There are huge opportunities that we can gain from auctioned property but remember that there are huge traps too. As a general rule, any investment that give an opportunity to make a lots of money also have a high risk of a losing lots of money too.
So, remember that if you want to make money from property auctions, you must know what you are doing. Otherwise, you could lose it all and get a major problem.
First trap – Poor Location
Some of the properties being auctioned off are very cheap. Some properties being auctioned off for less than RM20,000. That is less than the price of some second-hand cars.
However, just because it is cheap it does not mean that you should be buying it. Because the price may be cheap for a long time. So yes, you can buy it cheap, but then no one will be buying it from you until years later.
Second Trap – Occupied Property
You are buying the auctioned property as it is. So if there are people occupying the property, it is your job to get them out. It is very difficult to get the out. They are not in most of the time. Even when they are, they refuse to open the door.
You can get a court order to evict them but that will equal to time, cost and money. Sometimes, they may still not budge even with the court order. So in short, if the property is tenanted, and the people living there are not willing to move out, forget about it – no matter how cheap the property is unless they are willing to pay you good rental.
Third Trap – Outstanding Bills
Outstanding bills are include electric, water, maintenance and even assessment taxes. The cost may run into tens of thousands. So it is important to discover all these before bidding for the property. Otherwise, you could be buying a property and unknowingly have thousands of Ringgit in bills to be settled.
However, this does not mean that you should shy away from a property with outstanding bills entirely. The point to note here is that you must know about them before bidding. That way, you can calculate your costs and figure out if it will be a worthwhile purchase.
Forth Trap – Repair Cost
You must also take repair costs into consideration, and hence include them into your budget. The budget will obviously depend on the condition of the property.
If the property is good, then the budget will be lower. However, if the property is in a poor state, then obviously you will have to set aside a higher figure. And because of the potentially vast difference in cost here, you would do well to inspect the property first. That is the only way to get an accurate costing.