The secret to making astounding profits from property is by buying dirt cheap.
It’s as easy and as simple as that. And there’s a small group of informed people around the country who know this, and who are quietly and confidently making shocking amounts of money by buying at rock-bottom prices and smoothly selling on. Naturally enough they avoid the traditional estate agent route. They pass by the newspaper small-ads, and concentrate their time and energy where they know they’ll get the best deal – at auction.
Typically, you can buy at a 30% discount of similar properties advertised in estate agent’s windows. Now, 30% off the cost of a new fridge is not going to change anyone’s life, a saving of maybe £150. However, 30% off the average property is about ¬£20,000. Buy and sell two, three properties a year, which is extremely easy to do, and … well, you can do the sums yourself. Needless to say, there’s big money to be made for very little effort. Indeed, one major property auctioneer reports lots selling for 45% of their present market value, and deeper discounts than that are quite frankly not unusual
Of course you don’t have to trade in property to benefit. You may be looking purely to buy a home in which to live, or maybe a second home to rent out for some extra income. That’s just fine. Through Buying Bargains At Property Auctions you can find a great place for a silly price and either pocket the saving or raise your expectations and buy a bigger and better property than you ever thought you’d be able to afford. Now that’s an exciting prospect.
But do you want to know the really exciting thing about property auctions?
It’s the trading potential … the ability to consistently make overwhelming gains over and over again. Who knows, the bug may bite and having experienced property auctions and all they have to offer first-hand you may like to start dealing part-time, buying one property at a time at an outrageous discount from auction and quickly selling on at a realistic market price. It’s easily done. It happens all the time. It’s lucrative and the whole process, as a short-term investment strategy, is a particularly low risk exercise. Very low risk. Then … who knows? You might enjoy the process (and the proceeds!) so much it just might develop into an enterprise, maybe a side-line or even a flourishing business, perhaps a full-time pre-occupation (I say pre-occupation rather than occupation because to most people it’s much less a job than an immeasurably fun hobby).
But the most wonderful aspect about buying bargain properties (and land, of course) from auction is that your investment can double, treble even, the very moment the hammer comes down. BANG! What other investment/hobby/pastime, call it what you will, offers such tremendous rewards in such a short space of time?
Exciting … Rewarding … Fun .. Low Risk
Why Buy Property From Auction?
Because of the sheer simplicity of the process, the variety and choice of stock on offer and the speed of the whole endeavour. It simply makes good business sense. Forget the conventional approach to property ownership – the go-between estate agent taking their pound of flesh, the counter offers, the waiting, the gazumping, deposits, the lengthy time it takes to exchange contracts and complete the deal. In fact, trying to make money from property using conventional methods is a real lottery. Profit margins are tiny, sometimes non-existent, and it may take years waiting for a property to increase in value. The only sensible, sure-fire way to make substantial capital gains fast is to buy cheaply and then sell on again at just under the market rate (which you can afford to do since you will buy at such a discount).
Apart from repossessions, there are many other reasons why properties come up for auction.
- Breweries, in order to comply with Monopolies and Mergers Commission criteria, have to occasionally sell quantities of public houses, but cannot put them up for sale on the open market.
- Other multi-nationals and large companies (BT, water, electricity and gas concerns, the petrol industry etc) own vast areas of our country, buildings and land that are sitting idle.
- The guaranteed speedy cash from auction sales comes in handy at the end of the tax year when dividends need to be increased to maintain or enhance share prices.
- Executors often want a quick return to settle the division of wills. Beneficiaries may be much more interested in getting their bequests immediately rather than having to wait the eternity for a conventional sale to proceed, irrespective of a smaller return.
You’ll find that many fascinating lots are entered by local authorities and government departments who are more interested in not being seen to be preferential to this or that developer (and thus open to accusations of sleaze) than in achieving realistic prices. Indeed the Financial Times recently reported “over 300 council properties” up for sale from just one authority, and the same newspaper came up with yet another reason properties are offered for sale at auction – “receivers and trustees need a public stage to show they are fulfilling a duty” “It provides a quick and efficient method of sale, avoiding the procrastination often associated with private treaty [Estate Agent] sales”.
Why, you may ask, are property auctions shrouded in secrecy and considered to be a specialist process reserved for experts and those ‘in-the-know’ – developers, landlords, professional investors and the like?
It may not surprise you to learn – those people would rather like to keep it that way. It’s in their interest to keep the whole process rather quiet. They’re happy making a killing out of this system so why would they want anyone else involved, disturbing their comfortable existence and cashing-in?
If you found gold or struck oil would you put an advert in the paper?
No-one is excluded from participating in property auctions and more and more people are now discovering these Aladdin’s Caves for themselves. Further, for many years auction houses themselves were content with the status quo. They were only too pleased to deal with regular clientele, familiar faces who promised not to make waves as long as they were fed a regular diet of juicy deals.
There existed somewhat of a ‘clubby’ atmosphere to the proceedings. Now, most auction houses have begun to open their doors a little wider and accept the non-professional, the amateur, even the casual observer – mainly due to public pressure.
Some have openly stated that they are now in favour of attracting members of the public to share in the spoils – though you would hardly know it from the insignificant amount of publicity they engage in.
It is rather difficult for property auctioneers. On the one hand they need to be seen to be being open and fair, and on the other they have their business to protect. You see, too high a profile might upset their clients – the organisations and individuals who quietly pass surplus properties through their sales. Building societies and banks want to keep the disposal of embarrassing and awkward repossessions as quiet as humanly possible, for obvious reasons – but they want the cash, the equity that bricks and mortar represents, to lend to someone else.
That’s their business after all. They have no interest in empty properties, neither is there any interest being paid to them.
Then there are maintenance costs to consider, insurances, security, dilapidations. To place repossessions in estate agent’s windows would assuredly depress the housing market and win them no friends.
Not the best way to drum-up potential new business, plus it would serve to anger existing borrowers.
Selling quietly at auctions serves them well. They don’t need the full market value because mortgage repayments have already been made and deposits retained, and any and all losses are fully insured.
Financial institutions are not stupid. They simply can’t lose. And because they’re insured the prices fetched at auction are almost irrelevant. All they desire is to speedily dispose of what they consider to be a liability in exchange for cash to loan out.
The truth is that thousands upon thousands of substantially undervalued properties are simply got rid of, at knock-down prices, at auction throughout the land … every week of the year for a variety of reasons. And, encouragingly, the numbers are set to rise.
Q&A: Property Auctions
- What is a property auction? A property auction is a public event where real estate is bought and sold through competitive bidding. Properties are typically sold to the highest bidder, and the sale is legally binding.
- Why would someone choose to buy a property at an auction? Property auctions offer several advantages, including the potential for a good deal, a transparent and efficient process, a wide range of properties to choose from, and the opportunity to acquire properties that may not be available on the open market.
- How do I participate in a property auction? To participate in a property auction, you typically need to register as a bidder and provide identification and proof of funds. It’s important to familiarize yourself with the auction rules, terms, and any pre-auction requirements.
- Are properties at auctions always sold to the highest bidder? Yes, properties at auctions are generally sold to the highest bidder. However, some auctions may have reserve prices, which are minimum prices set by the sellers. If the highest bid does not meet the reserve price, the property may not be sold.
- What should I consider before bidding on a property at an auction? Before bidding, it’s essential to thoroughly research the property, conduct inspections if allowed, review the legal documents, and assess its market value. It’s also crucial to set a budget, including additional costs like auction fees and potential repairs.
- Can I finance a property purchased at an auction? Financing options for auction properties vary, and it’s important to check with the auctioneer or auction house beforehand. Some auctions may allow financing, while others may require cash purchases or have specific payment terms.
- What happens if I win the bid at an auction? If you are the highest bidder and win the bid, you will typically be required to sign a contract and provide a deposit on the day of the auction. The remaining balance is usually due within a specified timeframe, as outlined in the auction terms.
- Can I back out of a property purchase after winning the bid at an auction? Generally, once you win a bid at an auction and sign the contract, the purchase is legally binding. It’s important to thoroughly understand the auction terms and seek legal advice if needed before participating to avoid any potential complications.
- Are there any risks involved in buying a property at an auction? Like any investment, there are risks associated with buying a property at auction. These may include hidden issues or repairs, limited opportunity for due diligence, competition from other bidders, and the potential for properties to sell above their market value.
- Can I sell a property I bought at auction for a profit? Yes, it is possible to sell a property purchased at auction for a profit. By carefully selecting properties, conducting proper research, and making strategic investments, investors can aim to sell properties for a higher price than their initial purchase, earning a profit in the process. However, success depends on various factors, including market conditions and property improvements.