Renting Out or Buying: Does the Price Differ?

When people attend auction and are considering buying a house they usually go for one of three reasons. Either they are looking to buy properties to live in, they are looking for properties to sell on or they will be renting the property out. Either property may start out as a renovation project but the end result is more than likely one of these three.

These three endings are all dramatically different. The buyer who looks to buy a house to live in will have completely different hopes for it than the buyer who will be renting it out and more different still to the buyer who is looking to improve a property and sell it on at a profit.

There will be different qualities that the buyers will look for and the price each buyer will be willing to pay may differ. The buyer looking to move in will think about personal issues for him and his family. The buyer looking to rent will have to consider the tenants who will be renting and their interests.

The buyer looking to sell the property on will have to consider what best way to make a profit when he or she eventually sells the building.

The Personal Finances

But while the ideals and necessities for each buyer may differ the way they pay at auction will not. Those buying a house will still have to make bids and each buyer will have to decide on a maximum spending limit so as not to exceed what they can afford. House prices at auction may be cheaper but they still may not necessarily be in your budget. The price comparison may be good but you have to look at it at a personal level. They will all also have to view the property in the same way as each other. If they will be renting the property out they need to consider it in someone else's view.

What does differ in some ways though, is the way these finances are gained i.e. the mortgage. Mortgages differ for properties that are bought to live in and those that are bought as a business enterprise i.e. bought for renting or commercial buildings.

Your mortgage adviser will help you find the best priced mortgage for residential, commercial or buy-to-let. It is important that you go to independent market advisers as these will have access to all the mortgage products available whereas, an adviser in a bank or building society is tied to the products that lender provides.

It is important to have your personal finances arranged. You will probably need to secure a bridging loan once you have made the offer at auction as the full amount must be paid within 28 days and most lenders take longer than this to process a mortgage. A bridging loan is a short-term loan that can be processed within a short timescale. These have high rates though so make sure the process to get an ordinary mortgage has begun too or you’ll end up paying quite a bit in interest on the bridging loan. The bridging loan is the same whether you are buying the property to live in or rent out or for business purposes.

A mortgage adviser can also help you get a bridging loan while he or she works on getting you an ordinary mortgage too. It's important to make sure you are eligible to get a mortgage before taking out a bridging loan or, indeed, buying houses at auction, unless you have other ways of obtaining the money.