Nick Statman: A Guide to Buying Property at Auction

If you’ve been considering investing in property but want to avoid the sometimes lengthy and time consuming buying procedures, you may consider buying a property at auction. If you’ve never ventured into the world of property auctions, check out the helpful guide to help navigate the exciting world of property auctions

Benefits of Buying In Auction 

Auctions can be a great way to find unique properties that may not be listed on a property portal or with a high street Agent. Auctions are also becoming an increasingly popular option for investors who want to avoid the multi-step process of purchasing a home.
Buying at an auction eliminates the frustration of something falling through at the last minute. Once that hammer falls legal exchange takes place and the home is almost yours. There are fewer moving parts, which means less risk of a mistake costing you the sale. 
Another perk of buying at auction is that you can see when and what other people bid, so you’re always in the loop about where you stand in regards to the sale. The auction process can be a lot more transparent than buying property the traditional way. 

Downsides Of Buying In Auction

While transparency and saving time are two of the biggest advantages of buying at auction, it does have its drawbacks. It is common for investors to get caught up in a bidding war at auction. If you’ve already put money into the survey and other costs associated with researching the property, and then you don’t win it, you’ve lost money. 
Another frustration that can come with buying a property at auction is doing all of the research on a home, putting money into making sure it is worth buying, and then finding out it has sold before it even gets to the auction. These are some risks you will have to take in order to take advantage of the many benefits of buying at auction. 

Costs Of Buying At Auction

One of the first questions property investors have about buying a property at auction is how much it will cost them. Some of the most significant costs associated with buying a property at auction include:

Paying your solicitor/surveyor

Before you bid on a home, you need to conduct a survey to ensure the condition of the home. Surveys range from a basic home condition survey costing around £250 to a full structural survey from £600 or more.

Administration fees 

Investors will sometimes have to pay a buyer’s premium, also called an administration fee. This is a fee that the buyer pays to the auctioneer, and varies depending on the auctioneer. Usually the fee ranges from £200-£300, but could also be a percentage of the purchase price.It is important to know what the administration fee is before you bid so you can factor that into your budget. 

Finding An Auction

To find your first auction, first you must decide on the area in which you’re interested in investing. Liverpool is one of the hottest spots for property investing in the north, while Bath and Oxford are some of the popular areas to invest in a holiday home. Once you know where you want to invest, request an auction catalogue for the area so you are notified when properties go up for auction in that particular region. 
There are usually only 3-4 weeks between when a property is listed in the catalogue and when the property goes to auction. It’s imperative that you have all of your documentation ready to go so you can act fast. 

Preparing For Auction

The best way to be successful at an auction is to be well-prepared. The more information you have about a home and the auction process, the easier it will be. Some things you can do to prepare for your first auction include doing the proper research and carefully looking over the legal pack given to you by the auctioneer. The legal pack includes all of the necessary documentation associated with the house, including “the title deeds, local authority and environmental searches, fixtures-and-fittings list and a seller’s information form, along with any relevant leasehold information.”

Finalizing your finances is another important step in preparing to go to auction. Getting a mortgage agreed in principal before the auction starts will help expedite the process once you’ve won the bid. You’ll be expected to pay 10% of the home price as soon as the auction is over, and you’ll have 30 days to pay the rest. If you can’t complete the payment within a month, you will not only lose the 10% you put down, but also be responsible for covering the costs to re-sell the property. 

On Auction Day

Auction day is an exciting day! When you’ve done the research and work beforehand, you can walk into auction day with confidence. It’s normal to feel nervous, but do your best to keep your cool. Remind yourself what you can afford and the absolute max you can bid. Then, be careful not to get caught up in the energy and excitement of the auction. If you don’t win this one, remember that there will be other properties and other auctions. You can increase your chances of a successful auction day by arriving early and having all of the required documentation. 

Advice From Experienced Bidders

  • Come dressed for business and bring a notebook with you. 
  • Try to sit at the front because this will show others that you take the auction seriously. Alternatively, you could stand, which might make you stand out from the crowd. 
  • When you speak, speak confidently. 
  • Instead of saying “300” say “£300,000” 
  • Don’t disclose how much you can actually bid or how much you are willing to pay. 

Online Auctions 

In an age where you can do almost everything online, it is no surprise that property auctions are quickly moving to the online realm. This allows you to bid on a property from the comfort of your own home, 24 hours a day, seven days a week. At the end of the auction period, the person who bid the highest wins. To secure the property, you’ll pay a reservation fee, which is usually non-refundable. This is made as soon as the auction is over by by debit or credit card or bank transfer.  This fee is usually at least 2.5% + VAT of the sold price.

Benefits of online auctions include:

  • The entire process is transparent so you know exactly what you’re getting into.
  • Homes at auction have already been on the market for a while, so they are priced realistically to sell
  • Online auctions offer longer completion timescales
  • Fixed dates for exchange and completion set by both sides, which expedites the process. 

An auction is a great opportunity to expand your investment portfolio and try something new. While it can be a little intimidating stepping out of your comfort zone, approaching an auction well-researched and well-prepared can help you be successful. 

Nicholas Statman : 6 Questions To Ask When Looking For A Profitable Investment Property

Property expert Nicholas Statman shares the most important questions when looking for a profitable investment property.

Whether you are looking to dip your toes into the property industry for the first time, or you’re simply looking to beef up your existing portfolio, there are certain things you need to look for to ensure a profitable investment. Part of being a successful property investor is being able to identify the key factors that make a property profitable. As you continue your search for a lucrative investment opportunity, ask these six questions to ensure it’s a smart investment:

Nicholas Statman Property value

How Close Is It To Everything?

While it may be tempting to find an investment property that is tucked away from the noise and chaos of everyday life, you have to remember who your audience is. Tenants are typically looking for a place that is close to everyday amenities. A successful investment property will be close enough to supermarkets , petrol stations,  schools, churches, restaurants, pubs, and doctors to make a tenant’s life easier, but not so close that they are dealing with excessive traffic, noise, or safety concerns. The closer the home is to everyday conveniences, including public transportation and shopping, the higher the property value. Homes located in (or close to) the heart of the city and close to modern conveniences elevate house prices, which in turn allows you to maximise your ROI. 

How Are The Local Schools? 

When it comes to local property values, the school district plays a significant role. Families with children move to a specific area based on the schools that their children will attend. Many tenants are willing to pay more to live close to highly ranked schools. Tenants are usually willing to compromise on a lot of things when it comes to a rental property, but the school zone is usually not one of them. A profitable investment property will be located in an area in which families with school-aged kids will want to live. 

How Is The Local Employment Market?

The job market in a particular area will also significantly impact neighbourhood property prices. The demand for rentals is higher in areas where a strong workforce has been established, and areas with an active job market attract business professionals who want to live close to where they work. Where there are jobs, there will always be a need for housing. 

Does The Layout Appeal To Families?

Another critical factor in identifying a potential investment property is the layout of the home. This includes both the number of bedrooms and the square footage of the house. If you have the option between a larger home with four bedrooms or a slightly smaller home with more bedrooms, the smart choice is to go with a home with more bedrooms. If the home is located close to the city centre or the local financial district, this could be the perfect setup for 5-6 professionals looking to live together and rent out the individual bedrooms. Six monthly rent payments at £X will bring in more money than a single-family paying £X per month for a larger home with fewer bedrooms. 

Even if your target buyer is not a group of busy professionals looking for roommates, a family-friendly layout is an important factor in finding a profitable investment property. Because most of your tenants will probably be families, they will be looking for a layout that is conducive to their lifestyle. This means at least three bedrooms and at least one bathroom with a bathtub. 

Is The Garden Low-Maintenance?

Curb appeal is something that dramatically impacts the value of a home. The way the lawn is kept, the condition of the front door, windows, and the roof, all play a part in how much a home is worth in a specific market. When you invest in property, you are trusting your tenant to maintain the lawn and exterior of your home. While some residents may be happy to take on this responsibility, you cannot count on it. Look for properties that require low maintenance when it comes to landscaping. If the property has a large garden, you will either have to pay a landscaping company to take care of it regularly, or do it yourself. If this is not something you’re interested in doing or paying for, you may want to consider a property with a smaller garden.

Will This Property Generate A Positive Cashflow? 

Just like any other investment opportunity, it is important to know the facts and figures behind every decision that you make. It all boils down to the numbers, formulas, and the math behind the investment. While it can be exciting to think about your potential for rental income,  there are other expenses to keep in mind. Consider the mortgage payment, monthly repairs, property taxes, council taxes, property management fees (if applicable) and what it will cost during periods of voids. When you calculate all of these, does it seem like smart investment? Add all of the monthly expenses and multiply them by 12, then subtract that from what you expect to get annually from the rental income. Will there be positive cash flow? Many investment properties tend to need a little bit of love and upgrading to compete with the rental market. But a home that needs extensive repairs or will cost you more money per month than you are bringing in may not be an ideal candidate for an investment property. 

Property investing, just like any other type of investment, is about maximizing your ROI. It is about careful analysis and strategic planning. It is about being able to identify the key factors that will make your investment a profitable one. As you continue your search for the perfect investment property, keep these six questions in mind. 

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