Investing in real estate can be a great way to generate additional income. Since properties being sold at auction can be purchased for less than market value, learning to navigate these real estate auctions can help you improve your profitability when it comes to your real estate investments.
Here are three tips that can help you score a great bargain at your next real estate auction.
1. Drive through the neighborhood where the property is located.
When it comes to investing in real estate, finding a property in the right location is essential. If you are able to secure a list of properties that will be sold at auction prior to the auction date, you should plan to drive through the neighborhood where each property is located.
Watch for amenities like easy access to dining or shopping establishments, good elementary schools, and access to public transit. These amenities will attract potential buyers, making it easier for you to sell the property you purchase at auction quicker. The less time you carry a property after purchase, the more profit you can make.
2. Conduct an inspection whenever possible.
Some real estate auctions are conducted sight-unseen. If you want to reduce the risk of investing in a property that will cost too much to repair and sell, you should always engage in an inspection whenever these inspections are allowed.
To ensure that you are getting an accurate estimate of the property's value, it can be helpful to bring a contractor along on your inspections. A contractor will be able to gauge the amount of work that will be required to get an auction property into sellable condition, and you can use this information to determine how much you should bid in order to make a profit.
3. Try to purchase vacant properties.
Some of the properties being sold at auction are foreclosures. This means that the owners were unable to pay the mortgage, and the bank took possession of the home. Unfortunately, foreclosure properties can often be occupied by the residents.
If you invest in a home that is occupied at a real estate auction, you will need to complete a legal eviction. This process takes time, which can eat away at your profits. Whenever possible, try to purchase properties that are already vacant to ensure that you will be able to begin quickly working to sell the home.
Taking the time to inspect the neighborhood, the property, and the tenant situation can help you to locate the best properties to invest in at your next real estate auction.