Buying At Auction
Auctions are a fast, practical and effective way to make a home purchase or investment. If you’re considering buying at auction, here are a few pointers to give you a head start over the competition:
• Have pre-arranged finance: It’s a good idea not to place a bid on a property until you have pre-approved finance. It will cost you an enormous
amount of money to break the contract
if you do not have the finance to complete it. In addition, by having pre-approved finance you’ll have a good indicator of how much you can spend, allowing you to bid within your means.
• Read the contract: Source a copy of the sales contract as soon as you can or at least before the property goes to auction. The estate agent should be
able to send a copy through. Ensure that you receive some legal advice on the contract to ensure it’s suitable. If you’re serious about bidding on the
property, you can also negotiate on some of the terms of the contract before it goes to auction.
• Do your research: Research the area, property prices and past and current sales to give you a good idea on what the property is worth.
While you might have formed an emotional connection with the property, ensure that the investment stacks up financially and that there are good prospects for capital growth.
• Inspect thoroughly: Inspect the property inside and out before the auction and take note of all its defects.Also arrange a pest and building inspection before it goes to auction.
What may first seem like a bargain may not be the case if you need to spend money redoing the plumbing, electrical/ structural work, or demolishing an illegal structure on the land under Council order.
• Treat it as a business deal:
Considering the bidding process as a business deal will help you to remain objective and make clear decisions.
If you are an impulse buyer or have an emotional attachment to the property, ask a trusted family member or friend to bid on your behalf. They will have no emotional attachment and will help you to make clear decisions on the big day.
Size Does Matter
A unit can be a sound investment, but with so many styles of units
available, it can be hard to determine which will provide the greatest
return for you.
There are pros and cons associated with each purchasing decision.
Ultimately, one of the most important factors to consider before
purchasing a unit is its location.
A well positioned unit does present many advantages and often
provides very attractive returns. If you need assistance researching
the market, as a broker I can help you access property reports and
other related information. Moreover, investors should make sure they buy in a block that is well positioned, desirable and well-maintained.
With these key points in mind you can start to consider the style of
unit that best suits your needs. Here are some of the pros and cons
with each:
STUDIO APARTMENTS
• Pros
A new demand is emerging for accommodation that services career oriented, single people and independent retirees. Escalating levels of divorce and separation are also fuelling demand for trouble-free affordable accommodation, and studios are becoming increasingly attractive to both young and older Australians. This can help ensure strong interest from tenants and potential rental returns.
• Cons
The main disadvantage of a studio flat – other than its size – is that it may not rise as quickly in price as one and two bedroom units. Moreover, mortgage lenders’ acceptance of studio apartments as security has traditionally not been as strong as one and two bedroom units, potentially making securing financing more difficult.
ONE BEDROOM APARTMENTS
• Pros
Investors should expect to see a high rental return and should not have too much of a problem sourcing tenants for the property, provided it is close to the inner city. A one bedroom unit is generally larger than a studio apartment and can therefore command a greater rental fee from the occupant/s.
• Cons
Data from Residex has found that many young professionals today are looking for a unit that has two or more bedrooms, so that they can use the second one as a study or work studio.
In addition, renters sometimes seek a property that can fit into any future lifestyle changes, e.g. having a child, which may result in the ending of their tenancy.
TWO BEDROOM APARTMENTS
• Pros
Two bedroom units usually achieve the highest rental return for investors. And provided they are located near water, close to the city, or in an overall good location near transport, shops and schools, finding occupants is generally easy. Additionally, two bedroom units usually have a greater resale value.
• Cons
Two bedroom apartments are traditionally more expensive than one bedroom or studio apartments; the entry level price is therefore higher and can be a barrier for some buyers. Remember, while there are differences to each type of unit, your investment selection will most probably be dictated by how much you’re able to comfortably borrow and service. If you’d like to explore your investment options and borrowing capacity give me a call.
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