8 tips for buying a buy-to-let property at auction

December 1, 2020

As a property investor, auctions are a great way to pick up new buy-to-let opportunities at a bargain price. Not only does buying from an auction help reduce the frustration and cost of buying in a chain, but there’s minimal risk of a sale falling through, and short timescales mean that you could have your property within a couple of weeks. Another benefit of buying through auction is transparency: you know exactly how much the property will cost you, less fees, and you’re bidding in a public sphere - you don’t need to make sealed bids and wait for an answer. Below, we’ve put together some tips for buying a buy-to-let property at auction… 

Choose your area carefully

It’s easy to see an attractive-looking property at a discounted rate and think that you’re onto a winner. However, it’s important that you know where you’re investing, have an idea of how much you’ll be able to charge in rent, and what the local market looks like. Never invest in a property blindly - do your research and be confident that you can generate a healthy return.

Subscribe to local auction houses

Once you’ve decided on an area where you’d like to invest, register with local auction houses and ask to be added to their mailing lists. You’ll be first to hear about upcoming auctions and properties and might just spot a diamond in the rough. Don’t solely depend on sites like Rightmove and Zoopla for auction listings; they’re often outdated and overexposed.

Try to view the property

It’s always advisable to view the property in question before you make a bid, so ask local agents or the auction house about open house dates. When you visit, consider taking one of your business partners or builders with you so you can assess potential renovation costs,and don’t be afraid to lean on local agents for intel on average rental yields and sale prices.

Keep a sensible head on your shoulders

Buying property at auction can be a thrilling experience, but it’s important that you don’t let the excitement get the better of you. Enter the auction with a clear top-limit on the property you’re interested in, and be prepared to walk away. This might look like the ideal investment on paper, but there’s no point in paying more than you think it’s worth. Factor in the costs of renovation, taxes, fees, and the time it’ll take you to find a good tenant, and see whether it still makes sense. If you simply cannot bid higher, remember that there are many more properties on the market; come back to the next auction and see what else you could buy.

Review the legal pack

One of the biggest benefits of buying a property at auction is that you can view the legal pack - which includes everything from local searches and title deeds to an inventory with fixtures included - before you bid. If you’re seriously interested in the property, instruct your solicitor to review the pack and give you their verdict. It’ll cost a couple of hundred pounds, but it’s a small price to pay for peace of mind that you’ll be bidding on a great property.

Be clear on finances

You don’t need to be a cash buyer to bid on a property, but you do need to be confident that you’ll secure a mortgage if you win. Speak to a broker to find out how much you could borrow, estimated rental income from the property, and arrange an agreement in principle. 

If you’re the highest bidder on an auction, you’ll have 28 days to complete; if it takes longer than that, you’ll lose your deposit. Be ready to hit “go” on your mortgage application and consider having a back-up plan should you be rejected or things take longer than expected. 

Bring ID and your bank card

If you’re an impulsive person and invest in property at the drop of a hat, make sure you take valid ID and your bank card with you when you go to the auction. If you win, you’ll need to pay a 10% deposit on the property as well as auction costs, so have the funds available. It’s also important to review the auction house’s list of required documents; you’ll need to take a range of documentation to ensure your offer can be finalised and the sale can commence. 

Take out insurance

As soon as the hammer falls, the property is your responsibility. Take out buildings insurance immediately and consider having a quote prepared with all of the necessary forms filled. Once you’ve exchanged, you can pay for your insurance and protect your new investment. 

There you have it - our tips for investing in a buy-to-let property at auction. Check back to the Billing Better blog soon for more tips and tricks, and don’t forget about our bills inclusive tenancy service, designed to help you generate additional revenue from your properties.

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