If you're a landlord in the UK looking to grow your property portfolio or explore new investment opportunities, buying at auction might be worth considering. Auctions can present excellent deals and access to properties not always available through traditional means. However, it's crucial to understand the potential risks and rewards before diving in.
Benefits of Buying at Auction
Potential Bargains
Properties at auction often sell for less than market value. Although a guide price is set, the final sale price may be higher or lower based on competition among bidders.
Fast Transactions
Auctions offer a clear timeline: you know immediately if you’ve won, and must pay a 10% deposit on the day. Completion occurs within 28 days, allowing landlords to quickly begin renovations and prepare the property for rental.
Equal Opportunity
Auctions provide a level playing field where the highest bidder wins, without any preferential treatment.
Rapid Rental Readiness
With the legal process completed in 28 days, you can swiftly start any necessary updates. Some auction properties may even come tenanted, generating rental income immediately upon completion.
Unique Property Options
Auctions often feature a diverse range of properties, including those that are unusual or require renovation, offering a chance to invest in something distinctive.
Pitfalls of Buying at Auction
Limited Due Diligence Time
Auction schedules are tight. You have only a short window to inspect the property, review the legal pack, seek legal advice, and arrange financing.
Additional Costs
Be aware of extra expenses such as legal fees, auctioneer fees, buyer’s premiums, stamp duty, and insurance. Thoroughly review the auction catalogue to factor in these costs.
Immediate Payment Required
A 10% deposit is required on the day of the auction, and you must ensure your financing is in order. If you pull out, you risk losing the deposit.
High Competition
Bidding can be intense. Although guide prices may be low, final bids can be much higher. Stick to your budget to avoid overspending.
Top Tips for Auction Success
View the Property
Inspect the property thoroughly to understand any renovation needs. Viewings are typically available for a few weeks before the auction.
Register in Advance
Ensure you are registered for the auction well before the deadline, which can be several days to a week prior.
Research Thoroughly
Examine the legal pack carefully, and consult with a solicitor to review survey results, leasehold details, and other legal matters.
Obtain an Independent Valuation
Know the property's true value, as auction guide prices can be set low to attract bidders. Set your budget based on a realistic valuation.
Estimate Rental Value
Consult with a property management company like Abode to get an estimated rental income and advice on property location and potential.
Account for Renovation Costs
Factor in costs for updates like new carpets or kitchen refurbishments. Property management companies can provide quotes and manage the work if you win the auction.
Prepare Your Finances
Ensure you have the necessary funds ready for the deposit and check if the property qualifies for a mortgage. Have your finances sorted before bidding.
Stick to Your Budget
Auction bidding can be emotional, but it's crucial to adhere to your budget. There are plenty of properties available if you don’t win this one.
SUPPORT FOR LANDLORDS WITH NORTHMODE.
Buying a property to let at auction can be a great way to expand your property portfolio, but it's important to be aware of the auction process and the potential pitfalls.
If you’re thinking of buying a property at auction, the team at Northmode can help advise you on property choice, the location and the potential rental income.
We also offer a refurbishment service assisting and advising Landlords on refurbishment to help achieve the highest possible rental yield. We source competitive quotes from trusted contractors and can manage refurbishment projects if necessary.
For more help and advice on buying a property at auction to let give our team a call on 0161 676 0084
or fill out our contact form.