Buying Tenanted House at Auction - Little info on Tenants

Brightfox78

Hi,

I already am a landlord with one property and have a long term good tenant, I'm considering buying another house at auction.

I have seen small house in West Midlands Area for GBP 50K guide price (more than half the market value of other properties on the road). its very cheap.

It has a sitting tenant on Assured short hold tenancy at £600 a month. There is little information, no internal pictures and no viewings are allowed. No information on the tenant or whether rent is up to date. The special conditions (in legal pack)  go on for 10 pages with all sorts of onerous clauses, for example, its not the sellers fault if the property is severely damaged or squatters move in whilst being sold. I am not sure whether the special conditions in the legal pack is more of a standard 'catch all' scenarios or has it been specifically drafted with any problems the property has.

That said, it does have up to day gas safety certificate, EPC and electrical certificate.

Additional Costs in legal pack:- The buyer is liable for various additional costs, including £5,995 buyer’s premium and seller’s costs, £995 auctioneer fee plus VAT, and £1,950 administration fee plus VAT.

The size of the buyers premium and lack of information on the tenants is ringing alarm bells. The buyers premium seems high and was buried in the middle of  small print. I don't know if the current tenants are good or a potential nightmare.

What are people's thoughts on the above info, could this be a good investment or a potential mistake which will cause problems? how would I obtain further info, to enable me info to make a good decision?

gwynlas

Ypu pay your money and take your chances.
You could try searching electoral role to see if long term tenants perform credit check etc.
It could be that they are extremely old and likely to vacate in the near future.
Chances are if all certification current that there should not be any problem if return on investment stacks up

doodling

Hi,

What recourse would you have if the tenant turned out to have something other than an AST?

What is stopping you knocking on the door and having a chat with the tenant?

sheramber

Visit the property.

Speak to neighbours. 

Ms_Chocaholic

Yes I would second popping round to see what it looks like from the outside, knock on the door and say you are interested in purchasing, they might have a chat if they are reasonable and see that you are already a landlord.  Speak to the neighbours too.

Brightfox78

Thanks for the comments, very helpful.

Adding on SDLT of say £4K....it could be  £15,000 inc VAT upwards of expenses / dead money, just to buy it at auction. 

Then if the inside is wrecked or tenants are problematic, that could be more expense on top of the above. I guess im realizing its not for the fainted hearted. 

Speaking to the tenant is good idea, it would be nice having evidence of rent payment history, but doubt the auction house will provide that.

eddddy

In simple terms, buying the property is a gamble. It could turn out well, or it could turn out badly.

You have to decide how much you're prepared to pay to take that gamble. (Also taking into account the £15k buying costs.)

Some people like to take a gamble with a cheaper, high-risk, challenging property with the possibility of a large 'profit' - other people prefer to stick with low-risk properties, even though the potential 'profit' is lower.



I guess that, ideally, you want to pay a price such that if everything turns out well, you make a big 'profit' - but if everything turns out badly, you still make a small 'profit'.

Bigphil1474

If you are buying a house for £50k with £15k costs and the house is 'more than half the market value of other properties on the road', then you are unlikely to lose? I take it this is modern auction method? Wouldn't touch them with a big pole, but I'm not a gambler. 

Brightfox78

Appreciated & thanks all, I will bear it all in mind. Its an online auction, so maybe will sit it out and see what it goes for above guide price. Its my first look at auctions, so I'm treading very carefully. 

monkey-fingers

doodling said:

Hi,

What recourse would you have if the tenant turned out to have something other than an AST?

What is stopping you knocking on the door and having a chat with the tenant?

This. My folks took on a place that had a Protected Tenancy.
Basically, as long as they follow the rules and pay the rent, you can't ever kick them out.

Brightfox78

Thank you for sharing your story, I never knew this type of protected tenancy existed. Certainly something i will watch out for.