Today in Russia every month, on average, about 1,000 legal entities are declared bankrupt. Any property (transport, real estate, furniture, appliances, and much more) is put up for auction for bankruptcy. Such auctions are official and are held in a regulated manner. By buying a property with a markdown, you can start doing business. The benefit gained from the price difference brings a good profit. How this can be done will be discussed further in the article.
What is a bankruptcy business and how can you make money on it?
The basis for starting a business in bankruptcy is participation in auctions, where the property of bankrupt legal entities is put up. At such an auction, you can purchase equipment for business activities at a cost that will be significantly lower than the market price. Such activities are regulated by Federal Law No. 127-FZ “On Insolvency (Bankruptcy)”.
In this way, you can start your own entrepreneurial activity with minimum start-up capital. There are several options for how you can earn money by participating in a bankruptcy auction:
- Buy real estate that you can rent out.
- Buy sand, coal or other resources that can be resold at a bargain price.
- Become a specialist in participation in such auctions and earn on the percentage of completed transactions.
- Buying equipment for an enterprise is cheaper than the market value and saves on initial investments.
- Buy old vehicles that can be sold for parts. It can also be repaired and used for your own purposes.
- Buy a property at a price below the market and save on the absence of rental costs.
- Buy furniture that can be used for personal purposes in everyday life.
- You can open special courses, lectures, trainings or seminars, which will teach the art and intricacies of participating in such auctions.
- Become an investor for a bankrupt company in order to receive interest on their profits as a result.
According to Article 25 of the Civil Code of 2015, the property of an organization that has been granted bankruptcy status can be sold at auction.
What is the format of the auction?
Such auctions are held electronically. On July 23, 2015, the Ministry of Economic Development and Trade of the Russian Federation approved Order No. 495, which describes the procedure for holding a bankruptcy auction in stages. Also, this type of trading is regulated by Law No. 127-FZ.
The bankruptcy auction procedure is as follows:
- The first stage is the holding of the primary auction.
- If the primary auction did not take place, it is held again, with a reduced price by 10%.
- In the event that the repeated auction did not take place, the bankrupt’s property is put up for public auction at a reduced price.
For each lot there is a certain step by which the price decreases or increases. It is usually set at a certain percentage of the offer price.
In the first two stages of trading, transactions are very rare. The most effective are public debts. You can find and buy a very profitable offer on them.
Where are bankruptcy auctions generally held?
There are several resources that are the main organizers of such auctions:
- bankrot pro.
Where can I choose an object for purchase?
All possible lots (property) for purchase are placed on special trading platforms. Their complete list can be found on the Federal Resource (Unified Federal Register of Bankruptcy Information).
How to choose the right lot at a business bankruptcy auction?
You can not immediately choose the best offer for the price. Behind the cost, there may be a bunch of pitfalls that will float to the surface after the deal is closed. Before buying a lot, you must definitely study its additional photos, check all the documents that are on it. You need to make sure that the object being bought will be commercially attractive, and its acquisition will be legal.
One of the important stages in the analysis of a lot is the assessment of its liquidity. Here it is necessary to compare the condition of the proposed property and its prices with similar offers on the market. It is also worth studying the availability of demand for this lot. Thus, the entrepreneur will be able to assess the liquidity of the supply in the market.
When choosing and evaluating a lot, it is better for aspiring entrepreneurs in this field of activity to seek help from specialists in this field of activity. Also, an entrepreneur can take special training courses to participate in such auctions. If a businessman decides to sort out such an issue himself, it is best for him to start with the purchase of more budgetary and less profitable lots.
It is not easy to analyze a lot and evaluate it. There are many hidden nuances when buying a lot:
- poor work of arbitration managers;
- lack of a lot and any other fraudulent transactions;
- hidden encumbrances behind the lot and others.
But, before finally making a purchase of a lot of interest, an entrepreneur can study detailed information about it using both paid and free information resources.
Options for making money at the bankruptcy auction
The first option is the opportunity to earn on such auctions without investments and loans.
Bankruptcy auctions make money selling real estate. Many agencies find bankrupt lots that contain real estate. Further, they put it up as an offer for their customers (for this you do not need to redeem it). If there is a demand for such an object and there is a client, the next step is to resolve the issue of redemption.
Too often, agencies talk about auctioning property and simply negotiate their commission like an agent. If the buyer is not satisfied with this option, then there is an investor on the proposed lot who will help to buy it. After there are clients for it, the agent and the investor will receive their interest from the transaction. In this case, the markup on the starting price will be about 20-30% of the total amount.
The second option: buying out lots with your own money or with borrowed funds
The most effective option is to buy a property with your own money. In this case, all possible benefits from this lot will belong only to the buyer.
You can also purchase the lot you are interested in without investing money. For example, you can get a credit card with an interest-free repayment period. If an entrepreneur has bought a liquid lot, then the chances of its quick sale are very high, and hence the return of the required amount to the bank. Interest earned remains with the buyer.
Third option: act as a manager or intermediary at the auction
You can not participate in bankruptcy auctions on your own, but at the same time earn money on them. The main task of the intermediary is to find an interesting offer on the trading floor and offer it to the person who is interested.
Can I bid remotely?
You can participate in the auction and be in another region. This option is possible in the case when the object of sale is real estate. Evaluation and analysis of such a lot can be carried out remotely.
To do this, you can hire a person for a small fee, who will meet with representatives of the arbitration commission and take real photos of the lot. Also, pictures of the property itself can be viewed in online maps. A report from the appraiser and monitoring of real estate prices in the region will help determine whether the price of the lot is fair.
How to Start Bankruptcy Bidding: Bidding Requirements
In order to be able to participate in the bankruptcy auction, you must first issue an electronic digital signature. Its presence is required without fail in accordance with the Law No. 63-FZ “On Electronic Signature”.
Such a signature can be issued in a certification center. The entire list of accredited organizations of this type is on the official website of the Ministry of Communications of Russia (Ministry of Communications and Communications of Russia).
There is no single fixed price for such a service. Each center sets at its own discretion the price of an electronic signature, the period of its execution, as well as other issues related to this procedure. Therefore, before submitting documents for signing, it is worth examining several centers in the region and checking whether they have accreditation from the Ministry of Communications.
In order to issue an electronic digital signature, an individual must be present in person, as well as submit a package of the following documents:
- the passport;
The legal entity must submit:
- extract from the Unified State Register of Legal Entities;
- founding documents of the organization.
All data of the electronic signature (its keys and certificate) are recorded on a certified electronic card or on a carrier. The center that issued the signature will issue instructions for installing certificates and configuring the appropriate software.
How to register on an accredited platform?
In order to register on an accredited bankruptcy auction trading platform, you need to go to its official website. They are usually provided with a simple interface with which you can logically understand all the stages of electronic registration. For registration, you must have the following documents:
- a copy of all pages of the passport;
- a copy of the TIN;
- copy of SNILS.
All these documents must be marked with an electronic digital signature and uploaded to the system. If you have any questions about this procedure, step-by-step instructions for this are available on the website of the bankruptcy auction trading platform.
How is the submission of documents?
It is necessary to present copies of all pages of the passport, an application for participation in the auction, a notarized copy of the TIN, consent to participation from the spouse, and a document fixing the payment of the deposit for participation in such auctions.
How to pay the deposit?
To be eligible to participate in the bankruptcy auction, you must pay a deposit. If the entrepreneur wins, the amount of the deposit paid will be included in the total cost of the lot. If the winning bidder refused to pay for the transaction, the amount of the deposit will not be returned to him. If participation in the auction was unsuccessful, then the deposit is returned in full.
How to learn how to participate in bankruptcy auctions?
There are many online courses to learn how to participate in a bankruptcy auction. Before choosing a particular course, you must independently study the “Bankruptcy Law”.
People who have been trained in such courses very often write on the Internet that all the necessary information can be found independently on the Internet in the public domain. But organizing and searching for such information can take a long time. Therefore, it is worth deciding what is more profitable: to pay for courses and start developing in a bankruptcy business earlier, or to spend this time on free education.
How is the winner of the bankruptcy auction determined?
Previously, the winner of the auction was determined by the right of the queue for making applications. It was possible to win only with the help of automatic systems. According to Law No. 127-FZ dated June 22, 2015, now the winner of the auction is the one who paid more for the exposed lot.
From the moment the winner is announced, he is presented with a contract for the sale of the lot. He has five days after such an offer to pay the amount specified in the contract. If he refuses to do so, the contract is offered to the one who was next on the list at the price offered. The deposit will not be returned to the first winner in this case.
After the winner has been announced, the members of the commission check all his documents. If any violations are noticed behind him, he is immediately deprived of the opportunity to redeem the lot.
Bidding is not held if only one application was submitted for the exposed lot. In this case, the interested person may be offered to immediately draw up an agreement on the entry into ownership or the auction is recognized as not having taken place.
After the winner signs the contract, he must pay the amount indicated in it (excluding the amount of the deposit paid). At the time of the final payment, the winner becomes the full owner of the purchased lot. At the same time, he receives the rights of full disposal of the object of sale.
The trading period is strictly regulated. There are strictly defined deadlines for each stage of the auction.
If any securities become the object of bankruptcy trading, the application is submitted several times within 2 months. This period begins from the moment when the necessary decision was made in court.
If the object of the auction is real estate, then it is necessary to prepare in advance documents fixing the ownership of the land, a resolution and an act of acceptance and transfer, a document on the arrest of real estate, its characteristics. For auction objects that are just being built, it is necessary to provide a building permit issued by state authorities and a copy of the act on land allocation for development.
Information on the inventory of the object being sold is entered into the Unified Federal Register, where information on bankruptcies is kept.
If the debt exceeds the value of the lot by more than 2%, then creditors or other officials have the right to demand that the auction manager evaluate it. It can be arranged within 2 months of the request for an assessment. Services to the person who will conduct the assessment are paid from the amount that will be paid for the lot itself.
Within two months, the auction organizers are given a list of properties that can be put up for auction.
Disadvantages of Buying Property at a Bankruptcy Auction
When buying property at a bankruptcy auction, very often there are difficulties associated with checking the real state of the lot. If the question concerns a property, then checking the debts behind it can be a lot of difficulty.
It is also sometimes difficult to verify the consent of the spouse to the sale of the property, or minor children may be registered in it.
What is Investtorgi?
The investor is an organization that provides support for the process of buying property at bankruptcy auctions. Using the services of such a company, you can easily find the best deals. Employees of this organization provide customer support from the moment of finding a profitable lot to the stage of its full payment.
Since the procedure for finding and buying property at such auctions is not easy and has many nuances, Investtorgi employees will take on all the responsibilities for finding an offer and processing the relevant documents.
Is this business profitable?
Before doing business in bankruptcy auctions, you need to decide on a niche in which there is a desire to develop, as well as a way to make money on such auctions. Next, you need to consult a lawyer, how it will be legal. The payback of entrepreneurial activity, in the end, will depend on many factors, the most important of which will be the way of earning and the choice of trading platforms.