How to Get a Good Deal at a Property Auctions - Part Two by David Lawrenson of Letting Focus

Right now it looks like I will have to wait a little longer for some good property buys to come along from London’s estate agents so I have been to a few auctions instead to see what is going on there.
Sure enough, as stated in last week’s blog, lots of lenders are still being too greedy and chasing after too much money.
For example, at the auction I went to in London’s West End on Monday, which was packed with what looked like mostly experienced investors and developers, many lots DID fetch a fair price.
However, for those properties which had been repossessed and which were being sold by mortgage lenders, the greedy mortgage companies were still seeking too high a “reserve price” which in many cases, meant the properties failed to sell on the floor of the auction.

SO HOW CAN YOU GET A GOOD PROPERTY BUY THESE DAYS?
Well, auction is one way.
The best deal I saw was a property sold by a private seller, which had assured shorthold tenants in it.
It sold at the auction for £90,000 despite a guide price of £110,000.
Similar properties in this well maintained block go for at least £145,000.
Clearly, the seller was keen to sell (who knows why?) and must really need the cash because the property is supposedly renting for £8,100 per annum – a gross yield of 9%. Not bad at all when you think what you get at the bank right now.
But whilst this looks good, on this property you were buying the property with the tenants in situ. Some auction pros I know highlight the dangers of this – falsified tenancy agreements and the like.
So, yes there are dangers. But even if the tenants did not pay a bean in rent until they were evicted 6 months down the line and even if they took the kitchen, the bathroom fittings and did a “Dirty Protest” in the flat, the most it would cost would be £4K in unpaid rent and up to £15K to refit – which would leave the investor in the money against similar properties.
Access was not possible on this property ahead of auction – the tenants were not playing ball apparently – though £10 to the tenants for a wee mooch around might have been welcome by them to spend on who knows what.
Yes, buying it would have been a risk – you could end up with crack addicts as tenants. But that is the nature of property auctions, which is why first time buyers and first time landlords are rarely seen bidding at auction houses.

OFFER
On the subject of auctions, I have a little gift for you.
Essential information Group at EIGgroup.co.uk has an amazing amount on information on all upcoming auctions around the UK including info on all the lots including lots of info on what property at previous auctions went for etc.
It is well worth taking a look at their site and signing up for their information service. Sign up by speaking to Julian on 01737 232 284 or email him at juliant@eigroup.co.uk to receive 1 free month on top of the 6 month subscription or 2 free months on the 12 month subscription. You’ll need to quote “lettingfocus - Julian”
Read our guide to Buying Property at Auction
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ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - the landlord and property letting advice experts.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book - Buy Successful Property Letting - How to Make Money in Buy to Let.
The new edition is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on sale and rent back.
I’m an expert freelance property writer, property speaker and I run this well known property letting and investment blog
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general property letting advice for anyone looking to buy property for themselves or to let out.
In my work as a consultant I help private individuals with any aspect of buying property or buy to let. What’s unique about lettingfocus.com is that we are independent property investment advisors because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.
We simply give one to one unbiased advice and are often asked to evaluate other property investments.
In my corporate consulting role I also advise banks, building societies, housing associations and web portals with their buy to let and property products and services.
You can read more of my blog & find details of my networking, advice and property training programme at my website.Copyright: David Lawrenson 2008. This blog is updated once a week.
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