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Financing Auction Property

In an ideal world you would see a property you'd like to invest in at auction, get it at a bargain price with uncontested bidding, then pay for it using an inexhaustible supply of cash from under the mattress. In the real world, however, things don't quite work like that. So in this report let's look at the current main methods of financing auction property and the merits of each.

Very broadly, there are three routes for the financing of an auction purchase, each of which has different pros and cons. The first option to consider might be to make a straightforward cash purchase (if not necessarily from under the mattress). This has perhaps become more common over the last few years as, usually, small investors look for a better return than in a bank savings account. It is quick and simple, and also allows an investor to acquire properties which cannot be financed easily or at all.

However, most professional investors will reach the stage when a cash buying approach becomes restrictive. Additionally, it doesn't allow the investor to fully exploit the power of leverage and there might also be other financial and taxation disadvantages of owning a property outright.

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