Auction investors

This week, after I’d finished rooting through emails and the previous blog, I came across the programme ‘Storage Wars’.   The show works on the notion of “one man’s junk is another man’s treasure". My expectations were pretty low to be fair but after the first ‘lot’, I was hooked.

A group of ‘Tat’ investors bid on what they can only see from the door of a huge storage unit.  After a 2-3 minute inspection of the unit, the most ludicrous auctioneer starts the bidding in a language I suspect is only common place in the storage world. Then only after the lot has been bought, can the purchaser enter the storage unit and inspect their investment; with sometimes hilarious results.

With the property market showing no signs of rapid recovery any time soon, the serious investor is looking for other ways to maximise their return and receive a suitable yield on their investments. With this in mind it is no surprise that the buying property from auction is a rapidly growing market with the CML expecting house repossessions to increase from 33,900 in 2012 to approximately 35,000 for 2013.

  Repossessed properties are not the only reason for putting a property through this quick option however, families just wanting a quick sale for their property for a number of reasons or Estate Agents using auctions as a vehicle to dispose of property that has been sat on their books far too long.

Bidding at auction is not a scary or daunting task and a nod or a wink at the wrong time will not commit you to buying a house. Most auctions are conducted at a rate in which a novice can follow and not like a tobacco or cattle auction which is so fast you cannot understand a word the auctioneer is saying. There are 3 ways in which to bid at auction, in person, by telephone or by proxy.

Once the hammer has gone down, your heart rate has dropped and you find yourself the proud owner of lot number 23, what are your options to finance the investment?

1)    Buying with cash will always be the most cost effective method with no interest to pay as there is no borrowing.
2)    Buying with a mortgage can be an option if the property is mortgage able but these properties aren’t generally brought by the investor.
3)    Buying with a bridging loan can be a short term way to purchase property which needs refurbishment in order to sell or remortgage onto a Buy to Let mortgage to clear the bridging loan.

Bridging loan rates can vary between lenders, with rates starting anywhere from sub 1% up to over 2% per month, depending on the status of the applicant and the property being lent on. Including the monthly interest rate, the investor must keep an eye on Acceptance and exit fee’s which are generally charged on all bridging loans  and can make a big difference on the final return for the investor.

Blemain Group has capitalised on this growing sector of the market with our pre-approved auction product, which is becoming increasing popular. With experienced underwriting teams very geared to the speed and flexibility required for auction purchases it does make the Group a serious lender in this market place.  So as the property market is beginning to show signs of recovery, ensure you do your research for your clients as to the best method for them.