Property Auctions: Flip Your Own Houses

You can make money with property auctions. Have you seen that show on television where people buy a fixer-upper for a good price? Then they do the work themselves and resell it for a great price. These people are making all kinds of money. Why can’t that be you making a fortune flipping houses for profit? Is it because you don’t know where to find below market deals on houses that need fixing up? Property auctions are a great place to look.

Here’s how it works. Somebody looses their house to foreclosure or seizure of some sort, either for non-payment of taxes or some legal issue. Once they’ve lost the house it will go up for auction to the highest bidder. Typically these homes can be purchased at property auctions for 30% to 50% below market for their areas, and often there are very few bidders to compete with. All you have to do is meet the auction reserve price, which will be whatever the seller sets, and is usually just what they need to get out of it so that they are not taking much of a loss.

Think about it. The economy is in a pretty bad state these days and foreclosure rates are the highest they’ve ever been. People who have been paying on their homes for years are suddenly unable to do so anymore. They are losing these homes to the banks. They have all kinds of equity in the house and the banks only want back what is still owed. All that equity is then given away at property auctions to the highest bidders. Is it starting to make sense yet?

Now, you find property auctions that are for houses that either need some work, or just some cosmetic changes to make the home fresh and appealing. Buy the house at a really low price, say 40% less than market value. Fix the house up for another 10% or so, then sell it at 10% below market. You’ve just put 20% of the value of that house into your pocket.

Let’s put it in real numbers. We’ll say the house is worth $100,000 (and that’s a low figure, by the way). Buy it at a property auction for $60,000 and put another $10,000 into it, for a total investment of $70,000. Put it on the market for $95,000, which is 5% below market, and expect to sell for $90,000. You make $20,000 on the sale of the house! Most people can flip a house within a month or two. Not bad income, is it?

So why aren’t the people on TV buying their flips at property auctions? I can’t say for sure but I have a theory. The shows are only so long and if they get into property auctions that would take up a good portion of the show. They just don’t want to deal with that. They want to show you the pretty new bathrooms and kitchens next to the before pictures.

What I can say for sure, though, is that a lot of very successful real estate investors are buying houses at property auctions to either flip them or as rental properties. You can be one of those success stories using property auctions, too.