Low Reserve Wins the Day
In this case study, we analyse the sale of an inner-city studio apartment located in the Grand Central building, the former Auckland railway station.
The property was put up for auction with an incredibly low declared reserve of $5,000.
The declared reserve did the trick in gaining market notoriety with 4 excited bidders bringing us to a sale price of $36,500, thrilling the Vendor with the highest achieved price for identical units in at least 12 months.
This case study delves into the factors that contributed to the successful sale, the buyer's intentions, and the potential benefits for the investor.
Background: The Grand Central building holds significant historical value as the former Auckland railway station. Its heritage and character have always been a major draw for potential buyers and investors looking to acquire unique properties. The studio apartment, which was part of the Grand Central Apartments, was sold as a leasehold property with an annual leasehold of $11,150, including body corporate and ground rent, and council rates of $1,200 per year. Despite being a leasehold, the apartment proved to be an attractive investment opportunity, primarily due to its rental income potential.
The Auction and Competitive Bidding: The auction attracted four bidders, with three participating via phone and one attending the event in person. The bidding was intense and rapid, with 44 bids made before the auctioneer, Ted Ingram, finally closed the sale. Some bids were as low as $100 or $500 increments, indicating the enthusiasm and determination of the bidders to secure the property.
The Buyer's Intentions: The winning bidder was a Russian New Zealander who chose to remain anonymous. He revealed that he was purchasing the property on behalf of his wife, who had plans to build an investment portfolio. The buyer recognized the potential of the property and saw it as an excellent opportunity to generate rental income. The apartment's attractive weekly rental of $350 was a significant selling point, promising a tidy net rental return.
Agent's Perspective: City Sales agent Iona Rodrigues, who handled the marketing of the property, expressed her excitement at the successful sale, noting that the final price surpassed her vendor's expectations. The vendor, who had owned the studio apartment for over two decades, had a deep attachment to the heritage and character of the Grand Central building. However, due to his retirement and plans to relocate to the South Island, he decided to part ways with the property.
Market Trends and Investment Opportunities: City Sales sales manager Scott Dunn observed that it had been five years since he had seen such a low reserve on similar apartments. The attractive low reserve motivated serious buyers and investors to participate actively in the auction. Dunn further explained that typically overlooked properties, such as leaseholds, cheap properties, and those requiring remedial work, were receiving the most competition in the current market. Cash-only buyers recognized the potential in these properties and were keen to invest.
Conclusion: The sale of the studio apartment in the Grand Central building exemplifies how a low reserve can generate fierce bidding and result in exceptional returns for the seller. The historical significance of the property, coupled with its appealing rental income potential, attracted multiple bidders eager to secure the investment opportunity. The successful sale demonstrated that sellers with serious motivation are leveraging auctions to attract buyers in the current market. For the winning bidder, this acquisition presents an opportunity to build a promising investment portfolio with attractive rental returns.