Auction strategy advice

cheekymonkeb0y

Hi Folks,

I thought I would ask for some advice regarding auctions and bidding strategy.

There is a property on my road at auction, guide price 200k.

I know that on my road these houses can sell for between 300 and 330k, depending on a number of factors, such as position on road, (we rent at best end, auction one is at worst end), the state of the property itself, and often higher prices are achieved as the old people selling it, aren't in a rush to leave.

The 200k figure is a teaser price and I know the property is going to go for more. in my calculations you would have to spend between 20 and 30k to get it up to a decent standard, as currently it is barely habitable. The work includes moving walls, put in a new kitchen, new bolier, replace economy 7 heaters with radiators, carpets, painted walls etc, possibly new windows. Is 20-30K even a realistic figure?

My real question is that at 250K, just under stamp duty threshold, this could be a good purchase, to get as a home to live in. My worry is that we will be outbid by BTL/builders/property developers.

Firstly, can anyone tell me what figure these guys are likely to stop bidding at? At what point is it more hassle than profit?

Secondly, if price gets close to 250 - what strategy should I use to ensure that someone does not take the 250k slot, as even bidding a penny over will cost 7.5k in stamp duty.

All advice welcome.

poppysarah

"as currently it is barely habitable. The work includes moving walls, put in a new kitchen, new bolier, replace economy 7 heaters with radiators, carpets, painted walls etc, possibly new windows. Is 20-30K even a realistic figure?"


Can't see how needing to move walls means it's barely habitable.

I assume you want to remodel it.

Getting a mortgage if it has no kitchen might be a problem...

How many rooms? 3 bed semi = maybe 2-3k for whole heating system. But does it need a rewire too and then plastering work and full dec and flooring? You need to do windows then too before that...
So 2k for rewire, 2-3k for windows, plastering on top and then dec. etc.
New kitchen =1k+ if you DIY
bathroom - say 750 including tiling for cheap suite...


Have you got finance in place?

cheekymonkeb0y

Hi Poppy,

Finance is close to being in place, just want to get the banks valuer in the property, before auction day.

Property does not look like it has been lived in since the 70s, and the 'kitchenette' is about 2 m x 2m, hence the need for a remodel.

Am more interested in trying to size up the competiton really as well auction bidding strategy.

I think the work will put off most folks, but we have access to a builder, that's helped family before.

liam8282

cheekymonkeb0y wrote: »

Hi Poppy,

Finance is close to being in place, just want to get the banks valuer in the property, before auction day.

Property does not look like it has been lived in since the 70s, and the 'kitchenette' is about 2 m x 2m, hence the need for a remodel.

Am more interested in trying to size up the competiton really as well auction bidding strategy.

I think the work will put off most folks, but we have access to a builder, that's helped family before.

Don't know how you would go about sizing up the competition as it will be down to who turns up to bid at the auctions and you are not going to know a property developer, from a person out to buy a home.

You have a strategy, your maximum bid is £250k, your strategy is go along stick to bids under £250k, if it goes over don't bid anymore. Or if you are prepared to take less profit, set a higher limit, but if you were to do this I would set a strict budget on the renovations works, legal expenses etc. otherwise you might end up making a loss.

cheekymonkeb0y

I think you are right regrding sticking to limits.

I am still beliveing there will be a houseprice crash in next year or two, but am comfortable buying now while rates are low, only if I can get soemthing at a reasonable price

hazyjo

If there is lots of interest and you know it's way under value at £250k, bear in mind others will also have set this as their upper limit because of the stamp duty.

If the bidding is going up in £1ks or £5ks and gets to something like £240k, just make your next bid £250k. If anyone wants to bid over that, let them and walk away. You don't want to let anyone else get that £250k bid before you. Obviously don't just jump to that if the bids are at say £210k!

Jx

JQ.

That would also be my view too - once it gets to £240k, bang in your top bid of £250,000. Don't wait for the bids to increase as everyone will have the same thought as you and it will be whoever, gets that one and only bid of £250,000 who'll be in the strongest position.

Ultimately, you'll only get a feel for how much interest there is once the bidding starts so you'll have to play it by ear.

DavidHum

Hi

I may be able to help but you need to post a lot more information such as approximate location, guide price and how you proved your fixed up value.

I agree with the advice on bidding but consider putting in an offer prior to the auction having 1st having done item by item costing on the works, then your maximum bid should be fixed up value less works less transaction costs equals maximum bid.

cheekymonkeb0y

Tried to buy before auction but property company wants to see what it will make.

JQ.

DavidHum wrote: »

Hi

I may be able to help but you need to post a lot more information such as approximate location, guide price and how you proved your fixed up value.

I agree with the advice on bidding but consider putting in an offer prior to the auction having 1st having done item by item costing on the works, then your maximum bid should be fixed up value less works less transaction costs equals maximum bid.

You'd also want to include a contingency of 2-5% of costs, but more importantly you also need to factor in profit. Full time developers look for 20% profit on cost, if you're looking at living in the house you'd still want to see at least a 10% profit on cost. If you're planning to sell it then you need to also factor in all your finance costs.

There's absolutely no point buying a property at auction, investing all the time and effort renovating it only to spend exactly the same amount as if you'd walked into an EA and bought a fully renovated property off a developer. That profit represents the reward for all the hard work you will have to invest in the renovation. Personally I'd want to see 15% on something I was going to live in myself.

Overpaying at auction is the downfall of many inexperienced investors. Once you've overpaid, it becomes very very difficult to recover that loss no matter what you do to the property.