Today is my second time bidding for an auction property. And I have been outbid again. I have set my max bid to earn at least a Rate of Return on Equity of at least 20%. There were only one other bidder and obviously he valued the property more than my valuation. We kept bidding until the end, the property sold for 21.3% higher than the reserve price.

I wanted the property because of investment. I look at yields and rate of returns. The other bidder wanted to buy the property for his own use. I suppose his reason to buy would be for savings. Instead of paying rental to the landlord, he will pay mortgage installments and build his own equity. The property is an office unit.

I set a 20% rate of return because I could buy REITs with 20% rate of return. Therefore, I didn’t bid higher. If I had bid higher, then the purchase price will increase and the rate of return will reduce. This I learned from a book. “The price you pay determines the yield.”