Are Auctions The Best Way To Buy Positive Cash Flow Property?

It used to be common beliefs that if you bought an investment property through auction then you were almost guaranteed to have got yourself a bargain. But the truth is from the moment you are made aware of the property going up for auction, you are often weaved into stories from the agents explaining how the sellers have fallen on some hard times and are now desperate to sell at the first decent offer.

Of course, you could try and put an offer to the sellers before the auction date in an attempt to see how ‘desperate’ their situation is but more likely than not, they will simply thank you for your interest and shelve your offer until after the auction takes place.

Trouble is, it isn’t until the day of the auction that you find out what that ‘decent price’ is. And that means if you are serious about purchasing the property, you may already have gone to the expense of getting pest and building inspections done, spent countless hours checking out valuation estimates and haggled with your bank manager over financing.

But certainly you do need to do that research beforehand. You want to know what properties in the surrounding area have sold for recently. If you are looking to rent the property out, it is also wise to make sure that there is a demand in the area for rental properties. There’s no point in spending many thousands of dollars only to have the house remain vacant for weeks or even months on end.

On the other hand, if you are looking to onsell the property to a Wrappee, you also want to know that you can indeed secure the property at or below valuation cost so that you get a decent flow of positive cash right from the beginning of a Wrap deal. And for that reason, you also want to be looking at properties in areas that people would be proud to buy a house to live in.

You could employ the services of a buyer’s agent which could prove invaluable especially if you are buying outside your local market and haven’t been able to gather enough information to make a decision either way.

If the auction is proceeding at a low pace and the bids are still within bargain range and then stalls, make sure you come in as the last bidder. In fact, it’s best to register as a bidder at the very last possible moment; the lower number of bidders the seller is expecting beforehand, the less they expect to get a bidding war and their hopes are not raised.

With any luck, you will still be able to get a great investment property at less than valuation price.

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