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  • Auction Tribe

    Buying at auction - all that glitters isn't gold

    (11-12-2015 04:44 AM)ipsy_dipsy Wrote:  1)The luck question - As I gave you an example earlier, were you born 10 years prior, for instance, and as a result had you started executing your "10-streets" strategy in, say, 1988 just before the prolonged trough, those 65% you mention could have nose dived into a negative territory big time!

    Negative equity doesn`t mean you go under. It maybe limits growth and curtails exit strategies. But you should consider yields and cash flow which carry you through these periods. I made more money in my hand during 2008 / 9 / 10 after the crash than i did in 2005 / 6 /7 before it.
    Have you read my hovercraft approach thread. That enables you to skim over all these irritating waves in the economy





    2) What year was the right time to invest in property in your view and why was that year crucial? It makes no sense whatsoever to look at any specific year. There are only numeric individual opportunities and they are not measured in years,

    But your previous answer seem to say that 1988 was not a vintage year to invest. Ergo - Other years then are presumably better. You appear to contradict yourself when you say it makes no sense to look at a specific year.


    3) Please give me an example of an unforeseen hazard in property investment ? . How about an unexpected interest rate hike? How about banks calling in their loans simultaneously due to, say, new Basel accord applied across the board and out of the blue? How about bad tenants trashing your property to pieces? Or how about a meteorite happen to choose comfortable landing on top of your property? Ok, even leaving purely human-made factors out, we are still dealing with BRICKS-AND-MORTAR: bricks crack, mortars crumble.

    I totally expect interests rate to go up and down over the course of the next 25 years. That is about one of the most predictable things in our economy. Its not unforeseen at all. ( Read Hovercraft approach thread) I totally expect a bad tenant to trash my property at some point in the next 25 years. Thats why i keep a contingency fund.
    Meteorites are covered as is cracking bricks and crumbling mortar and subsidence and roof falling in and leaks underground etc etc by insurance. Just sorting one out now . £100 excess paid for maybe a £2000 job . Again I expect these so plan for them. I agree that if 20 boilers go down at once its annoying and a body blow but I would still survive. Plan for the worst . Hope for the best . As Paul says its a calculated gamble.

    I`m not bullet proof -but if you are the type that takes 20 umbrellas with you ( in case 19 break ) when you visit the Sahara because there is a 0.5% chance of rain then perhaps BTL property is a not the investment vehicle for you :-)


    4) What defenses are you referring to? This is a good one, JC. I really hoped you could share with us your real nitty-gritty,

    Contingency fund. Money sorts most problems out. The key is how much to hold. I used to carry 2% of borrowed money when growing my portfolio . Mark Alexander on 118 recommends 20% . I sit now at about 10% . That`s my defence

    Jonathan, as much as I would like to believe that you're absolutely infallible iron man and your heart never sinks, I'll beg to differ. Because everyone's heart sinks, with no exceptions. It just depends on the individual and any given circumstances. In your above example, having a comfortable feeling about your equity cushions when property prices started to tumble isn't the same as "The doubt crept in" when you thought you had paid over the odds for your investment property. I must admit, though, I exaggerated your rather mild "the doubt crept in" and translated it into more critical "heart sinks". My apologies. But I bet there were plenty of business-related situations where you have experienced emotional yo-yo effect.

    Oh yes sure I`ve experienced the yo yo effect. That`s an adrenaline rush though. Love it. That`s the buzz of business. We are all different. Its getting a sense of proportion about whats important in life Some peoples heart sinks when Sainsburys have run out of apple turnovers.

    Its often your in built constitution though and how one reacts to bad news. I am lucky I guess I dont suffer from depression / off days / the blues. There you go I`m lucky. You got me. I finally admitted it!

    As for the established well trodden path vs tightrope, you're right, it so much depends on how you look at it. The glass is either half-full or half-empty, there are no grey areas in between. Agreed, many people (myself included) walk it a tightrope (mine is due to personal circumstances). But I'm certainly here to learn and change this attitude eventually. That "financial freedom" part sounds straight out of guru courses, so I suggest dropping it for now because everything in life comes with price. Learn-execute-rinse-repeat >> Learn-execute-rinse-repeat >> Learn-execute-rinse-repeat. The financial freedom will then take care of itself, no doubt.

    I agree financial freedom is a bit of a yucky phrase. But it does describe the goal in a nutshell. Give me a better one and i will definitely consider it. You've had some knock backs it seems. Compartmentalise them as best as you can . Do the data thing if you have to to get it out of your system. If it works I will buy a copy off you. If not you have learnt something valuable. Log it in your mind and move on.......

    And hey dont be scared of success
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    Jonathan Clarke. http://www.buytoletmk.com


    (11-12-2015 04:44 AM)ipsy_dipsy Wrote:  I agree that it is no kids task to undertake construction of "enigma machine" while knowing that perhaps it is something that has never been done before. There are hundreds of reasons why many naysayers would cheerfully join you seconding that this is impossible in principle. However, as you may agree, the enigma machine remained enigma to the rest of the world. Except that for a simple, down-to-earth, low-profile and very-very humble German engineer Arthur Scherbius, for whom it wasn't such enigma after all if he managed to build it in the end?

    The engima machine did not remain an enigma for very long. Albert Scherbius patented the machine in 1918, which involved publishing the design. In the early 20s he was selling machines commercially.
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    Ipsy good stuff
    To sum up up becoming a LL is a calculated gamble!!
    There are NO certainties in life!!
    No plan survives first contact with the enemy
    Best laid plans of mice and men etc
    Something few Gurus will indicate
    To them it is allegedly all so easy!!
    I attended several of these Guru meetings and not one of them ever mentioned the issues around eviction etc
    Funny that!!!Confused
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    I've read this thread with interest and as someone who might have a little more auction experience than most - happy to offer my opinion.

    I have doubts that a computer system will work, I have no doubt it could filter many past properties 'lemons' out and possibly those with guides that are too high (reserves too high too) to have a good enough sized margin

    however, most properties are unique, all are different in condition (internal and external), many have issues (smaller / larger garden), good/bad views, next to/nearby commercial or industrial. different layout, legal issues, unusual construction, freeholder/management issues, what shops are below on flats above shops....many more variables too.

    I spend huge amounts of time trying to work out what a given lot is worth and what margin of accuracy i can say it (or range of values), I present this info to clients and then see if they're interested in buying.

    I have base filters

    a) is it standardly mortgagable - even if you're a cash buyer its always nice to be able to get money out or sell on quickly at any time.

    b) how large is the property

    c) what past and present comps exist for the property and how close are they to size, layout, condition of the auction.

    then its site visits - I only call agents last min as they have waiting buyers that could easily pay more than my clients want to and don't want to give anyone else a chance even remote chance of buying in front of my clients.

    experience tells me auctions are a numbers game - more often you win, sometimes you lose(unforseen issue - some with more thorough due diligence you'd have ruled out) but on average (thats the key) you do better than through a local agent (in my opinion - over 200 properties acquired at auction). I often see properties sell for more at auction than through agents and maybe as many as 20-30% on average many go for similar prices and majority sell for just under - its about being there to take the good ones that sell a lot cheaper.

    I will be going to BM on tuesday and allsops on thursday if anyone wants to meet me and learn more about auctions.

    andy
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    @andysourcer
    Thank you for the insight, Andy, much appreciated. These small tips are absolutely priceless for a newbie. Is there any chance to get more details please? To save your time, one short sentence per each query will do just fine.
    1) How do you prefer to structure your relationships with clients?
    2) In general, are your clients high net worth individuals with resources ready to be deployed at any moment? Or it's all about finding the right gem, client base is rather comes as secondary objective?
    3) Would you consider forming partnerships/JVs with your clients or you would rather source properties for a fee? If the latter, is 2-2.5% finders fee far off from what you would charge? How many clients insist on you having a skin in the game?
    4) Would you consider providing services to include dealing with anything post-auction (such as lease extensions, sorting out complex probates or arranging the builders to deal with subsidence, etc.)?
    5) What's your personal preference - dealing with more complex property for a larger fee or you'd rather have higher turnover with lower charges?
    6) Would you kindly walk us through a couple of real life examples where the auction deals have gone terribly wrong? What was your takeaway please?

    @JC

    Agreed, newbies generally need a lot of compartmentalisation and knowledge structuring to do. Like I said, there is a lot of hard graft lying ahead. I'm familiar with your hovercraft technique, though, thank you.

    I take it is pointless to try and prove the validity of my points because the best proof is, as always, your final result. Your results speak for themselves, and I respect that.

    Let's agree to disagree on this one and move on.
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    (11-12-2015 08:47 PM)ipsy_dipsy Wrote:  I take it is pointless to try and prove the validity of my points

    Not at all. That`s what i relish.
    I look for light bulb comments all the time.
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    Jonathan Clarke. http://www.buytoletmk.com

    1.) Most auciton houses that sell in the room publish their results so as long as it was sold in the room you should be able to see what a property sold for. Sold Prior's or After's are usually undisclosed, similar to many Private Treaty deals even though it's often on an auction contract.

    2.) Buyers should carry out their own due diligence in all cases however it's worth noting that reserves should not be above the guide prices so the 'new guides' when it returns to the room should be fair in the sense of being a price you can purchase the property at.

    Guide prices after an auction are often not published as these prices do not count as evidence. These are marketing prices (even though they should be prices you can buy the property at). Looking at the Hierarchy of Evidence, marketing prices do not appear so you should not to use these as evidence. Rely on actual evidence, namely sold prices.

    Although the auction process may not be dissimilar from EBay in the fact that an auction takes place you are right when you say that property is more complicated than a pair of shoes. You should, with property, look at the fundamentals of each property, location being an example of a fundamental. Do not rule out a special purchaser either (e.g. a next door neighbour) who may pay a premium for a property as it greatly enhances the value of their holding.

    At the end of the day do not bid on any property unless you are happy to proceed. If you have any doubts do not bid. Its the safest way.

    I hope this helps
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    (12-12-2015 12:55 PM)benhodge Wrote:  I hope this helps
    It certainly does! Notes taken.
    Real thanks, Ben, for stepping in and adding to this thread.
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    Just a quick update:

    357A Victoria Park Road, Homerton, London, E9 5DX
    Auction----- Date-- Lot---- Price
    Barnard Marcus 15/12/2015 73 Guide price £80,000 >>>>> SOLD £99,000
    Barnard Marcus 10/03/2015 29 Sold for £122,500
    Barnard Marcus 02/02/2015 54 Sold for £141,000
    Allsop Residential 30/10/2014 200 Sold for £100,000

    Looks like we're back to where we started a year ago. I'd be laughing if this gem goes back to the auction in a month and then gets sold for over £140K again. All they need to do is go back to Allsop Smile simpleZZZ!
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