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Tips for investors when buying a property by auction

Property investment can be a rewarding and lucrative source of income, and professional investors are always looking for new additions to their portfolios to maximise returns and seek out higher rental yields as the market develops. However, even the most financially savvy investors may be caught out by failing to do enough research or being unaware of helpful auction tips.

If you’re planning to expand your property portfolio and want the best chances of securing a property that can work to achieve your business goals and maximise the return on your investment, read our useful property auction tips below.

Property auction tips and tricks for investors

Purchasing investment property can be a rewarding venture but it is essential to conduct extensive research and plan accordingly before heading into an auction. To help you create a more thorough strategy for successful bidding, the following considerations should be taken into account.

Read the legal pack

Any seasoned property investor will have seen hundreds of legal packs, making it tempting to gloss over or skim-read through the information. However, this pack will contain essential information relating to the property you’re buying and going through the small print with a fine-toothed comb can help you to make the most of your returns, as you’ll know exactly what to expect. This is also where you’ll find any restrictions, access rights, or other considerations that must be addressed.

Research the local market

Before going to auction, you should create a plan that details what your investment goals are. That way, you can make sure that the properties you are interested in will be able to meet your expectations. By researching the local market, you’ll be able to estimate costs, rental yield, and growth potential. You’ll also need to research any covenants or restrictions that may be in place by the local council, or any planned building, development or infrastructure works that may affect what plans you have for a property. As such, you can adjust your bid accordingly or search for alternative auction properties that are better suited to your business plan.

Create a financial plan

You will need to think carefully about how you are going to fund your project. This includes setting and sticking to a budget, and accounting for the deposits and administrative fees that are required to be released on the day of the auction. Auctions can be very competitive and it is easy to get caught up in the excitement, but don’t be tempted to exceed your budget as this can complicate your financing. In addition to this, you’ll also need to consider any additional costs for renovations, legal administration, surveys, and rectifying any problems that the property may have. 

Auctions have short time frames in which to complete, so you’ll need to make sure that your lender can accommodate this or that you have the funds available as a cash buyer. Remember that banks may not lend on properties that have structural issues, or properties that have not been owned for at least 6 months. You must create a thorough financial plan that takes all of these considerations into account.

Investigate building insurance

It is likely that as a professional property investor, you may have an insurance policy already set up. If you’re planning to increase your portfolio, you should look at what your policy covers and the costs of adding another property ahead of the auction or setting up a new policy. From the moment that you become the new owner of a property, you become responsible for it. Make sure that your insurance will have you covered in the event of unexpected issues.

Familiarise yourself with HMO regulations

Houses in multiple occupations (HMOs) are becoming increasingly popular with buy-to-let property investors. By law, large HMOs must be licensed with the local council, and this licence must be renewed every 5 years. Every council has different rules and regulations for obtaining these licences, and failure to comply or renew can result in a fine of up to £20,000. Before going to the auction, make sure you speak with the relevant council so they can advise you on what is required.

Make sure you’re suitably registered to bid

One of the great things about auctions is that you don’t have to join in and watch live to make a bid. Whilst you can bid yourself on the day, you can also opt for a telephone, proxy, or internet bidding method to secure your property. However, each of these options will require you to submit a suitable registration form and provide proof of identity, financial details for your deposit, and have a valid auction passport. You can find out more about these options on our dedicated page.

View the property ahead of the auction

Reading the legal pack is an essential step before heading to auction, however, viewings are highly recommended to ensure that you get full visibility of the property and you can assess whether it is right for your project. You might wish to bring along a developer or builder who is aware of what you’re planning so that they can advise you further on whether your plans are viable before you purchase.

Consider income potential 

As an investor, you’ll need to consider the possible income potential you could achieve. If you’re buying a property to sell after increasing the market value through renovation work, you might wish to speak to a few advisors to get more information on the local market as well as an indication of what your property could go for. 

Alternatively, you might wish to have a continued source of income through buy-to-let arrangements. In this case, you’ll need to assess rental yields to figure out your budget vs your potential monthly or annual income. To do this, you may wish to read through our ‘What is a good rental yield?’ blog which guides you through finding a suitable property and area to help maximise your returns.

Expand your property portfolio with SDL Property Auctions

We have a wide range of property types and styles to suit the needs of various investors. From land auctions to commercial properties and housing, browse our Auction Events and Timed Auctions to start your research. Alternatively, you can search through our commercial properties or unsold lots to find your next investment opportunity. 

Buying an investment property at auction… that was easy.