Every problem sum has a solution. But, one has to work at it.
Fuck, the recent open-bid auction got 10-15 people bidding for the property of my choice. Fuck them. In the end, of course, I lost the bid. It was bidded at 25-30% higher than the reserved price.
Since I have been to enough open-bid auctions, I should be able to summarize my findings.
- 0-5 bidders: 10% above the reserved price.
- 5-10 bidders: 20% above the reserved price.
- 10-15 bidders: 30% above the reserved price.
- Above 15 bidders: Please don't try, you would be fucked for life.
How about bidding more than the reserved price? This is for the stupids. Loads of people don't understand that increasing the bids is the most stupid thing to do.
Let me try to illustrate:
A typical property takes about 30 years to finish the instalments, let's call it 100% or simply 3.33% per year (simple approximated). If you pay 10% more, it implies your loan would need to increase by another 3 years to 33 years (10%/3.33%=3 years). If you pay 20% more, it implies your loan would need to increase by another 6 years to 36 years (20%/3.33%=6 years). If you pay 30% more, it implies your loan would need to increase by another 9 years to 39 years (30%/3.33%=9 years). This is obviously not for the faint hearted.
Well ... I would keep my money under my pillow and see within the next 9 years whether I can find another deal that matches your bid and during a deep deep recession. Surely I can. So what's the hurry? In the end, I still can get what I want and do what I like.
If you do take up a bank loan which I advised against and assuming you are also very credit-worthy, you are able to borrow at 90% loan and 10% cash. But, banks are clever bastards. They would only valued the property AT its reserved price. If you itchy backside, outbidded every body as in my most recent auction by paying 30% above, you will need to fork out a total of 40% (10%+30% over the valuation provided by the "conservative" bank). See how fucked, one can be? And you are given only 3 months to pay up. Otherwise, they are going to fire-sale again and you have to foot the difference and administrative and legal fees. An auction's reserved price is at this value is because people do get fucked bad.
Every property after spending time to evaluate, one would fall in love with it. It is very natural. But, do take heed and learn to walk away.
If you cannot buy at reserved price, just walk. There is another 16-years worth of depression to go.
Also, during this last auction, I overheard some bidders saying if he is successful he will open a car showroom and rent it out. He was dressed in shorts and fucking sandals. I don't look down on such dress code. I just find it amusing on how dreamy things can get. What make you think that you can confidently clear the government-of-the-day's control and change the land use in shorts and sandals? Depending on where is your property, in white land, it takes the better of 1 year to approve a restaurant. Bidders who dream big, die fastest. Just a case-in-time, I have just visited some of my lost auction bids. The properties were not even renovated nor improved. Where is therefore the money for such dream team for a car show room? Talk is cheap, renovation is pure cash. Some property owner can't even afford to paint their house regularly, let alone change of use. Fuckens are fuckens.
As at this writing, I just heard another neighbour has just died. Most probably if I am patient enough. I can grow my portfolio again. I just have to wait and smile at all my neighbours. No harm getting into their good books. Hehehe ... Winter's coming. Action time.