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Co-Buy/Co-Invest The Auction Route
It is no secret that first time buyers are finding it more difficult to get on the property ladder than any time in recent recollection. Property prices in across the country are still rising despite this week’s interest rate rise and the threat of more to come, and as young and not so young potential property purchasers watch their dreams of home ownership drifting off into the distance on the back of a buoyant market they must be wondering if there is any way that they will ever be able to afford their own home. One option open to all buyers is the auction route. When combined with the concept of co-buying/co-investing it becomes a very affordable solution for the brave at heart.
SharedSpaces.co.uk introduced the concept of the “co-buyer network” to the UK in 2005 to encourage first timers to club together to afford their first homes. Splitting the costs and sharing the bills is the frugal way of buying a property these days, and with the total social acceptance of flat sharing in the rental market the co-buying sector has been able to grow from strength to strength. The next natural evolution of this sector was co-investing where individuals decided to purchase property together for investment purposes only. Share the costs, share the risk. It’s a great way for new investors to afford to enter the buy-to-let or buy-to-sell market, or even for an investor to help a first time buyer into their first home by co-buying with them and incorporating a rent into the mix on the percentage of the property that is investment only (much like a mini version of the Government’s HomeBuy (part rent part buy) scheme).
Auctions have for many years been seen as an excellent way of finding a property bargain. A canny buyer with a little luck may well be able to find a property to buy below it’s market value (this is totally dependent on the others who are there bidding on the same property on the day of course) and because of the large number of auction houses that now exist solely to auction off property you have a lot of choice open to you. However, many properties that are sold through auctions tend to be in a poor state of repair and require a little (or a lot) of TLC and money lavished on them to bring them up to standard, and to buy at auction you must have all your finances in place (mortgage and cash) before the auction starts because your successful bid legally binds you to purchase the property.
Joining forces with a co-buyer or co-investor to buy at auction can give you the advantage of more cash to play with. Both of your deposits combined can mean you will require a smaller mortgage which may be easier to arrange prior to the auction, or more money set aside to do up a property once you have purchased it. Auctions are such good investments because they give you an opportunity to re-create a home from a shell and in doing so increase the value of your property investment. The result is a property you can then either live in or sell on and use your profits to either buy another place together or your first sole home of your own.
Co-buyer/co-investor relationships should always be accompanied by the correct legal framework in the form of at least a “Deed of Trust”, which sets out your legal rights, responsibilities and ownership. If you are going to be attempting to buy a property at auction you may also have some up-front costs that you may share so a solicitor may suggest a pre-deed of trust agreement (usually just a simple letter signed by all parties) where everyone agrees to split all costs incurred prior to the purchase.
Remember to research your potential purchase thoroughly for value for money. Check the prices in the same road, check the structure of the property through a survey (never short-cut this stage), and never purchase a property with someone that you do not have 100% confidence and trust in. But if you have found your ideal property partner and you are discussing ways to buy your first home or investment together, consider an auction as they still an excellent way to find a bargain.
AUTHOR
Richard Cohn is the Founding Director of www.sharedspaces.co.uk the UK’s original “co-buyer network”. Search though thousands of people from across the country looking for likeminded others to co-buy or co-invest with to help them afford their property dreams. Together we can achieve anything.
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