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.”

I came to know of this property sometime back in January. This property came up for auction the week before Chinese New Year. The reserve price was RM202,500. Nobody bought. This property came up in auction again in the first week of March. The reserve price was RM182,300. Nobody bought. This property came up for auction again today. This time the reserve price was RM164,100. I liked the price decided to attend this auction event to put in my bid. This is the first time I buying a property. I was excited.

I woke up early this morning. Double checked my bank draft for the deposit. I made up my mind that my ceiling price will be RM175,000. I didn’t expect anybody to bid above the previous reserve price which was RM182,300.

When the auction started and the lot that I was bidding came up, there were 6 bidders! I was so shocked. I was outbid within seconds. The winning bid was RM209,000. This price is higher than the reserve price first set before Chinese New Year.

Has the real estate industry bottomed? Are potential buyers coming back into buying appetite after staying on the sidelines for months?

I have been following this property for the past 3 months. Now that this property is no longer up for grabs, I am kind of lost. I have to find a new target property. I know good bargains don’t come knocking everyday but I am hoping this economic slowdown will offer more properties below market value.