If you’re trying to bag yourself a cheap buy-to-let property that will bring in a handy income for you, you might be thinking about attending an auction. After all – it looks simple enough on those daytime TV shows, where enthusiastic bidders are filmed renovating bargain properties, which they then sell or let for a healthy yield. How hard can it be?
The truth is that property auctions aren’t as straightforward as they seem, and if you’re not careful, you could end up investing in a property that is totally unsuitable for the purposes of a BTL landlord. Here’s what you need to know about buying property at auction:
If it seems too good to be true…
… that’s because it usually is! As with any investments, if a property appears to have an incredibly low valuation, or you’re surprised at how little interest such a great property is attracting, you should delve deeper to find the catch. Perhaps the property is in an area with problems with crime, or maybe it needs extensive structural work before it can be habitable. Maybe there’s a clause in the lease that means that property can’t be rented privately. Don’t be taken in by the lure of a bargain basement property – you should still be looking for value in the market, rather than a steal.
Do your research
If you’re hoping to buy in an unfamiliar area, do your research. Naturally, this applies to all property investors, but especially to those buying at auction. Talk to local agents and other landlords in the area to get an idea of what a realistic rental price might be for certain properties, and don’t get caught in a bidding war with another potential buyer if you’re not 100% certain about a property’s location or background.
Factor in other costs
Legal work and surveys apply to auction properties as well as regular purchases – make sure you factor in the costs of these when you’re drawing up your own budget for this investment. You should also remember that there’s little to no access to mortgage finance for auction properties, and you’ll need to have a deposit ready on the day of the auction to secure the property itself.
Remember the plus sides…
If you can manage to remember all of these tips, you’re in a great position to find a BTL bargain at auction. If you have the cash to buy the property outright, you could be letting the property out within a matter of weeks, and if you’ve renovated the property to a high standard, you could also see a high return on your investment. Don’t let the fear of accidentally bidding on a bad property put you off from the world of auctions, where there are real bargains to be had!