As a buy-to-let investor or aspiring landlord, you may consider going to auction to find a bargain. But there are a few things you need to consider before you jump into, what can be, a confusing world.
For example, some properties may appear at auction on more than one occasion, because it’s a property that has a poor rental proposition, so it’s been put in the hope that a prospective buyer may purchase it before doing their research.
Or the level of crime in an area that you’re not familiar with may lead to voids in tenancy, in which case, leaving you no choice but to re-auction the property, potentially losing money.
Buying a property to let at auction is usually quick, so if you have the cash to buy one, you could purchase it within a month and let it out as soon as you have completed on the mortgage.
However, the due diligence and research that you need to do before making a bid can be expensive, as you will need a large amount of legal work and surveys that usually amount to thousands of pounds.
If you do the research properly, you could find yourself a bargain. Properties that aren’t in a mortgageable state, due to things like subsidence or fire repair, can be purchased at heavily discount prices, leaving you to make the repairs and add to the capital value to boost your rental returns.
Be cautious though, as amateur or first-time investors, and home-buyers may also look at the same property and continue to bid over and above the actual value of the property, meaning no good buy-to-let return can be made.
Do I need to know anything else?
A 10% deposit is usually required when buying at auction, and as you will have to use a specialist lender, it’s best to get the mortgage in principle before the auction itself.
Purchasing a buy-to-let property at auction can be an extremely profitable route to owning your first investment adding to your portfolio, but you will need to ensure that you are even more rigorously prepared than if you were going for a normal residential mortgage.
To speak to one of our experts or to find answers to any further questions you may have about the auction world, contact us on 02380 642 018 or email email@example.com.