Buy Properties Below Market Value

As the property investment game gets ever more challenging, the only sensible way to add to your portfolio in this environment is to only buy properties that are priced significantly below market value. Do this properly, and you’ll find you don’t need to put in any money of your own.

The mortgage companies want you to find 15% of the purchase price every time you buy! Where on Earth do they think you have all these 15%’s stashed – under the floorboards?

This article will take you into the world of the below market value (BMV) investor, and show you how you can free yourself forever from the shackles of the 15% deposit.

You must first understand that it is perfectly possible to buy BMV properties, regardless of which area of the UK you live in, and almost regardless of your own financial circumstances. There are below market value properties for sale all over the country, every day of the week. The challenge is tracking them down and adding them to your portfolio.

There are two routes to finding BMV properties for sale in the UK. One is through auctions, and the other is to track down motivated sellers yourself. In this article, I’ll be concentrating on auctions – we’ll leave the tracking down to another time!

People and organisations choose to sell through a property auction for two main reasons – speed and certainty. It generally takes no more than eight weeks at the most, and sometimes considerably less, to go from the decision to sell a property to the auctioneer taking bids for it in the auction room.

If the vendor sets a reserve – the minimum price they’re happy to accept – and the reserve is met or exceeded on the day, then the property is sold the moment the auctioneers gavel falls, and the deal will be completed within 28 days.

No pulling out. No quibbling. No question.

As a BMV investor, you can get the auction catalogues from auction houses in your area, research potential properties, do your due diligence, turn up at the auctions, bid on your target properties, and then go ahead and complete on the deal within 28 days (or risk severe financial penalties).

All of this takes time, money, resources, a certain amount of skill and, if you’re out-bid on the day, it’s all for nothing and you have to start again. And let’s be clear – not every property that goes through auction sells below market value – far from it!

The other way to do it is to use what might be called “vulture tactics”.

Rather than spend all that time and energy researching possible BMV properties only to be out-bid by ‘amateurs’ who don’t understand the true worth of a property, or who want it at more or less any cost, you can just sit back and relax. Then, when the auction is over and the bidders have all gone home, you take a leisurely look at whatever lots are left unsold.

The advantages of doing it this way are…

* You only spend time and money researching the properties that are definitely still available

* You know the asking price without having to bid

* The competition for properties is significantly less

* The 28-days-to-complete rule usually disappears

There are three ways you can get hold of unsold auction lot details.

1. Direct From the Auction Houses

You may have a couple of auction houses in your area, and you could always ask them to send you details of unsold lots as soon as a sale is over. The larger firms now publish them on their website, too.

2. From the EI Group

David Sandeman does a great job at the EI Group. They collate all the property auction data from around the country, and their records go back as far as 1991. However, a subscription costs around £500 a year, so you need to be pretty committed to make that sort of investment worthwhile.

3. Subscribe to the Property Bargains Bulletin

Leo Summers has produced the Property Bargains Bulletin since 2005, and what he does is unique. The Bulletin is emailed out to subscribers twice a month, and each issue covers 8-12 bargain property opportunities. You get a photo of the property, the full address, contact details for the selling agent, the price of the property against it’s true market value, details of any income it’s bringing in, and a full page of analysis as to why the property is a bargain, some ideas as to what to do with it, and any potential pitfalls identified.

All this for less than a pub meal a month!

Now you know exactly how to find BMV properties at auction, and particularly amongst unsold auction lots. In a subsequent article, we’ll look at how to track down motivated individuals who will happily sell you their property at below market value prices.

Property investment is a numbers game. The wise and savvy property investors know that more profits can be made in buying below market value than in the resale of the property. Purchasing property at bargain prices translates into significant long term profits. Whether you’re a novice to property investing or an experienced investor, buying below market value is definitely the way to go. Other than the traditional route of buying through estate agents, there are alternative ways of purchasing property that can give you the best value for your money.
Tread the road less travelled and explore other ways of purchasing property. Here are some of the best places to buy below market value properties:
* Purchasing at an auction
Auction houses are treasure troves of below market value properties. Many investors have discovered auctions as a good source of properties sold low enough to resell. Generally, properties are sold for about 10% to 30% below their market price tag, certainly lower than if you purchase through an estate agent.
An auction, however, can be an intimidating experience for the first timer. The fast-paced process can also be quite confusing. If you bid at an auction, make sure you come prepared with a maximum bid price and stick to it. Also make sure that you have made a thorough inspection of the property and found it to your liking.
Not all properties at an auction are sold for a bargain price. This is something that you should be aware of, too. There are a lot of strong sellers at an auction and this causes the price to jack up to even higher than the market range. Here is where your initial investigation comes in handy because you know how much similarly situated properties are sold for.
On a final note, make sure that your finances are in order before going to an auction. If the gavel falls on your bid, the property is yours. You then have to immediately pay 10% of the amount as down payment. The rest of the purchase price will be paid usually within 28 days. Make sure that you have this amount ready or that you have prepared a credit line or a pre-approved mortgage with your bank.
* Purchasing online
Due to the popularity and demand of property investments in the United Kingdom, many companies have set up websites that cater to the needs of the market. Some agents set appointments and advertise their properties through the web. Some even give you virtual tours. There are also several businesses that focus solely on Internet-based sales. In short, the world wide web has fast become the newest source to hunt for properties. Of course, below market value properties are available too. More importantly, since most net-based agents charge a remarkably lower commission, the benefits goes back to the buyer in the form of the property being priced lower than usual.