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.

The property investment market is currently in a challenging environment. It’s hard to obtain a mortgage at the moment unless you have a huge deposit. The only way to stay in the game is to source and buy below market value property. Depending on the property and the seller it’s possible to buy property up to 30% below market value. There are below market value properties available all over the country the only problem is finding them. There are three main ways of sourcing these properties. You can go to an auction, find sellers yourself or use a specialist company that deals in below market value property. Sellers usually choose to sell their properties below market value because they need to sell quickly. This could be due to the threat of repossession, bankruptcy or other financial problems.   Auctions are ideal places for motivated sellers who need to sell quickly due to financial pressure. The seller sets a reserve and if it is met or exceeded the house is sold. It generally takes no time at all to complete and there is no pulling out or negotiation involved. If you hate the thought of bidding and competing at an auction you can simply wait until the end and check out the properties that did not sell. You face little or no competition and can buy at the sale price. You can also use specialist companies to source below market value properties. They negotiate the price and manage the sale from beginning to end. As well as this they also make sure you have a tenant and in some cases guarantee the rent for a period of time. Below market value properties are ideal investments if you are looking for good returns. You can either let them or refurbish and flip the property for a decent profit.