Surge in 'grandlords' snapping up auction homes Chris Baguley. of Auction Finance, says: "Many of these 'grandlords' are getting very low rates of return on savings, their pensions may not have performed as they hoped, and annuity rates have tumbled." He adds that a property investment offers the opportunity of regular rental income, with long-term capital growth. Problems in the housing market have left many younger people with little option but to rent, and this has pushed up rental yields in many parts of the country. Those in this age group may feel more comfortable putting their money in bricks and mortar, rather than investing in less tangible assets, like shares, bonds and funds. But buying at auction is not without risk, and novice buy-to-let investors should tread carefully. The main difference is the speed of the process, and the type of property that comes to auction. Not all auction properties are repossessions - only about 10pc are sold this way. Often, though, the properties will be run down and in need of extensive refurbishment. There will also be commercial properties, local authority properties, leaseholds and land and garages for sale. "These are the type of properties that would take time to sell through an estate agent," says Mr Sanderson. This can mean a bargain, but in the auction room, demand on the day for an attractive rental proposition can drive prices upwards - which is why, of course, many vendors opt for an auction sale. Auction houses will publish a catalogue of lots around three weeks in advance. This includes property details and a "guide price" - although this can bear little resemblance to what the property will sell for. Often these are set low to encourage interest in the sale. If you are interested in a property, you are advised to visit it, and conduct legal searches and surveys. If you leave this until after the sale, and a survey later reveals serious structural problems, there is little you can do. At best you've lost your deposit; at worst, you will have to pay a lot more than expected to get the property habitable. This is one of the downsides to buying at auction, and it can lead some to bid more than they planned, or gamble on not having a proper survey in advance. Both can prove costly mistakes. It pays to do your research. Visit a few auctions, look at what similar properties have sold for and investigate the rental potential. You can contact some of the leading auction houses, such as Sutton Kersh, Barnard Marcus, Edward Mellor or Eddisons. Or subscribe to a site like the Essential Information Group (EIG). This costs £250 (plus VAT) for six months, but lists details of all property auctions nationwide - which includes some 380 auctioneers listing more than 36,000 lots a year. The site also holds historical information on sale prices. Think carefully about how you will fund the purchase, and don't forget to factor in the cost of repairs and renovations - many people underestimate these. It is possible to get a mortgage agreement in principle in advance. You may pay a small arrangement fee, but if you don't win the bid, the facility usually lasts for six months, giving you the opportunity to find another property. Some people opt for short-term bridging loans. These can be arranged at short notice (often lenders will be present at the auction), though the interest rate will be higher than normal. The idea is that this might give you sufficient funds to complete the deal, renovate, then sell or let the property. Once you know the full cost of this you can then either remortgage your own home, or put in place longer-term finance on more favourable terms. Remember that the property won't sell if it doesn't meet the reserve price. This may or may not be the guide price - and it won't always be published in advance. At the end of a sale, if bidding has not reached this level the auctioneer will simply withdraw the property. EIG lists properties that haven't met their reserve price, and so have not been sold. As it also lists details of the auctioneers in each case, you may be able to make an offer. However, if you notice that the same property has been listed previously, and still remains unsold, this can indicate serious structural or legal issues - such as an absentee landlord, or planning permission for a new road or block of flats to be built on the doorstep.