"Once the bidding starts, there is no way back – the seller can’t suddenly change their mind or choose to sell their property to someone with a nicer haircut"
From the UK’s feudal history where everyone but the king was a tenant, to the stories in the mainstream media we routinely get exposed to today.
It is not uncommon to read about finance or tech executives snapping up exclusive penthouses in London and New York to use as boltholes, and we’ve all heard of overseas investors routinely buying up entire apartment blocks in rapidly developing regeneration areas to flip upon completion.
The sad truth is that because of its perceived elitism and assumed complexity, property as an asset class often gets neglected by those who are, in reality, fully equipped to take advantage of the opportunities it can offer, and can, in fact, afford to invest in real estate without taking out a (very expensive) mortgage.
But there are certain tricks to the trade, namely, knowing what to buy and where (when is also a helpful variable to look at, however, property prices are known to go up over a sustained period of time, which means that unless you’re planning to sell your asset in a year or two, you’re likely to see it grow in value, often quite significantly).
Price
The UK residential property market as an investment class has a mixed reputation due to being costly and constrained from a supply perspective, which is enough to put some people off the idea of considering it as a potential option for the rest of their lives.
On top of that, given the latest Bank of England base rate hike, borrowing is becoming more challenging and, well, expensive, which only adds insult to injury.
But it’s worth remembering that there are tons of different types of property out there. If we look at the residential sector, investment options can range from ground rents to small pieces of land and remote bungalows; it’s not all glitzy penthouses in SW1.
Since 2020 we’ve sold a variety of attractively priced properties to cash buyers, which included the following investments:
A reversionary ground rent investment in Cardiff with four short leases sold for £16,000. The new owner just needs to wait for the leaseholders to request a lease extension for them to reap the reward then.
A leasehold two-bedroom flat in Preston subject to a short-term tenancy, producing £7,200 per annum in gross rental income. This property sold for £35,000 providing a gross return of approximately 20%.
A less-hands-off investment than the previous example, a property like this may require some of your time given the need for management but the return is attractive enough to incentivise more active involvement and a bit of hard work.
Lot 115A – A long leasehold two-bedroom house in Sheffield that needed a full programme of refurbishment that sold in the auction for £46,000. After refurbishing the property, the new buyer could either sell the house or rent it out for the income.
The above examples clearly demonstrate that having a hefty budget is not always a necessary prerequisite to property investment, and in the world of residential property auctions, such examples abound.
Process
So what’s so good about buying property at auction and how does buying at auction differ from working with a local estate agent?
The reason why people choose to buy and sell at auction is the speed and reliability of this method. Once the bidding starts, there is no way back – the seller can’t suddenly change their mind or choose to sell their property to someone with a nicer haircut – the highest bidder gets the asset. It’s as simple as that. On top of that, auction houses like Allsop offer access to UK-wide opportunities, so your options won’t be confined to your local area.
You won’t have to deal with chains, complex legal issues or any other headache – the auctioneer will conduct all necessary due diligence ahead of the sale and once the hammer falls, you and the seller enter into a contract that legally obliges the parties to complete the transaction, and it takes truly exceptional circumstances for a sale to fall through.
Once the contract’s been signed, the property will become legally yours within just 20 days. What that means for you financially is that you can start seeing returns on your investment much quicker, which, in today’s economic environment, is worth a lot.
Knowledge
Buying at auction may sound complex but it’s anything but rocket science. All you need to do is decide on how much you’re willing to invest, review the latest available catalogue of properties listed for sale, register to bid, pass our vigorous but very straightforward anti-money-laundering checks and pay a security payment for each lot you wish to bid for.
What next?
With inflation showing little sign of abating, finding a home for your money before it gets eaten away has never felt more urgent. There are many ways to safeguard and multiply capital, but options are often limited for those without thousands of hundreds of pounds worth of savings and can be quite complex.
So, why not consider buying a property at auction, instead of letting your hard-earned cash sit in your bank account, waiting for the bank to finally pass that higher interest rate onto deposit holders?
