Buying auction properties – Part 2

Two more reasons given by Mr Stephen Soon, the chairman of Penang Auctioneers association and MD of MNP Auction Team as below.
Property investment is about ROI. Return on Investment. Today, when you buy any property, you are faced with Real Property Gains Tax. This would severely deplete some of your gains or even make the investment not as worthwhile as previously. With auction, if you are able to bid for a property way below its market value, touch it up and sell at the right time, even with RPGT factored in, you may still be earning a decent ROI. Note that you may also achieve the same if you are able to buy any secondary property below market price though these days it is harder due to transparency of information. As a seller, you already know what the price in the neighbourhood is and there is little chance of you selling lower except if you happen to have some personal reasons.
Next reason is lack of transparency and not buyer friendly. The truth is totally opposite. Auction bidding provides an open platform for buyers to see the real demand for that particular property and everyone can compete fairly on the same terms as other buyers. In fact, the prices are determined by all the bidders and not influenced by the greedy owners or unprofessional buyers. Note, you must not overbid because if you bid way too high for the said property, you will end up with an overpriced property. Before you enter, know what is the maximum bid that you will bid and stick to it. In an auction, the auctioneer cannot let his friend win the bid unless his friend bid the highest. In fact once you win the bid, typically if you qualify, the bank loan application would be fast because the auction may be under a certain bank.
Some of the things you should take care when you buy from auctions are:
Check the said property. Even if you cannot go in, making sure the said property is empty is quite important.
Set aside some funds for potential makeover. For example, a new set of paint is normally necessary for older properties.
Always ensure you know what is the maximum that you would bid based on the market value. If you intend to bid beyond the market value, buy from the secondary market instead.
Know what is the reserve value that you must bring along when you register for an auction. Typically 5% or 10% of the property price is needed.
Time for property investment? Perhaps it’s time to consider dropping by property auctions. 🙂
written on 7th Jan 2014
Next suggested article: Penang Property Prices too high?
Or you want to read: Top 10 Most Read Articles