Whether you’re a first time landlord or just new to the auction scene, buying property at auction can seem a little overwhelming. To enter the auction room knowing you could be coming away with an investment property is daunting – but it’s a popular way for landlords to add to their portfolios, as properties are often sold for below their market value and sales are generally quicker than buying through an estate agent.
If you prepare properly and know what to look for, auctions can be an excellent way to bag a perfect investment opportunity at a good price – so, here are our top tips.
Find a property auction
There are many property auctions all over the UK. Most properties are listed online which makes it easy to check out potential properties before heading off to auction.
Here’s a comprehensive list of property auctioneers across the UK.
Read the auction book
Auction houses provide a catalogue, either a hard copy or via their website. These let you know which properties will be coming to auction and when – this is your first port of call. Take your time to look through, assess which properties you think would work for you, and weigh up which ones you think you’d like to go and see.
Don’t forget to check if any commercial properties have the potential to be changed for residential use – they’re often overlooked but can go for an excellent price which could make the paperwork well worth it.
View your potential properties
This step is no different to buying any other property – you should visit any properties you’re interested in to get a clearer idea of what it’s like, any potential problems, how much (if any) development needs doing on it, and other crucial aspects of a potential investment.
It’s also a good chance to check out the surrounding area an – if you’re particularly interested in a certain listing – arrange for a survey to make sure you’re making a sound investment.
Crunch the numbers before buying property at auction
Once you have a few properties in mind, it’s time to get your calculator out. You’ll need to take into account what Stamp Duty you’d be liable for on each potential property, as well as working out the rental yield to ensure whether the numbers make sense for your portfolio.
Other aspects, such as the cost of any development work, could also add up, so make sure you have a realistic view of any such costs and that it’s still worth making a bid.
You should also make sure you have a 10% deposit ready, and if you’re looking to buy with a mortgage, you should get a decision in principle from a mortgage lender so you’re ready to go if your bid is accepted.
Know how to bid
Auction rooms can be hives of activity, which can be daunting to a first-time auction goer. To combat this, and get a feel for how it all works, why not pop along to an auction before you actually plan to buy? This way you’ll understand the process better. You’ll be able to note how the nuts and bolts of an auction work (you don’t want an auctioneer to miss your subtle nod when you’re bidding on your dream investment!) and ask any questions you’d like clearing up before you go in with your chequebook.
What to do if you win the auction
So you’ve successfully bid on a property – now what? First and foremost, you should already have a solicitor and a mortgage decision in principle (if you’re not buying in cash) in place. Once a bid has been accepted at auction, things move at a fast pace, so expect to hear from a representative from the auction house quickly to get the ball rolling.
This is also when you’ll pay your 10% deposit – but if you’ve got your finances in place as per tip #3 (above), you’ll be prepared for this!
And that’s it! Congratulations – you’ve completed your first auction buy. Now all you need is to find a good letting agent (like us!) and you’re ready to go.