 Good evening and welcome to episode 285 of the Private Property Podcasts, I'm your host, Usama Domoakumalo. It's a Friday edition of Private Property Podcasts and if you're joining us for the first time, well, you've been missing out on some great content that we've brought to your screens, so do make sure that you go to our Facebook or our YouTube page to catch up on all that great content. To all our regular viewers at home, welcome back, you know how we do it, every single weekday at 7pm, you and I have an appointment, we're always in conversation with a property expert who helps us navigate our property journey. This evening we're not coming to your live, so we're going to keep the conversation going on social media as we always do, so do continue liking, sharing this live so that we can make the property circle bigger. Talking about making the property circle bigger, you can of course tune into a whole host of other shows that Private Property has across the social media platforms, talking about the Home Shoppers show that you can catch later this evening at 8pm, that comes to your screens every Mondays and Fridays, which hard takes you through incredible properties that you can find on www.privateproperty.co.za. Every Tuesdays and Thursdays, a warden and farmer, Umba Linua Co, brings you the farming podcast where she's always in conversation with agricultural experts who help you navigate all things farming and agriculture. Now Wednesday's Esther Klassen takes us through conversations with people who've not only walked that first time home buying journey, but have gone on to grow their property portfolio from strength to strength. So if you ever want to find out more things when it comes to property, well you've come to the right place to make sure that you follow us across our social media platforms that's on Twitter, on Facebook, on YouTube, on Instagram, and we're now also on TikTok. You can follow myself at zamandonga underscore on Instagram and on Twitter. Now this evening we're talking about something that I'm actually quite excited about because I recently, you know, I recently bought a property this way and I think it's so useful that we get a sense of the different ways that you can buy a property and what you always need to know about those different ways and we're going to be looking at what you should know before you bid on a property. I know that there are some people who are exploring, you're buying their property on auction and we're going to be exploring, let's say the two types of buyers that one would typically get who would buy at an auction, you've got your sort of resident buyer, then we've got your property investor and what they should ultimately be looking out for when they are buying their property and also looking of course at how we've got two different types of auctions that will explore your distress sales as well as your private treaty and how you should or what you should know rather when you're going to be buying in those two kinds of auctions and those are some of the things that we want to explore. I want to find out from you at home if you've ever bought a property on auction, what was your experience like? I know it can be quite intimidating especially if you've never done it before so do share your experience down here below. To help us better understand what we need to know before we bid on a property I'm joined by Vilna Havenga who is a property specialist at Auction Inc. Vilna good evening, thank you so much for joining us again on the Private Property Podcast. Thank you Zoma, what a privilege to be here again, thank you. It's really great to have you back and Vilna I want us to get straight into it because I think oftentimes a lot of people tend to have the misconception that property auctions are only for the distressed properties and that's why they're sometimes very scared of doing or buying rather a property by auction. First just highlight the two different kinds of property auctions that one can find and have an option to buy a property from. Yes Zoma that's very important that the markets and the buyers must understand that you get private treaty properties that we sell on auction which are properties that is normal selling of a property is not a distressed property. In other words they are still responsible for the COC, normal estate rules are important that if there's a tenant they must know that the tenant comes part of the package of this of the property and that a private treaty property is just another way of selling a property on auction. It's becoming a global trend at the moment that a lot of properties are being sold for auction because it's a time effective way of selling a property. The auction is a catalyst for the process and the exciting thing is it creates excitement on the day and often our properties don't, if it doesn't sell on the day it sells in the month after the auction or two months after the auction that's why our mandate period is extended because people want to know what happened on the auction but is there a reserve price was the price met and it creates that excitement that you've got a lot of interest where with a normal residential sale you bid against one or two people that's interested it takes longer takes four to six months to sell a property where it's on private treaty literally within four weeks we can have an auction and hopefully sell that property if the price is correct. And I think you know when we then look at things to look out for because I think we've certainly covered and I urge viewers at home who've missed some of the episodes sort of the difference between private treaty auctions and distressed properties but when we then look at somebody who's looking at buying let's perhaps break down the resident buyer and the investor buyer because I can imagine that they're looking for two different you know things relatively speaking when they're looking for a property whether they're buying a property that's distressed or they're buying a property that's you know private treaty auction perhaps explain to us how they would you know usually differ before we look we look at what they would typically probably need to look out for when they want to bid on a property. Yes look there are two very different buyers your investor buyer wants to know bottom line return on investment they're not emotional about the property they're not emotional about the location of the property they want to know that every square meter of that property will bring in the income from them versus their money in the bank. So return on investment is they are bargain hunters if I can say they want to fix it up put tenants in rented out and because it will be the second part of a portfolio that they're building so an investor buyer is a good buyer they're usually cash buyer but they're more strenuous on their negotiations that they want to buy a bargain and they want a good deal where your property owner that buys a property they're looking for a property in a specific area they're also more emotional about a property in the sense that if they're walking and they love the property they would probably bid a bit higher because they're buying a house that they want to live in with their family and their loved ones so if that makes sense it's a bit of a difference a different approach for these buyers I think the important thing for both the investor buyer and the residential buyer is that they must do their homework before they buy the property it's very important to know what the properties in the area go for also the value of of the property in a sense that is there a lot of things in the property that they need to fix because when in general when we sell a property private auction and even distressed you buy it footstooled so you buy what you get the day of the auction so there might be things in the property that they need to fix up a bit they need to do their homework speak to their broker and make sure that they know exactly what they're buying and be financially ready because when you buy an auction it is a fast process and the buyer has to pay a deposit on the day of the fall of the hammer to secure that deal and then the 21 days to get the finance in place after that but to make sure that you're a ready buyer when you go to an auction and you see a property that you want to buy and purchase and you love your money must be must be in place then also the a very important point is to make sure that the rates and taxes be obviously if it's a normal property through a private treaty right and taxes will be covered but if it's a distressed property that might be part of the of the the buy on a distressed side so you know how being in contact with your broker before the property is really important to understand exactly what you're getting. With our conversation this evening with Vilna having a who's a property specialist at Auction Inc as we explore what you should know before you bid on a property so if you have bought a property via an auction now to find out from you how that experience was like I recently went through that experience and I think it really helped that I used different resources to find out about the dos and don'ts of property auctions so I was very well prepared for that particular auction as Vilna has sort of rightfully pointed out. Now Vilna I want us to focus a little bit on the investor buyer because I tend to find that they're often the ones who especially during this period who are looking at or exploring going the auction route or buying their properties on auction because they certainly have a sense that they'll get a better deal than if you know it's sort of a normal sale and a lot of the viewers at home are always trying to find ways of you know accessing properties at a discounted price as much as possible so for the investor buyer who's looking to buy an auction what are some of the things that they need to be very clear about the property before they even you know get to the auction or the day of the auction because I think sometimes especially if you haven't really bought a property on auction you're still unclear about what do you need to make sure or your due diligence effectively looks like perhaps on the money side you might say you're fine but holistically what does your due diligence look like for the investor buyer? I think the important thing for the investor buyer is to determine are they going for a commercial property or they're going for a residential property those two portfolios are very different current in the market as well you've got people that invest in blocks of flats they might be investing in retail space they might be investing in a piece of land that they want to develop later or it could be someone that's buying a second as I said a residential property where they want to put tenants in there are small commercial properties at the moment going very well as well with maybe tenants on with 10 flats or 20 flats or something like that for a smaller investor that would be interested in something like that again the important thing for that buyer would be to know who the client will be that's going to be living or your tenant that's going to be occupying that space is it a rentable property the location is always key where is this located is it close to schools if it's a residential property is it close to hospitals highways accessible and what type of client will be renting that property from you also security for a lot of even if it's tenants that's renting it's important to know that there's good security in the area and if it's a estate or the property that it's secured on the investment side as I said if it's a person investing in retail space or in rentals of residential properties like flats blocks of flats or something like that they would also need to know who would be their tenants and that they know they've got a secure and solid and stable income when they do that because often they do a portion of their own money and the money a portion of that comes from either other investors or from the bank so they need to offer security and when you invest a buyer and you go into commercial you must also know that your time frame of paying back that investment is much shorter than with a normal residential property usually the bank gives you 10 years you must put on at least a 20 30 sometimes even a 50 percent deposit where with residential it's much easier and much more lenient and there's better deals from the banks available for first-hand buyers or for in for investor buyers in properties and and you know you mentioned the purchase of your blocks of flats in terms of people are looking at you know commercial commercial properties and buying them on auction I know that a number of viewers are also looking at just getting a small block because more often than not you that's how you're going to start off as opposed to you're buying a big building with the 100 units inside you're very likely going to get your under 10 or under 15 units block to first run and get a sense of how to to effectively run your block of flats put those systems in place when we look at people who are especially right now buying those kinds of deals with those kinds of properties how can they best sort of get a sense of what the right price point is I know for example that oftentimes auctions there'll be an investor pack especially those kinds of properties there'll be an investor pack that has all kinds of details but how can they almost make sense of a that investor pack and how to get a sense of where they should be pegging you know the price I know that the you know the market will determine what the maximum price is but obviously certainly for you for newcomers how can they almost start getting acquainted with how to assess a particular property and even as they read that investor pack and and the kind of numbers that they should be comfortable with when it comes to them putting on the day saying look this is actually going to be my maximum yes I think the important thing for that buyer to know is is what is the net profits of that building in other words what is the money that they get in their pocket as is for that property so what is the rental income obviously there will be management statements for this that will be verified for them to see what the income is on that property at the moment and then they you know for any investor or someone that goes into the property market and it's their business they need to know a little bit about how to fix up a property or what is the cost to get so get someone in to get quotes on what is it going to cost you to fix up this building so that when you make your offer that that is included in the price for you to be able to fix up this property to make it a rentable property if it's not if you want to fix it up if it's needed to fix up if it's not then that's ideal for an investor to buy something that's a little bit under market value but that brings you a good return on investment and that's not going to cost you so much money so money is expensive so a lot of investors if you can rather pull together with club together with friends or with other investors to buy a property then they're necessarily getting alone from the bank but you know investors work a different way they can do a portion as I said privately and the difference with the bank it's also something to consider because it affects the the money that you put in your pocket at the end of the day well that one of the things that unfortunately happens along everybody's or most people's property journey is that they make mistakes along the way when we when we look at mistakes to avoid let's start with the the resident buyer what mistakes should you know the resident buyer who's looking to buy on auction and try to avoid as much as possible I think the biggest challenge that they might have is to make sure the money is in place because I lose money if they buy an auction and they don't get a bond so that's first thing I think make sure that you know how much your money you've got to buy a property secondly make sure what the defaults are if there are any on the property that you should be aware of everything that needs to be fixed because the contracts clearly state you buy what you see on the day so if there's defaults or structural things that need to be changed or maybe just cosmetic make sure we do your homework to see what the cost again it's not as intensive as an investor or a commercial buyer but still if you have to fix up this house there's a cost involved that's going to impact the bottom line if you move in with your family and have to pay back the bank so the cost of that property in total is very important and then we'll know when we then move on to the investor buyer what kinds of mistakes should the investor buyer be aware of and trying to avoid it look the biggest thing and and investor buyers in general are very good up on the market in general they know exactly what the hot buys are currently in the market it's very challenging for people that's selling office blocks so we get a lot of investors that actually do buy and they do conversions into residential again because of covid and I think it's unfortunately some something that's here to stay that the industry will never return back to where to always be in the sense that we will always have a portion of our companies working from home and the market is definitely made that shift so the risk for them obviously to know again what to do in client would be that's going to be in that building if it's a retail store what is the how busy is that center ask for the statistics make sure the rent roll is stable of the tenant sets that's renting at the moment and mitigate your risk as much as possible it has much information on your buy and your client as possible and and you know we'll know one of the things that you've you've just mentioned it is a growing trend not just locally but certainly even internationally is the conversion of office blocks to for residential use we've seen a number of different players locally doing it as well because of the high vacancy within the office space and obviously there's even the rise of you know having that lift stay type you know buildings so they still an office component within a building and then you've got your your residential whether it's typically at the top for example for people who are looking to explore that and and I know that more often than not you're not going to be a newcomer exploring that option where you've never you know dealt with any kind of property it's usually people who are slightly more seasoned and what are some of the things should they be looking out for straight from the back because I think in as much as it's a growing trend right now and I know different people are trying to take advantage of sort of smaller scale office blocks that they've seen as opposed to some of the bigger ones that I'm sure a lot of the bigger players are gunning for and even have the budget to gun for the slightly smaller players what should they be looking out for when they're you know exploring buying a building for conversion the biggest thing would be location location location location um you know they can convert that for student that could be converting that into smaller flats or bigger flats um you know it's a lot of these opportunities are in the CBD for example Joburg or Pretoria or Cape Town so location is very important that doesn't have access to public transport um and you know if it's near government buildings where the employees are working um that's important to know again as I said who's going to be your intern and that will be living there so location location location and then your tenants that will be renting there where do they work transport schools in the in the facility facility around that um are all important factors that they need to take into account this evening I'm joined by Vilna having I was a property specialist at auction and can you explore what you should know before you bid on a property whether you're a private whether you're a resident buyer or certainly an investor buyer these are some of the things that you always need to be aware of in the event that you're going to be buying on auction now Vilna I want to get a sense from you then when people are now at the auction and are ready to effectively bid and the bid is about to start what are some of the do's and don'ts on the day of you know the actual auction because I think it's very easy to especially if you're attending a physical one and as opposed to an uh one where it's you know hybrid both physical and online but certainly when it's physical it's very easy to get taken up I mean the the auctioneers usually very good at what they do and sort of rouse you up what are some of the do's and do's on the day of the auction while you are um participating in the auction one thing that I found which always astounds me is that people rock up 10 minutes before the auction actually starts um don't do that be on time be there prior to view the property to be calm um the auction has to start on time they usually give you five to ten minutes um leeway but we have to be on time to start the auction according to regulations so rock up and be prepared make sure if you haven't seen the property prior to auction that you've got time to see the property you usually give two hours before the auction for people to view and make sure your finance is in place when you rock up at the auction um so you know we've mentioned it before and there's a reason we do because often people say I love this property I wish I was prepared to buy make sure your deposit is available um to buy the property to put your your holding deposit down when the bit falls on you for you not to lose that property but um you know as I said be calm be in time don't rock up on the time of 10 minutes before that because it causes stress on you and and um it causes stress on the auction as well so um I think that's the biggest thing and I can that I can comment on for people is be prepared and and will know when it comes to issues of access and this is you know particularly for distressed properties because I know that oftentimes with your private treaty you typically don't really have access issues but when it comes to issues of access and accessing the property and in the event where you're unable to gain access how can and this is typically your investor buyer would be gunning for these kinds of properties because I found that a lot of private or resident buyers tend to uh you know not go for a distressed property where they're also unable to get access because more often than not you want to buy and live there yourself so for property investors who are looking at a property where they think look this is a great location it's got quite a lot of potential but they have trouble with access any tips for them in terms of navigating access issues yes I think again it's important to talk to the broker who is responsible or the auction near auction house that's responsible for selling that property there will be a mandate given to them by the bank or by liquidator or by the sheriff to sell this property and whoever buys this property has to have access to view the property even if it's on the day of the auction so um make sure that you do your homework and contact them and make arrangements even if it's an hour before the auction that you can view this property and and buy it nobody's going to expect of you to buy it will not sell in any case a property that you don't have access to or at least you know if it's a desktop evaluation that you've done or photos have been taken by the auctioneers and the video that's often sufficient for you to make a bid on the property which is in detail a lot of detail information will be on the bidder's pack for the buyer to go through but be prepared and make sure that if you are informed as much as possible more that you can arrange with him to get access to that property novel that one of the things that could potentially happen and you've highlighted how and you've consistently highlighted how you need to be prepared you need to have your money uh face in in place when you go in auction on the day of the auction and of course after uh you know the three one day period where you are able to raise the rest of the finance or secure and then financing in the unfortunate event where somebody is the highest bidder and they do have the deposits and the agents commission on the day and they make that payment on the day however they aren't able to raise you know the money for or the financing for that particular property what are the you know potential consequences or that they potentially face because I think sometimes there are people who think it's going to be quite similar to when you you know sort of buy a property I'll say the conventional way because there's typically a clause around and you know securing financing whereas with auctions it's slightly different any tips for people or send the insights into what happens in the event where you're unable to raise that finance look we we can't keep people's money um if if it's um due to them not getting their finance we unfortunately there is a risk depending on the on the um auctioneer's contract that they might lose the deposit um or the commission part of that if they don't get finance so I can't say that depends on every auction house is different what the risk will be there um and then obviously what we want to do is we want to sell that property effectively so we usually go to the second bidder that was at the auction um to ask you know would you like to make an offer or match the offer that was made um for the sale to go through successfully but yes there is definitely a risk depending on the contract of the auctioneers that they might lose their deposit and forfeit that which will be unfortunate and and it really would be because I think oftentimes especially because an auction is one of those things you want to go into prepared as you rightfully pointed out not just for the money that you'll put down at the fall of the hammer but certainly you you want to for example have been either pre-approved or you know where your financing is going to come from for the particular property that you are eyeing as we wrap will now any final tips for viewers at home when it comes to what to look out for and what and how to best be prepared for a property auction um you know people have got this conception that auctions are only about distressed properties and I really want to leave the viewers with a with a knowledge that it's not we have a lot of success selling our property sometimes even higher than mandate price because of its effective way that auction runs our online campaigns are highly successful that's why we've got a national footprint so again if you're interested in either buying or selling property on auction make sure you work with a reputable auction house make sure that you do your research on them and make sure that when they market the property that they give you enough exposure if you're a seller if you're a buyer the information pack that you get from the auctioneers that they will send through to you make sure it's detailed and as I said get more information get on the phone call them or send emails get up to date with it with the information and try and get a viewing of the property before the auction if you can but otherwise on the day and last thing again be prepared and that's a great place to leave it at will not thank you so much for joining us thank you very much Alma and that is Vilna having a who's a property specialist at Auction Inc and that brings us to the end of the Friday edition of the private property podcast with myself Ozamantomo Akumalo at 8 p.m. you can afford to the home shoppers show with charge so do make sure that you tune into that I'll be back on your screens on Monday evening at 7 p.m. until then hoping you're going to have a safe weekend and of course stay home as much as possible especially in how things we're seeing in numbers surging higher and higher