Buying an investment property can be stressful at the best of times. Add a high-pressure situation like an auction and it can be even more nerve-wracking, especially if you’ve never bid at an auction before.
If you’re looking to buy a property at auction, you’ll need to be prepared well before the big day. Here are seven things to do before you bid at an auction to help your investment property purchase go as smoothly as possible.
What to do before you bid at auction
- Check what you can borrow and decide on your limit
It’s easy to get swept up in the excitement during an auction, which is why it’s so important to work out your budget ahead of time and stick to your limits. Buying an investment property is different from buying a home to live in – you’re making a financial decision rather than an emotional one. If you’re planning to use your existing equity to finance your new property, make sure you’ve checked how much usable equity you have with your lender ahead of time so you don’t have any surprises when it comes to getting finance.
- Get pre-approval for your investment loan
If you’re the successful bidder you will need to pay the deposit on the day of the auction. This means you’ll need conditional or unconditional approval from your lender as well as access to enough money to pay the deposit. Make sure you apply early for pre-approval as it can sometimes take a few weeks to come through. Here are a few of our top tips to help speed up the pre-approval process.
- Review the contract of sale
There’s no cooling-off period when you buy a property at auction so it’s important that you review the contract of sale with your solicitor or conveyancer before the auction to make sure you’re happy with the terms. You can get a copy of the sale contract from the selling agent.
- Get building and pest inspections
Make sure you’ve thoroughly inspected the property and completed any building and pest inspections before the auction. Because there’s no cooling-off period, you need to be absolutely confident of what you’re getting yourself into before you bid. Make sure you do your due diligence and are 100% happy with the condition of your prospective purchase.
- Check out the neighbourhood
As well as checking out the investment property, it’s worth spending a bit of time investigating the neighbourhood. If you want to attract good tenants who will stay for a long time, you will want to make sure the neighbourhood is liveable and the property itself doesn’t have things like nearby construction or traffic noise that could put potential tenants off.
- Register with the selling agent
Before you can bid at an auction you may need to register with the selling agent and get a bidder number. You will use this when you’re bidding on the property. To register with the agent you’ll need to have some form of ID handy. Requirements vary from state to state so check the regulations or ask the agent ahead of time.
- If it’s your first auction, watch a few other auctions first to get a feel for how it works
It’s a good idea to attend a few auctions before you attempt to bid, so you can understand how everything works and get comfortable with the atmosphere. This will help you feel more confident on the day – you might even pick up a tip or two from the seasoned professionals.
Buying a property at auction can be intimidating, but the right preparation can help you feel more comfortable with the process and decrease your chances of getting caught up in the moment and making a decision you regret later.