an internet search for ‘property auctions’,” says proprietor of Belvoir Liverpool West Derby Adam Rastall. “Most auction companies will market the properties on property portals too, such as Rightmove and Zoopla.”
Your local letting or estate agent should also be able to advise on auctions that are taking place in the near future. “At Belvoir Swansea we actively research when property auctions are coming up,” says proprietor of Belvoir Swansea Ben Davies. “We speak to local ‘sales only’ agents on a regular basis, plus watch out for when auctions are advertised. As a result I can usually advise landlords when and where the next property auction in the area will be.”
Q: What are the benefits of buying an investment property at auction?
A: “The process is very quick as both the purchaser and the seller are agreeing to complete the transaction in a few weeks,” says Adam. “You can also buy a property with a tenant already renting the property so you would have an instant income as soon as the purchase is completed.”
Properties bought at auction can sometimes come with a lower price-tag than those purchased through an estate agent… “In the current climate there are a lot of repossessions being sold at auction,” says Ben. “There are some very good deals to be had and many properties fetch far lower prices than their market value.”
Q: What are the potential pitfalls?
A: “One of the biggest challenges when buying at an auction can be staying calm and not getting too carried away with the process when bidding for a property,” says Adam. “You don’t want to pay more than you had originally planned to pay!
“Also some properties are sold at auction because the owners are aware of ongoing issues with the property or the area,” he continues. “They have chosen to sell at an auction because they have a better chance ‘to offload’ the problem property than they would selling it through an estate agent.”
Q: Why is it advisable to view the property before bidding?
A: “I would always advise viewing a property prior to buying at auction,” says Adam. “You may find the area where the property is located is not desirable or that the property has several maintenance issues that must be resolved prior to it being let.
“Contact local agents and go online to check past sold prices for the street and other information needed to help you make an informed decision about whether to purchase or not.”
Q: What should I do at an auction?
A: “Take note of when the lot you’re interested in is due to be sold,” says proprietor of Belvoir Southend-on-Sea Wayne Mearns. “Each lot averages about five minutes to sell. If your chosen lot falls around lunchtime the room can be up to 50% emptier than in the morning… meaning less competition – and, typically, afternoons are far less busy than the mornings too. “It’s always advisable to go to at least two local or national auctions before bidding on a property to observe proceedings and pre-plan your strategy.”
Q: What should I NEVER do at an auction?
A: “You should never buy a property that you haven’t researched thoroughly,” says Adam. “I’ve known landlords go to an auction and fail in their bid on the specific property they’ve spent time researching. Not wanting to leave the auction empty-handed, they’ve then gone on to buy a property that looks good on paper but they’ve neither viewed nor researched. “This can be a massive risk due to hidden problems that may only be discovered on viewing the property or area.”
Q: Who should I turn to for further advice?
A: “If you see a tempting property up for auction, contact an independent lettings specialist to get their opinion on the area, the street, the type of tenants that the property would be suitable for and the anticipated rent that could be achieved. As they are independent, they will be able to give you objective and honest advice on the property.”
In fact, a letting agent can help from the moment you spot the property… to when you place the winning bid. “We often advise landlords on good property investments that are available at auctions,” says Wayne Mearns. “In fact, recently one of our investors secured a 12% yield on a property that we recommended.” Ben Davies agrees and says, “I can be there from the very beginning of the process to the end. I often go out to view auction properties with investors, offer a free rental appraisal, advise on whether or not it would make a good investment purchase and then attend the auction, along with the landlord, on the big day itself.”
Auction advice… at-a-glance
Do…
√ Research the local market
√ Budget for renovation costs
√ View the property in advance
√ Set a realistic budget… and stick to it!
√ Find out what ‘rental return’ the property can achieve
√ Visit an auction to observe proceedings before bidding
√ Arrive in plenty of time to assess the competition
√ Stay calm
√ Try national as well as local auctions
√ Make sure your finances are in place prior to the auction
√ Get advice from an independent source, such as a local letting agent
Don’t…
X Bid more than the budget you set
X Buy a property you haven’t researched
X Be late for the auction
X Enter the bidding process too early – it may push the price up
X Get emotionally involved
X Bid in overly large increments
