Buying A Property At Auction
If you know what you’re doing then property auctions are a great place to pick up a good deal. However, you should be aware that you can’t just go in there and bid and expect to do well out of it. As any serious property investor knows, you have to do a lot of preparation before the auction itself so you know exactly what you are bidding on and what you can afford to spend in order to get a return on your investment. Attending and buying property at auction can be a great way to start your portfolio of property. If you’re new to this business, here are some of the things you need to know:
Finances: A winning bid at a property auction constitutes a legally binding agreement so you have to be absolutely certain you have the means to pay for it before you start. Whether this is your own money or a loan you have taken out, you will be expected to pay a deposit of around 10 per cent straight away, with the rest of the money usually due before a month is out. With this in mind, you can never just turn up at an auction and see what happens – you have to be able to access the funds in the allotted time.
Do Some Research: There are likely to be several places in your area that will hold regular property auctions so find out about each of these before you go along to bid. Some auctioneers may specialise in certain types of properties or those in certain price bands. So, for example, if you are looking for very low-cost properties to do up, it would be a waste of your time if you turn up at one selling only high end homes. If you look online or in your local paper you should easily be able to find the information you need. If you’re buying properties to let out, you should also research some property management software to help you manage your investment once tenants are installed.
What To Expect: It’s a good idea to go along to an auction as an observer rather than an active bidder the first time. This will allow you to familiarize yourself with the process as you may find the experience of bidding the first time to be a little intimidating. Pay attention to the signals bidders use to place their bids as you want to avoid making any dreaded ‘accidental’ bids. This can happen because even the smallest movement can attract the auctioneer’s attention – and once you’re in, you’re in.
Properties will be sold from the catalogue one by one with the auctioneer scanning the room for the highest bidder. They will be sold when there are no more bids and the auctioneer’s gavel falls. Remember that this constitutes a legally binding contract.
See Before Bidding: An auction is like any property purchase in that you should always inspect it thoroughly before buying to avoid any nasty surprises. The auctioneer’s catalogue will tell you how to make viewing arrangements so you can make sure it is as described in the listing. Don’t forget to carry out the standard property and land searches to check there are no problems lurking in the background. Once you’ve done this you should have a good idea of the properties you want to bid on and how much you are prepared to pay for them.
Bidding: On the day of the auction you ought to have a clear idea in mind of what you are going for. When the property you want comes up, make clear and obvious movements when you bid. Don’t get carried away in the heat of the moment and bid more than you’d intended in order to ‘beat’ someone else. It’s more easily done than you’d think and could be a costly mistake if you end up with a poor investment on your hands.
Be Prepared: Make sure you’re ready to take ownership of any property you win there and then. This will involve bringing along at least two forms of identification and a reliable means of payment so you can make your deposit. Remember if your bid is successful that you will be liable to insure it as soon as the gavel falls. It is assumed, therefore, that you will have taken out buildings insurance to cover the property before you even place a bid. It may seem strange to do this before you are even sure you will win it but it’s standard procedure nonetheless.
House prices are still not showing any sign of dropping, and this is making it harder and harder for buyers to get on the property ladder. Because of this, we have been seeing a huge increase in renovation projects – popularised by programmes such as Grand Designs. Whether you’re looking for your dream home or want to get into the buy to let market, buying a run-down property and doing it up yourself could be the answer to your housing dilemma. Yes, it can be frustrating and it takes time and patience, but the end results can be equally rewarding.
If you’re going to renovate a property, then before you buy one and start knocking down walls you need to sit down and arrange your finances very carefully. After all, the amount of money you have to play with will dictate the scale of your renovation and how long it will take. Once you’ve set a budget, stick to it. If you’re getting a loan then shop around very thoroughly to make sure you get the best deal. The same applies if you are still looking for a property and need to get a mortgage. Then consider what you want to achieve with your renovation. What are the most important features you want from your house? Is it to live in or to rent out?
Finding the perfect house to do up can take time but it’s certainly not something you can afford to rush. Because renovation is such as popular option there is far more competition for viable properties, so you may be looking for several months before you find what you’re successful. Criteria you should bear in mind during your search are location, the amount of structural work the house will need and whether it is already fitted with plumbing and electricity.
Before you buy the house you’ve got your eye on there are a few things you should do. Firstly, find out the situation with planning permission: will it be easy to get permission to make any structural changes you want to, for example? You will also need to have a good look at the deeds to the house to ascertain where the boundaries lie in case you want to add any extensions or other garden features. Lastly, this is the time to get a surveyor in to check the structural integrity of the house. You should never, ever buy a place without taking this step.
Once you’ve bought the house, the next decision you have to make will be whether you hire a building contractor to take control of the work, or hire separate contractors for each aspect of the renovation and manage the project yourself. If you’re going to take the latter option then you will need to make a very detailed plan of the order in which you need the work to be carried out so you an plan to bring them all in the right times. You should try to be on-site as much as possible to check that the work is being done properly and that the contractors are working as far as possible to schedule.
If your project is particularly ambitious you may find it helpful to bring in an architect or builder to discuss structural aspects. Remember, above all, that not everything has to be done immediately. If you are planning to live in the house yourself then there are certain aspects of the renovation that you can do over time once you are installed so your lists of jobs to be done should be laid out in order of priority. Be prepared to be flexible about your time scales.
However, whether you’re living in the house or renting it, the golden rule is never to spend large amounts of money on alterations that will not add value to the house. Remember that this is an investment for you and you will naturally be hoping to make money on it. As you go along you should also get as much advice as possible from experts in the trade, or people who have already renovated houses themselves. This way you get pick up some useful money saving tips or learn about the pitfalls to be avoided. If you’re going to rent out a property after renovation then get some good property management software to help you with functions such as invoices, payments and automatically generated notices