TenantLedger | Blog Post

Know Before You Bid – What to Look for in an Online Real Estate Auction

Property Management Blog

With property values falling and interest rates at historic lows, more and more investors are looking at real estate as a way to build their wealth and secure their financial futures. At first blush, those super low prices at real estate auctions can seem like a great deal, but the truth is often much more complicated than the hype. If you are to succeed in the home auction market, you need to come to the table armed with the right information.

 

Buying a residential property at an online auction can be a smart move or a big mistake. It all depends on the due diligence you are willing to put into the transaction before the final hammer comes down at the auction. The condition of the home or commercial property is perhaps the most important consideration, so having someone on the ground who can assess the true condition of the property, and the neighborhood is essential. A residential property that looks great on the outside may be hiding all kinds of hidden damage, from cracked floorboards to missing plumbing and electrical equipment.

 

When you are working in the world of online auctions, it can be doubly hard to assess the true value of the property. After all, participating in a commercial auction hundreds of miles away means you will, in essence, be buying a property sight unseen, always a risky proposition, even when prices are low. Taking the time to evaluate the home auction market in the area where the residential property is located is an important part of the due diligence you need to do.

 

Checking the crime statistics for the neighborhood is important as well since it will affect not only the market value of the home but its appeal as a rental property as well. Many people are drawn to the online auction market in hopes of scoring some cheap rental properties whose cash flow can pay the mortgage. If the home is located in a great neighborhood, you should have little trouble lining tenants up around the block. But if the home is in a deteriorating area plagued by high crime, the chances of keeping the property rented 100% of the time can go down dramatically. And since every day the property sits empty will be costing you money, the time to assess the rental appeal of the residential real estate you are considering is before the auction, not after.