Learn How To Buy Auction Properties with Jay Howard
Last updated: 19 Sept 2024
Meet Jay Howard
We had the pleasure of hosting Jay Howard, a seasoned property trader, co-founder of Hammered, and author of the Amazon bestseller “Before the Hammer Falls”. With over 20 years of experience in property investing, auctions, and trading, Jay brings a wealth of knowledge to the table. His expertise spans residential, mixed-use, and commercial properties, making him a go-to authority on auction properties.
The purpose of this article is to summarise the invaluable insights shared by Jay Howard during his appearance in Deal Finder’s Corner. From understanding the nuances of auction properties to avoiding common pitfalls, this article provides you with the knowledge you need to succeed in the competitive world of property auctions. Whether you're a seasoned investor or just starting out, Jay's practical advice and real-life examples will equip you with the tools to navigate the auction landscape confidently.
Understanding auction properties
Jay Howard opened the discussion by highlighting the importance of understanding auctions as a marketplace, not just a strategy. He emphasised that auctions offer opportunities for various types of investments, including HMO conversions, ground-up developments, and commercial-to-residential conversions.
"Auction isn't a strategy; it's a marketplace. Whatever you think you can do in property, you can do it at auction."
Unconditional vs. conditional auctions
One of the key topics Jay covered was the difference between unconditional and conditional auctions. Unconditional auctions, which have been around for thousands of years, require the buyer to complete the purchase immediately after the auction ends. In contrast, conditional auctions offer a 28-day reservation period, followed by an additional 28 days to complete the sale. While the latter may seem more flexible, Jay cautioned against the higher costs associated with conditional auctions, which can be as much as 5% of the purchase price.
Case studies
Case study 1
Jay shared a personal experience where he lost £100,000 on a deal in Southeast London. The property, a mixed-use building, seemed like a promising investment with a potential GDV of £1.6 million. However, after facing challenges in letting the property and getting planning permission, the deal fell through, resulting in a significant loss.
Key takeaway:
Always prepare for unexpected challenges, and don't assume every deal will go as planned.
Case study 2
In a more successful venture, Jay recounted how he and his team acquired three commercial units in Bristol for £252,500, significantly below market value. By renegotiating the leases and increasing the rent from £26,000 to £41,500, they were able to increase the property's value to £415,000, netting a substantial profit.
Key takeaway:
Identifying underutilised assets and adding value through strategic lease renegotiations can yield impressive returns.
Case study 3
Perhaps the most striking example of Jay's expertise was a deal in Greenwich Peninsula. By leveraging a back-to-back exchange, Jay secured a £2.1 million property, which was later sold for £2.95 million, resulting in an £850,000 profit without the need for stamp duty. This deal underscores the importance of strategic planning and understanding complex transaction structures.
Key takeaway:
Mastering complex deal structures, like back-to-back exchanges, can significantly enhance profitability.
Actionable tips for auction success
Jay emphasised the importance of thorough due diligence, understanding your risk profile, and having multiple exit strategies. He also advised against overleveraging and recommended focusing on properties with multiple potential uses to spread risk.
"Don't be a motivated buyer or seller. Be an opportunist."
"The best opportunities are often hidden in plain sight. It's about seeing what others overlook and turning challenges into profits."
Conclusion
Jay Howard’s session provided a masterclass in auction, emphasising the importance of understanding the auction process, conducting thorough due diligence, and having a clear risk profile. His real-life examples, both successful and challenging, offer valuable lessons for any property investor.
If you're looking to dive deeper into auction properties or need expert guidance, consider reaching out to Jay Howard and his team at Hammered.
