Is Buying at Auction Too Risky?
In the UK, TV programmes including Homes Under the Hammer have made buying property at auction seem very accessible to the general public. It is definitely a route that aspiring property investors should consider, but it is not without its pitfalls. For every investor that snags a bargain, there are probably four or five who make only modest returns from their purchase or who inadvertently purchase a ‘money pit’.
As property investors, buying properties at auction can present great opportunities to build and diversify your portfolio. Take note, the auction process increases the pressure associated with buying a house by putting you in the same room as your competitors. There is a way to safely navigate yourself though the process and emerge the other side with an excellent addition to your property portfolio. Follow my tips below you and you will be more likely to make the right choices at a property auction.
Buying at Auction: Tips
Research
Weeks before the property auction date, request a copy of the auction catalogue and pick properties that that you are potentially interested in buying. Put together a shortlist and arrange to go and view all of your contenders ideally with a builder. When you’re viewing these properties, ensure that you take a lot of pictures of the properties and their surrounding environment. Make a note to remember if the road was busy, for example. Organise your viewing notes in a structured way so that they can easily be retrieved later. Finally, when you decide on your chosen property have a survey done.
Budget
At least a couple of weeks before the auction, plan a meticulous budget to work out how much you will have to invest; ensure that you factor in auction costs. Give your calculations context by working out the GDV of your project. You can read more about that here, How to Maximise the GDV of a Residential Property
Mental Preparation
This is probably not a step that you will see in everyone’s advice for a property auction. Take time to mentally prepare yourself for the eventuality that you are not able to buy a property because the price becomes higher than your budget. Prepare to be disappointed and remember that there will be other auctions and other properties.
Don’t get Carried Away
Ensure that you take all the required documentation and particulars to the auction on the day. My main tip for the auction day itself is to not get carried away by the competitive, high pressure environment. Stick to your budget and remain focused and dispassionate; that is my preferred strategy . When you do that, buying at auction is not too risky.
If you have liked this post you will also like, Who Should Be in Your Power Team?
Property Investments and Trading, London
We only work with a limited group of investors at any one time.
We create bespoke property portfolio Investment solutions on behalf of our clients which provide substantial returns on investment over either the short or long term.
Property not only, substantially out performs all other ‘high street’ investment types such as ISA’s, Bonds & high interest savings vehicles. It is also considerably more risk averse compared to stocks and shares.
To read more about our services click here.
If you want to build for the future, either over the short or long term, we would be delighted to talk.
It is not as difficult as you might think. Give us a call on 01923 797181 or email us via info@mypropco.co.uk to start the conversation.
Best regards,
Dion Carter
Director, Property Portfolio Management Ltd
Image credit: https://www.ljhooker.com.au/
This is blog post number 16.