We have all seen it in the paper or on the news, or even from friends - some random guy has sold his house and used the money to buy a house at auction for pennies and then sold it for thousands several times and is now living in a house worth a few million! It sounds easy doesn't it? As with most things though, its not as easy as it may first appear, and this is the reason why there is such large amounts of money to be made by buying property at auction. There are so many pitfalls that you can fall into if you do not know what you are doing.
If you do decide to try and buy a house at auction, the first and most important thing that you should be aware of is that the house has a set value, and therefore you should have a set budget! Before you can start working out your budget for the house, you should visit the house and see how much any work that will need doing will cost you.
If the house is a little bit on the small side, you may decide that it is beneficial for you to add an orangery or conservatory to the house in order to create the extra space. Bespoke kitchens are very popular these days, however just because it has a bespoke kitchen in, doesn't mean it is going to be to your taste or of a good quality so you may want to rip this out and have a new kitchen put in. If the house is quite old, the chances are that the windows are only single glazed - or some may even be smashed! If this is the case you will need to replace them. You will then need to measure up all the windows, decide if you want PVC or metal windows and then get quotes from a few different companies.
Adding 10% to all the costs you get is advised as this then gives you a little bit extra for if you encounter any problems along the way. Even though the work may only cost, for example, ?20,000 to do the house exactly as you want, you should leave yourself at least ?22,000.
With this figure in mind you should then research how much the house will be worth once the work has been done. Lets say that a house just down the road has just sold for ?150k in a similar condition to what the house will be once you have done it up. As the work is going to cost ?22k, the house is worth ?128k as it stands. As you are buying the house to make a profit on it though, you obviously need to add a little extra to this so that even after you have done the work the house still stands you at less than you have paid for it. The maximum you would want to bid in this example, would probably be about ?100,000 for the house. This would then leave you around a ?20,000 profit after all of the fees and renovation costs.
Your fees should also include any interest or fees that you have to pay for borrowing the money to buy the house or do it up.
Remember that once you have done these calculations and you are happy with the figure that these are your maximums. If you start to go over the maximum, you can soon end up paying way over the odds for the house and making less profit than you wanted, or worse, a loss!
Author Resource:
Vale Garden Houses design and manufacture bespoke conservatories, orangeries and roof lanterns which will create an extra room, or expland an existing room to provide the extra needed space. As well a conservatory , the Vale Garden Houses group also covers conservatory furniture and floor grilles, bronze windows and now through VelaCici offers bespoke kitchens, bathrooms and bedrooms. You can read more tips here .
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