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Purchasing at auction and renovating

Purchasing at auction and renovating

Purchasing a property at auction with the object of letting it out can be a great investment. This is an excellent time to purchase properties at auction. The world’s financial crisis has resulted in many residential and other properties being foreclosed and repossessed by the banks, and they are only too willing to let the properties go just as long as they can recover the balance owing to them. It is possible to pick up a property at an auction for as much as 40% discounted from its true value.

Providing the property is not run down, but is in a good state of repair, this type of property can usually be rented out for an amount that will easily cover any mortgage repayments. If the object of the exercise is to buy to rent then the renting out is in effect a business. Collecting a monthly rental can be a harassing affair, and we would recommend the use of a local (to the property) estate agent to handle the collection of monthly rentals and other administration on your behalf.

When you view a property with the sole object of purchasing it at auction to rent out, rather than as a primary residence for yourself, you should not be fooled into thinking that the property is not what you would personally like. It is not you who will be living in it, but a lessee.

Renovation and refurbishment costs.

When buying a property at auction with the sole purpose of renting it out, take a look at some of the neighbouring properties and try to establish the sort of price they have been commanding at auction. If you can manage to purchase a property at such a price that the selling price and the cost of renovation together combine to give a figure that is below the average property value of the neighbourhood, you stand to obtain a higher rental and show an overall larger profit on your investment.

Try to picture the type of person who may be renting the property. If you expect a young married couple, for example, find out what schools are in the area. Where is the nearest shopping mall? When refurbishing, it’s no good just refurbishing a couple of rooms and leaving the kitchen or bathroom. Here are a few tips on refurbishing a property with the object of renting it out.

  • Make sure that you repair such obvious problems as leaking roofs and flaking ceilings.
  • Add or replace carpets if necessary.
  • Paint the interior in a neutral pastel colour scheme.
  • Think about re-doing the kitchen and bathroom
  • Make sure that the finished article has a comfortable area for relaxing and an area for privacy.
  • Consider adding an extra bedroom

Check up with an accountant what expenditure items are tax-deductible. Unless you are an avid DIY enthusiast, property management professionals should perform most of the external maintenance of the property.

 
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