After spending most of my twenties day dreaming about a beautiful federation style dream home somewhere in Sydney’s inner suburbs, then acquiring a first investment unit around 5 years ago, and the last 12 months of 2015 watching house prices climb ever higher, by early 2016 what was “just out of reach” became completely out of reach (aka impossible) – a house within the 10 kms from the CBD.

My brother and I have spent hours talking about it over the years, and even if we’d done something together on our “good” salaries five years back there was very little we could afford to buy that didn’t need major, major work close to the CBD.

Fast forward to February 2016 when I was working from home one day and perusing the real estate websites aimlessly when a little 1960s brick veneer home caught my eye.  Wookie and I had been debating options for awhile – move into each other’s rental properties? Move to a new rental? Try to buy something?

See: The aftermath of the boom: How five years of soaring prices have changed Sydney

The house that caught my eye was similar to the house I’d grown up in, so I knew the style ’60s, brick veneer – very liveable!  Only a couple of suburbs over on the leafy upper northshore*! It was on a trainline! And it wasn’t $1 million!

Bit of an ugly duckling, but you could paint or render…

Priced  at (what we somehow all now thought was reasonable) around the $800k mark  I headed up there with Mum in tow that very afternoon to do a drive by and get a feel for the area.

That first house set off the relatively short period of angst that followed as we tried to secure THE HOUSE in Mount Colah at auctions.

Turns out that first house wasn’t the right one – it was tiny inside and really rundown and kinda badly built.  But it did make us think about Mount Colah as a serious proposition: pleasant, leafy, large yards, properties with scope to improve, on the trainline and actually as far from the city as Parramatta – around 23kms. Plus having grown up not too far away I knew what the lifestyle was like – safe, sleepy, suburban, but not ridiculously far from town, i.e. commutable.  Great for pets and kids if you have them (or are planning on them), so perhaps a Mount Colah house would turn out to be a ‘twenty year home’.

AUCTION #1
Um… is that a second toilet in the laundry?
No! That’s the only toilet!

We passed on that first brick veneer, apart from being tiny, there were dodgy looking neighbours, awkward street access, and it needed a new kitchen immediately – something our budget wouldn’t stretch to.  We started paying regular visits each weekend to inspect properties and a 1950s fibro caught our eye.

Original condition and a funny layout – but great street, plenty of rooms, underground workshop (home office! Music studio!) – SO. MUCH. POTENTIAL.

1950s charmer with established garden and lawn

We worked hard to get a handle on prices in Mount Colah – how did people not know about this area!? It was so cheap! Well relative to Hornsby and Asquith, both with $1.1M+ medians and then fringe Berowra (a further 10 minutes by car) at $950K….we had found our “hot spot” – where you could still get a house in OK condition, decent block, good street for $800-ish.  Excellent.

ADVICE It is much easier now with "sold" data on the major real estate websites to look at comparable sales and create a list of sales for the street you're interested in and surrounding streets.  By the time that first auction rolled around we were fairly confident, with most of the other bidders seeming to be on par with what we had worked out pricewise.

Based on that pricing knowledge along with what we’d calculated  we’d need to do to it (original hot water service rusting and in the roof! Um… is that a second toilet in the laundry? No! That’s the only toilet! The bathroom is way over the other side of the kitchen! Porcelain circuit breakers on asbestos cement backing board – you betcha!) – so yes quite a lot just to contemporarise the house before you could add any serious value through cosmetic updating.

Anyway, we didn’t care as we thought the cottage was charming and were happy to put in an offer (this is what Sydney has become: you are considering taking on $1 million in debt for the privilege of living in a fibro ! Full of asbestos!).

Our offer was not accepted and we decided to go to auction.

Now at first I thought I would get Papa Amos to do the bidding, he’s been in many auctions and prevailed at a few…but in usual Dad fashion he was double-booked and was picking up a sibling from the airport (very far away from Mount Colah!). Two nights before the auction I decided I could do it, and Wookie agreed.

The night before was nerve wracking – the auction wasn’t until 3pm… we crammed, I read many tips and articles plus we watched lots of YouTube videos for advice and to preview the terrifying auctioneers you can encounter.  They are HECTIC.

That said it did help me feel calmer on the day having done the preparation.

Once 3pm rolled around I bid early and strong – taking things up by $10k and then by $5k, but were tapped out about 5 bids in at $820k as were a couple of other bidders; finally right towards the end a quiet tall man raised his arm – his first and only bid with an increase of $2,000 – to secure the property for $832K.

We laughed, thinking “well he’s totally over paid! what a fool!”. He looked to be an off duty tradie and had been lurking at the end of the driveway with his wife – guess he had more cash to splash on the day…

As Papa Amos said, “There’s ALWAYS another house…”.

Auctions are such a strange situation, you have to be happy to take it on the day (no cooling off) and get that deposit cheque down if you “win”; or if you don’t get it and “lose” laugh it off and keep looking.  Quite an exhilarating but draining experience, but we learned a lot and were happy to move on as we were still fresh and full of excitement.

AUCTION #2
Mr Tradie strikes again…He REALLY wanted those houses.

Papa Amos was correct. The very next week a similar property was listed in the next street, but with a slightly better layout and loads of potential.

The next candidate – not bad and some good trees there…

We weren’t going to let this one get past us, and I attended almost every inspection (to suss out the level of interest and competition) over what was an extended campaign due to the Easter break.  What would normally have been a 4 week run up to auction was in fact 6, which allowed a really great rapport to develop with the selling agent.

After missing out on the first one, I felt for sure this was our chance and we had the market covered.  We put in an offer mid-way in the suggested price range of $800k – $880k at $840k. This was rejected by the elderly brother and sister who were selling their deceased mother’s house, so again to auction we went.

ADVICE - KNOWLEDGE IS POWER: Engage with the real estate agents, be friendly but don't give everything away about your pricing position whilst you nicely pump them for information.  Once rapport is established I found they will tell you quite a lot, it amazed me how many people wouldn't really ask anything during the inspections who later turned up and bid at auctions.  For me I need to know everything before I decide to lay out that sort of cash.

Auction day finally arrived and we were ready, less naive and with an even better feel for the market (or so we thought).

Even in the 8 weeks we’d been seriously looking, Mount Colah had seriously hotted up, lots of pretty average three bedroom homes were now going for well over $1 million…Buyers were finally catching on to this previously overlooked area.

Again we bid early and strongly – we were the second bidder and I got three quick bids in before our $860k limit was surpassed. This was a much more aggressive auction, and included a professional buyers’ agent who kept asking for instructions on his mobile (perhaps also a ploy to intimidate and slow down the bidding). As we were tapped out relatively early we could sit back and enjoy the theatre unfolding.

There was also a desperate man who rolled in late, two toddlers in tow (one who’d wet his pants), a heavily pregnant wife clucking under her breath about “asbestos”, registering with three minutes to spare who didn’t even get a single bid in…

I gasped when the bidding went past $900k and then openly laughed when a young couple we’d never even seen before started bidding at $905K – that was 100K above the opening bid!

At this point something interesting happened, Mr Tradie and ‘winner’ from auction #1 started bidding! I had noticed him at the first open for inspection thinking ‘he looks familiar…’ and figured he was just there at auction as an interested observer and recent purchaser.  What the hell was going on?

The bids started going up in tedious $1k and $2k increments and when the hammer finally came down it was again a “win” to Mr Tradie who had just laid down a cool $925K on a second house in the same suburb in less than two months.

Papa Amos joked, “That guy must have won lotto…”; whatever it was it felt like something weird was going on. He REALLY wanted those houses.

The selling agent with whom we’d struck up a kind of friendship rang to commiserate and said she and the sister-owner had really hoped that Wookie and I would have prevailed on the day but alas it was not to be.

I shared that the “winner” had also bought a house at auction, again bidding late, in the next street about 6 weeks before and we were curious as to what was going on and I mentioned the ‘lotto’ thing.

She confirmed, “Yes he’s literally a lotto winner, like multi-millions, mega, lotto winner…”.

Wow.  You cannot compete with that.

So I guess his strategy (if he is indeed a tradie) is to buy up a bunch of tear down fibros in his neighbourhood, rent them for a while and then chuck a McMansion or duplex on them in due course.

Mr Tradie Lotto is an extreme example for sure and not the type of investor who you’ll be up against at every Sydney auction, but that’s what those situations do boil down to, who has the most cash on the day (hint: it’s usually not the first home buyers).

My tips for acing auction day

As one of my colleagues said when I asked if he had any tips for buying at auction, “don’t”! But if there’s no choice for the area you wish to buy in and the market is hot here’s some pointers:

  • Visit a few auctions if you can in the area to see the process, format and antics and get a feel for different auctioneers.
  • Do what you need to feel comfortable – for me that meant being early and then hanging around in the area, luckily there was a nice garden centre and cafe where we could chill out and grab a coffee and go over our tactics.
  • It can go painfully slowly then really, really fast and be hard to hear. Have at least one buddy next to you with pen and paper who can write down the figures if it’s moving quickly and point at them for you to shout out without too much mental gymnastics – you can also exchange glances rather than speak (in case of eavesdroppers!)
  • Ignore the real estate agents weaving in and out of the crowd trying to increase your bid – you don’t want to be manipulated into bidding against yourself.
  • (Obviously) stick to your limit – remember there’s no cooling off period!
  • There’s lots of good resources online and videos – do some study, however even with all the tactics (“turn up in a suit”, etc) ultimately you’re either there to buy or not, so bid away and forget the mind games.
  • Finally don’t be a d#ck! Don’t get smart with the auctioneer – or if you want a special condition attached, for example only paying 5% (rather than the customary 10%) organise it and have it OK’d well in advance – don’t hold everyone up by asking for it 3 minutes before the auction starts like one guy we saw.

‘Waaa we keep missing out at auctions…’

ADVICE – PIVOT – be prepared to be flexible and compromise and never say never about an area

A 2016 Four Corners story on housing affordability was by turns depressing and also bemusing as they followed a 25 year old who wanted to buy a three bedroom home in Melbourne within her budget.

The more we learned the more unrealistic I thought this young lady was. I was practically yelling at the TV – how about getting into a stepping stone property? Like a unit? Nope she wanted the three bedroom family home at 25…I note her boyfriend did not want to participate in the program, or her auction adventures.  She was a young missy in a big hurry (ruuuuuuuun mate while you can!).

Anyways, you don’t start out in in what you want to end up in property-wise, and she’s been wasting a year looking and missing out at 20 auctions (twenty!) while prices climbed higher. Two misses was enough for me and Wookie – we didn’t want to play in that space any more and waste more time and emotional energy.  So we looked at where else we could buy.

For me I have to be based in Sydney for my work, as does Wookie for better paid opportunities, so whilst it’d be great to up stumps and move to the country or up the coast, it’s not really an option for us.  Also my entire (large) immediate family are all based in Sydney for now, so it’s important to me to be near to them as I actually like my family and yeah, I’d also like to live in my home town.

As they say in the start up world sometimes you need to “pivot” your strategy, so that’s exactly what we did when we turned our sights on Auburn.  We ended up securing a house really quickly and with none of the added high stakes stress of an auction.

*the upper northshore of Sydney must always be preceded with the descriptor of “leafy’.  Always, leafy!