Is buying a property at auction a good investment?
If you’re a landlord and you want to expand your property portfolio, whether commercial or residential, you may be familiar with the usual purchase routes – sourcing the property, dealing with estate agents, solicitors, the land registry etc, and enduring the endless wait to acquire your new purchase. One avenue you may not have explored is buying a property at auction. We ask if it can result in a good investment for you.
A wide choice
Buying a commercial or residential property at auction doesn’t guarantee that you’ll bag a bargain, but the potential is certainly there for canny buyers to make the most of any opportunities which excite them. It’s possible to buy anything from a one bedroom flat to a five bedroom family home; from a warehouse to a disused medical centre; from a fish and chip shop to a vacant office building and from an entire business park to a high rise office block, usually at a significantly lower price than you’d expect to pay on the open market. Experts estimate that investors can save between 10 – 30% on an auction purchase compared to buying it through an estate agent.
The most recent Commercial Property Market Survey from RICS, which covers Q4 2015, indicates that there is a UK-wide shortage of quality commercial stock and this supply/demand imbalance is the leading factor in driving up rents and capital values. HMRC’s own statistics reveal that the number of non-residential property transactions fell by 2.6% between December 2015 and January 2016 and this figure is 1.4% lower than the same month last year. So while there are properties available, they are not as easy to come by as they were previously which means that if you’re in the market for a commercial property, you’ll have to have your wits about you.
In order to secure a good price for the property you’re interested in, there are several points to be aware of. Firstly, as with any large purchase, you must do your research beforehand to ensure that the location, planning permission and price of the property etc are suitable for your needs. An impulse buy at auction can cost you more than the sale price if it turns out not to be what you wanted or needed in the first place. Secondly, set yourself a budget and stick to it, like glue – that bargain property won’t be a bargain if you find yourself in a bidding war with another interested party and end up paying well over the odds for it.
You should also factor into your budget the associated costs of purchasing at auction. To be fully prepared you should have viewed the property in person and potentially had a survey carried out to ensure its viability. You should also be aware that there are the auction houses’ administration fees to pay, after your successful bid – they typically range from between £200 – £300. Finally, add to this your solicitor’s or conveyancer’s fees, stamp duty and property insurance.
There’s never a cast iron guarantee that you will be able to secure a bargain at a property auction, but with foresight, planning and a certain amount of commercial acumen, you could be well placed to get the right property at the right price for you. For more details of commercial property auctions in your area, or to discuss buying a property at auction, talk to the Eddisons team. Our experts can offer you advice and information about all aspects of the process.
Written by: Rob Limbert on Thursday 31/03/2016