I was the guest speaker for ‘Your Property Networks’ Manchester webinar recently, talking all things property auctions to around 100 different property investors.
As with these events, there was a good mix of people tuning in, from experienced heads who have not only been around the block but bought a few blocks in their time, right through to the ‘newbies’ still looking to devour as much information as possible before taking that all-important first step into the word of property investment. I enjoyed giving the talk and I’ve had loads of nice feedback, so it’s good to know it was well received.
After half an hour or so of talking surveys, solicitors and South Manchester, we opened things up with a question and answer session. I had the usual “What areas are good to invest in” and “Where can I get hold of a legal pack” fired at me (I’ve published the full Q&A session on my Twitter account; @AndyT___). My favourite question of the night, though, was simply:
“Can you still bag a bargain at auction?”
I’ve bleated on about the changing world of property auctions for ages now. About how the new breed of auction buyer is pushing prices up and how property auctions in general aren’t what they used to be. For the sake of new readers, please allow me to bleat a little more.
Gone are the days when you could turn up at auction, buy a property with relatively little competition, clean it up for next to nothing, net yourself, £20,000 or £30,000 profit – and repeat. Why? Probably the same reason you’re reading this. Because people like you are now coming to property auctions on a regular basis. Auction is now a genuinely feasible platform from which to buy your next property. It always has been really, you just didn’t know it.
So what has happened to the first phase of auction buyer who used to turn up in their Ferrari’s or chauffeur driven Bentleys? They’re still around. Although, many of the flash ones didn’t return, post-crash in 2008. You can spot the old regulars on auction day – they’ll be the one’s chewing my ear off about how “these prices are just stupid” and “how am I supposed to buy something here” or my favourite which I get from the same chap every single time – “I’m not coming to your auction again…” See you on Wednesday Brian!
People like Brian need to move with the times – if the auction was a fashion show, he’d be turning up in a shell-suit, whilst the modern buyer of 2016 is looking hip.
So, who is this modern buyer that is out bidding my old mate Brian and Co?
It’s the doctor, the builder, the teacher. It’s the likes of Mr and Mrs Jones who inherited a sum of money and have bought a ‘Steady-Eddie’ buy-to-let on the other side of Stockport, where they live. The Jones’s are still working, hoping to retire in a few years and their two up, two down in Davenport will supplement their pension nicely. They don’t need the same returns as Billy Big Shot so naturally, when Billy stops bidding at £100,000, because “you can’t possibly make money at that price!”, the Jones’ keep lifting their paddle to £110,000. There’s still some equity in it at that price. Probably, not worth flipping after fees etc., but it’ll deliver them an extra £7,000 a year and a bit of a head start when looking at the capital appreciation.
Now if that hasn’t sent Brian packing, this one will…
Introducing, Danny and Claire. First time buyers. They’ve got their mortgage sorted well in advance, I’ve been guiding them through the process, so they’ve got a point of contact they can trust and now have the assurance to bid for that dream first home of theirs. Danny and Claire aren’t investors, so they don’t need to see a profit. So, whilst Billy is incredulous that Mr and Mrs Jones are still bidding at £110,000, Danny and Claire are imagining turning that second bedroom into a nursery next year and confidently out-bid the Jones’!
So, going back to the question “Can you still bag a bargain at auction?”. Well if you speak to Brian, he’ll tell you that you can’t. But he’ll be wearing a Disney tie and smelling of Old Spice. Take my word for it, you most definitely CAN.
Things are changing and you need to embrace these changes. Look outside the box and beyond your old investment model because, if you’re constantly being outbid by less experienced buyers looking for a safe bet, then maybe it’s time you upped a gear. Focus on properties that are still too daunting for Mr and Mrs Jones. Auctions of the past worked for investors because they were too intimidating for ‘Joe Public’ – now they’re not. Slapping a coat of magnolia on the walls and some laminate on the floors doesn’t cut it anymore. You need to be thinking about extensions, conversions and bigger projects. Do your research and you’ll see there are still properties that are out of reach for the less experienced buyer – at least for now.
…and that Brian, is where your profit is these days.
A Property Insider Guest blog by Andy Thompson. Andy is a Property Auction Consultant and investment specialist based in Manchester, covering the North West and beyond. His clients range from high profile developers and landlords from across the UK and Europe whom he advises on various property investment models and strategies, to aspiring home owners/smaller investors who require guidance throughout the property auction process.