CIMB Property Mart Auction during the Star Property Fair 2010
| No.of properties sold | 28 |
| Total value of properties sold | RM3,655,500 |
| Total up-bid amount | RM537,700 |
| Highest single up- bid value* | RM260,000 |
Making money from auction propertyProperty coach Dr Peter Yee says that for every five properties that are auctioned, there is probably one that’s a good buy. People go for auction properties largely because these properties are usually sold from anywhere between 20% and 50% below market value. Such properties allow for quick transactions (90 to 120 days, depending on condition on sales) and can be rented out fast.
In his recent “How to make money from auction property” workshop, Yee points out that it is important to take note of the following in the proclamation of sales:
- the necessary payment (bank draft or cashier’s order
- whether all arrears of quit rent, assessment, maintenance charges, taxes, rates, fees, utilities fees (namely water, electricity, gas or sewerage charges) and any other monies due to relevant authorities or developer is borne by the seller or
purchaser
- caveats
When you have the address of the property, it is time to pay a visit and do your research. Yee playfully says, “If you find a parang (machete) at the gate of the auction property, then move on. There are plenty more properties out there.”
If the property is locked, do not get a locksmith to cut the locks and enter as the property, as it is not yours yet. In Yee’s seminar, he provided an ‘Inspection Checklist’, and it includes the property’s status (who is residing in the property e.g. occupied by tenant or owner or vacant), estimated repair cost and outstanding utilities expenses; all of which will give you an estimated net total cost.
Your analysis should also be based on the property’s market price, estimated bank valuation price, and positive and negative features of the property. Additionally, Yee also provided a ‘Before and After Auction Property Checklist’. For example, the checklist before you attend an auction sale includes title search, your maximum bidding price, confirm with the auctioneer that the auction will take place as notified for before, bank draft (10% of reserve price), cash (10% of the additional bid price), and so on.
Tenant management
Once you have successfully bid for an auction property that is not tenanted, you can get a locksmith to cut the locks and at the same time, launch a police report just in case of problems later. This way, you can clean the place up and it can be ready for rent within a week. If the property is tenanted, Yee advises to talk to them nicely and inform that you are the new owner. Tell them the new rental terms and give them seven days to decide if they would like to stay on or move out.
Yee points out, “Be more human. See how you can help them. If they (tenants) have no place to stay, rent it to them at a cheaper rate for the first year. After all, you have not paid as you have up to 120 days.”
He adds, “There is no point if they say sorry. As the new owner, you cannot say sorry to the bank.”
Yee also highlighted that if you are new to purchasing auction properties, it is best to get one that is tenanted or vacant. Try to avoid auction properties that are resided by owners as it might be tricky when dealing with owners.
To some, it might seem like a lot of hassle. Hence, Yee puts it aptly, “That’s the “price” to pay for purchasing properties below market value.”
Once you have placed a successful bid for an auction property, you could opt to add value to it via repairs, settling all the necessary bills and then rent it out. If for any reason that you are unable to attend an auction, you could engage a real estate agent to bid on your behalf. Do make sure that you do your “homework”, buy in an area that you are familiar with and give the estate agent your maximum bidding price.
Where to find auction properties?
Once you have identified an area, these are things that you should look out for.
* Signboards on trees, lamp posts and so on. Most of the time, these are “advertised” by real estate agents. Call them to ask for the address of the auction property and do your research.
* Auctioneers’ office. Here are some of the websites: www.ngchanmau.com, www.auctiondata.com.my, www.leongauctioneer.com
* Banks, such as www.cimbbank.com.my/propertymart
* Daily newspapers’ classifieds
Auction properties are not for everyone. “If you can’t handle it, don’t buy,” advises Yee. His workshop is ideal for those who are new to the world of auction properties. Rest assured, Yee shares plenty of examples, case studies and a few exercises to introduce you to the realm that he is very much accustomed to. - by Dr Peter Yee
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Dr Peter Yee runs ‘How to make money from residential property’, ‘How to make money from commercial property’ and ‘How to make money from auction property’ workshops in Malaysia. For more information on his upcoming one-day workshops, SMS to 017-249 1077 or visit www.balancelifesuccess.com
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