Martin Cunningham

Mark, an excellent and informative article on buying property at auction. We, at Auction House, the UK's No 1 residential property auctioneers are witnessing an increasing amount of tenanted investment sales. For divesting landlords it makes sense to sell with tenants in situ, reduces void risk and for the buying invester they benefit from rent on day 1.

We have a number of help guides on our website www.auctionhouse.uk.net and to view our latest VT....Why do people choose property auctioneer Auction House can be viewed here: http://youtu.be/-SsDEL6Vxbg... Read More

@Richard,

As part of your B2L acquisition strategy might I suggest you look at acquiring an existing tenanted property via auction? A growing number of divesting landlords are recognising the benefits of selling with tenants in situ rather than going through the potentially costly void experience of decanting them and selling as vacant possession. From a new landlord perspective they can pick up a readymade investment with revenue from day one of acquisition and no tenant find costs.

Anyway hope this is food for thought.

You can find a buying at auction help guide here:
http://www.auctionhouse.uk.net/buyers-route-to-auction-success.aspx

A calendar of regional auction dates here:
http://www.auctionhouse.uk.net/auction-diary.aspx... Read More

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apologies to all in my tardiness in responding....had a bit of a disaster at the weekend....left my iphone on the roof of my car and drove off...suffice to say no more iphone and loss of contact with the outside world :-)... Read More

@Cristian Stoian

Hi Cristian,

Good question and not one that has an accurate answer as many variables are in play….like no one property is the same, location, condition and vendors motivation for sale. What I can say is that there is plenty of circumstantial evidence that would suggest that the sales price achieved for similar properties (et al B2L) would be similar.

It is worth remembering that the auction room provides a high degree of speed and sales certainty (Auction House UK average 80+% success), additionally its worth remembering that agents when valuing for private treaty sales value top down whereas auctioneers value bottom up the later relying of competitive bidding in the auction room to find the property’s value and sell on the day.... Read More

@ Sian Hemming-Metcalfe

Hello Sian,

I’ll try to answer your question. The auctioneers considers a number of factors when considering advising a vendor of the ‘Reserve’ price (the level at which on or over the auctioneers believes the property should be sold at and remains private between vendor and auctioneer) and the publicly quoted ‘Guide’ price range.

The auctioneer’s advice is based on:

• Comparable evidence of actual sales prices achieve for similar property in similar location
• Local knowledge of the property market and any local external factors, direct or indirect, that might have bearing on sales price
• The type of tenancy, length of tenancy, rental yield, length of time tenant has been in residence
• Is there any head-room to increase rent level

Clearly the greater the rent yield the more attractive the proposition from an investment point of view but other factors such as the quality, condition and location of the property influence value.

The auction method of selling is designed to get maximum buyer interest so that on the day buyers pitch up and compete to purchase, the competition element should ensure that the property achieves the best price on the day.... Read More

@Howard Reuben note comments about Scotland, delighted to advise that Auction House UK publicly announced this week our expansion into Scotland with Ross Harper Auction joining Auction House UK... Read More

@Mark Alexander at Auction House UK we constantly monitor all UK auction room activity, performance and results, including picking up examples of flipping....this is but one example:

A one bedroom leasehold flat was sold by a London auction room for £29,000 (15.2% yield). The purchaser then entered the property into Auction House UK Leeds auction; guided at £25,000-£30,000. The property resold at auction for £36,000 (12.2% yield) giving the vendor a £7,000 profit after 3 months of ownership.... Read More

@Howard Reuben pleased you have found the thread useful and thank you for your comments.... Read More

@Mark Alexander, ref Deed of Assurance, Auction House UK holds its annual conference next week and the use of the deed of assurance will be a topic to share with the 85 delegates representing all 30 Auction House UK auction rooms :-)... Read More

Sure, happy to answer. The beauty of auction is that the auctioneer can balance fee structure across, lot entry, vendor and buyer. Typically fee structure in UK auction rooms would have been based on catalogue entry fee and success fee (commission) paid by the vendor. In more recent year the UK has adopted fee strategies of overseas auction rooms by adopting ‘Buyer Premium’, indeed some UK auction houses have tried to adopt a 100% Buyer Premium commission charge, however the issue with this is that whilst it may in the first instance seem appealing to the vendor as there is no direct cost to entering property to auction, the flipside is that buyers price in their Buyer Premium within their bids…..in other words there’s a high probability the vendor takes less in indirectly paying all the auction fee. At Auction House UK we balance fees between entry, vendor commission and buyer premium, the catalogue entry fee element costing circa £300 - £450.

In answer to your second question about additional costs to re-list following a failed auction the answer is it depends on what property auction room the seller uses, at Auction House UK property auction rooms we re-enter failed lot sales into the next auction without additional charge.... Read More

Thanks Anon/Mark…..you learn something new every day :-). Like the sound of Deed of Assurance, interesting and useful.... Read More

Hello Mark, thank you for your comments about selling tenanted property at auction; I am pleased these have struck accord of interest.

In answer to your question about percentages of properties are sold at auction because they must be due to times pressures, e.g. probate sales and repossessions vs. sold at auction by choice? To be honest without undertaking extensive analysis across the 30 Auction House UK auction rooms I would only be guessing….however what I can say with confidence is that the auction room has seen a seismic shift in the demographic of property type entered and sold under the hammer. No longer is the auction room resigned to selling unmortgageable property and repossessions for today we see a wide range of properties including as I have flagged a rapidly growing recognition that the auction room is becoming the sales strategy of choice for selling tenanted property. I would add that Auction House UK auction rooms are achieving a combined average of over 80% sales success, so divesting landlords can proceed with a high degree of sales certainty.

The answer to your second question is, yes, the expansion of the UK’s private rented sector will drive the requirement for investors seeking to divest to exit and enter the BTL market cost effectively and the selling and buying at auction provides the right environment in which to trade tenanted property.... Read More

Since posting this article, I thought it would be useful to share direct feedback and some of the questions arising from fellow Property118 users. I have received 6 contacts (of course for client confidentiality I will mention no names), all 6 are seeking to divest for a number of reasons ranging from asset management of their portfolios to retirement or simply seeking to sell on tenanted units that lay outside of a reasonable distance to travel to manage.

Two questions that have been asked by several of the responders:

1. “I have a portfolio of tenanted properties; can I sell them as a portfolio or as individual properties?” – My view is that there is no one sales strategy as it is entirely possible to sell as a group or break into lots (single or multiple). An approach we can however recommend if to offer as individual lots with a special condition in granting options to purchase on following lots, this strategy we have found to work very well.

2. “When working out value of a tenanted property what does the auctioneer take into consideration?” – As well as comparable property evidence, rent yield, last rent review, market comparison of rent (to gage if any headway to increase), length of time current tenant in situ, length and type of tenancy. These factors influence ROI and in-turn reserve price.... Read More