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Bargains to be found in asset auctions

The Nation February 19, 2009 Astute investors making up to 30 per cent in less than a year Investment in residential properties is becoming a popular means of generating substantial returns on personal savings, since interest on bank deposits has fallen below 2 per cent, and some of the best housing bargains are available at regular foreclosed assets auctions. The auctions are held three or four times a week by the Legal Execution Department, and most properties can be bought for 50 to 60 per cent of actual market value. Take the case of Supranee Jaengkrankit, 67, who bought a townhouse in Nonthaburi province six months ago at a department auction. She paid Bt760,000, and already the property's value has shot up to Bt1.4 million. But she has no plans to sell. Her big return on the investment is her happiness in living in the house. This does not suggest a revolutionary new investment path. It is merely an example of how very healthy profits can be generated from property investments at second-hand house auctions, provided due care is exercised. On every Wednesday, Thursday, Friday and some Saturdays, the Legal Execution Department opens its office to auction off its foreclosed assets - a list totalling about 200 properties. Bidders who are interested are required to deposit at least Bt50,000 in cash or a cashier's cheque at the department's office. In exchange, they are given a yellow card to be used when taking part in the auction. One yellow card permits the holder to bid for one property. During the auction, a bidder raises the yellow card to let the auctioneer know he or she is willing to pay the asking price at that time. If another bidder raises the price, then the original bidder can outbid the competition by taking the price even higher, and so on until there is only one bidder remaining. As shown in the table, the amount by which the price rises with each new bid depends on the value of the property. The winning bidder has to pay the department 20 per cent of the price immediately and the rest is due within 15 days. Although this may sound simple and straightforward, there are some pitfalls to avoid if you want to save money and side-step a load of frustration. Many of the houses on auction are still occupied by the original owners, despite the property having changed hands. Even if you have bought the house, you may then face the need to file an order with the courts to get the previous owners evicted, and that could take from six months to a year and a half. Therefore, prospective bidders should read all the small print carefully if they hope to move into a house as soon as they've bought it. In Supranee's case, she was lucky. The house she bought was empty and located near where she was already living, making it easy for her to renovate it before moving in. An officer from the Legal Execution Department recommended that those wanting to bid at auction should check out the department's list and visit the houses they wanted before attending the auction. They should also determine the price of land in the locality and the value of surrounding houses, so they can decide on a maximum price they are willing to bid. As well as the cost of the house, bidders should set aside some money for renovation and redecoration. However, the department says most houses in the auction are sold for 50 to 60 per cent of the actual market price. Supranee spent an additional Bt400,000 on top of the buying price to renovate her townhouse, making its total cost Bt1.16 million. However, she has already been offered Bt1.4 million for the townhouse, meaning that if she decided to sell she could make a profit of at least Bt240,000 - a 20-per-cent gain in only six months. Aside from the attractive prices, bidders can pick up houses in prime areas, especially in the central business district, many of them at prices lower than those at new property projects. One investor who bought a house said he should be able to generate a return of about 20 to 30 per cent after renovation, when he would put the house up for sale or rent. "You should select houses by location, price and renovation costs," the buyer said. "It's a good investment if you have enough savings, because you can generate much higher returns than in deposit accounts at commercial banks, or more conventional types of investment. "Remember though, it depends greatly on the location," he said.

 

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