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Published on : April 21, 2021 15:52

Are tenanted properties a good investment at auction?

If you are a landlord, there are two major benefits to buying a tenanted property at auction. Firstly, you needn’t worry about the heavily time-consuming process of sourcing a tenant to begin with. Secondly, the return on your investment in most circumstances will begin immediately. With these benefits in mind, does this mean that buying tenanted properties at auction is a great method for any landlord or investor looking to expand their portfolio?

Purchasing a successful investment property requires an extensive amount of research and due diligence. Knowing if the property is located in an in-demand area, what types of tenants the property will attract, and whether or not the figures will stack up are all part of the property investment process. The largest component aside from these factors, however, is ensuring your property is tenanted efficiently by great, long-lasting tenants to minimise void periods.

At present, the demand in the property market is showing no signs of slowing (both from buyers and tenants). This is both good and bad news for anyone looking to invest in property or expand their current portfolio. The great news is that the demand from tenants should allow for your property to be let swiftly (particularly if aided by a proactive managing agent). On the other side of the coin, however, is the competition when it comes to buying property.

Ensuring the returns are achievable against the purchase price typically creates a solid block of price figures that investors and landlords should ideally be looking at. Competition from eager homeowners, however, can complicate the process; particularly when they are happy to pay above the investment value for a property that they wish to call their own.

When it comes to buying property at an auction, the number of individuals seeking properties to own as homeowners is significantly less than those looking on the traditional property market. There are a number of benefits to investing in property at auction, including finding tenanted ones.

The costs

Those looking to sell at auction, whether it be a tenanted property or not, are ordinarily looking for a prompt sale which may not always be achieved through the usual means of being listed onto the property market. Sometimes, this means that the party listing the property for auction are happy to take a price cut in order to offload the property as quickly as possible. For landlords and investors seeking the best prices, auctions are ideal for finding fitting buy-to-let assets with the potential for great return figures.

Additionally, buying a property at auction with tenants-in-situ allows in most circumstances for landlords and investors to begin receiving the return on their investment straight away. The costs associated with letting a property, such as time and reference checks, aren’t a concern when the property is sold with tenants. The costs of maintaining a property and paying the bills through void periods are also negated, whilst tenants are commonly happy that they aren’t having to relocate and can remain in situ.

The time

Time is our most precious commodity, yet, the property purchase timeline in the UK is currently at an average of six months; from the first viewing through to being handed the keys. Whilst direct investor-to-to investor sales can take significantly less time, an auction process can speed this up even further. As a landlord looking for returns as efficiently as possible, auctions have the advantage of allowing you to complete on a property generally around the 28 day mark. Investors should ensure they have the means to complete the purchase, including the funds, solicitor, and if required, a managing agent, in place and ready to go.

The legalities

Anyone buying a tenanted property should be clear whether it is being sold with vacant possession on completion (if the tenant intends to leave after the sale but before you complete, or they are being evicted) or subject to the existing tenancy. There are a number of different tenancies to consider when buying a tenanted property at auction, which can have an impact on whether or not you receive your rental income on completion.

Tenants have rights when it comes to requesting access for surveys and inspections; normally at least 24 hours. Nurturing a great relationship with tenants right at the start is crucial for the remainder of the tenancy and to guarantee your rental income, so any visits to the property should be planned and communicated accordingly.

If you require mortgage finance for the chosen property, it is important to ensure that a buy-to-let mortgage is obtained. Ordinary mortgages do not allow the borrower to let the property without the lender’s permission, so would not be suitable.

Your solicitor should be informed that the purchase will be subject to the tenancy. Although the general conveyancing work for the title transfer will be the same as for any other purchase, some additional work will be required.

It will also be necessary to obtain details of the tenancy, as well as a copy of the tenancy agreement. If the property already has a managing agent in place, they typically should be able to provide this. You should also ensure that rent payments are up-to-date, as well as the information surrounding the deposit that was paid at the beginning of the deposit, as well as who is holding it.

For peace of mind, it is also worthwhile to ensure any electrical equipment, furniture or other household objects in the property belong to the seller or the tenant, and whether they will remain in the property on completion of the purchase or at the end of the tenancy.

There are plenty more considerations to take when buying tenanted properties at auction, but ultimately it falls down to whether as a landlord or investor, you are happy to explore this alternate route compared to the traditional methods.

If you’d like more advice on buying at auction, our dedicated auction team will be more than happy to assist in the process. Our finance team can help discuss any insurance you may require for tenanted properties bought at auction, and would be happy to discuss this with you on 0161 443 4830. Meanwhile. our knowledgeable property management team are more than happy to talk over the process of managing a tenanted property. If you’d like to discuss this further, give us a call on 0161 820 6638.






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