Buying Investment Property at Auction

Whilst commercial property auctions, including online offerings, are becoming increasingly popular and accessible to investors, it is important to have a defined plan of action to maximise your potential returns and not get caught out ‘in the moment’.

Those participating in the property auction range from seasoned investors and developers to absolute beginners looking to acquire a small local investment to hold in a Self Invested Personal Pension (SIPP). However, whatever their previous experience and knowledge, the risks (and prospective gains) are almost as significant as the amount of prior preparation that’s required when dealing with auctions. As the expression goes, 'failing to plan is planning to fail!'

To secure the highest reward with the lowest risk, it is key to carry out full due diligence before entering the auction house (on or offline), taking into account the following considerations:

• How strong is the existing tenant/covenant?
• If there is a tenant break option/lease expiry imminent, how likely is the tenant to stay/renew? How re-lettable is the property if they do not?
• If the current tenant does not renew their lease, how are you likely to fare in the dilapidations claim against them?
• Is there a ‘development angle’ - ranging from converting upper floors above a shop to residential to demolition and wholesale redevelopment - and if so, how feasible and at what cost/return?
• Is there scope to ‘regear’ the existing lease, namely, to extend it/improve the investment?
• Are there any potential ‘time bombs’ or ‘bear traps’ in the Title deeds and/or lease?

We have had many clients come to us for the first time after buying at an auction by Acuitus, Allsop etc, having made mistakes due to poor, or even no, due diligence. We then ‘damage limit’ so far as is achievable.

The preference for all is to avoid such situations and buy wisely, with the bid tailored by knowledge and understanding. This is why we implore any bidder at auction to be thorough in their own due diligence or commission specialists like us to do so on their behalf. Whilst auctions can be a real opportunity for would-be investors, it is important that all of the risks are considered equally with the rewards.

Not only is it crucial to get the initial due diligence right, but ongoing management of your investments is something that will require the input of property professionals at various stages.

Through RAM Asset Management and our sister niche consultancies, Raeburn Consulting and Radius Consulting, we operate throughout the United Kingdom in maximising returns for commercial property investors with our leading class performance in:

• Rent reviews and lease renewals
• Property management (from rent collection to insurance valuations, development appraisals etc)
• Dilapidations
• Rates
• Agency - lettings, sales and acquisitions

The RAM Asset Management team are often regarded as ‘professional hand-holders’, protecting our client’s interests at every stage of the commercial property auction process, and indeed once the sale has gone through.

If you are considering bidding at an upcoming commercial property auction, no matter how experienced you already are, and feel we could assist with the due diligence or ongoing management matters, please do not hesitate to get in touch on 0345 956 9796 or email enquiries@ramam.co.uk.