Ever dreamt of moving into your local?

In the second part of our series on bargain buys, Richard Phillips explains which ex-council properties make good investments, and how your pub can become your home

Local authorities have been selling off their street housing for decades, not as part of any trend towards privatisation but simply because they often cost more to maintain than modern council properties on estates. They can represent good value for private buyers.

Take Lambeth Council, for example. In February it held three auctions at which it sold around a hundred properties, raising pounds 6.6m. Some were Georgian terraced houses in relatively smart areas of the borough but all were in poor repair, often dilapidated, boarded-up, or occupied by squatters. The money it would have cost Lambeth to refurbish them would, it considered, be better spent on other housing stock.

For the private buyer, they offered the opportunity to buy a decent sized London town house which could otherwise have cost pounds 150,000 or more for as little as pounds 90,000.

But is a buy of this kind a real bargain? James Coker, a partner of Edwin Evans, one of three auctioneers commissioned by Lambeth, doubts if there are any true bargains to be had in the auction market these days. "That's why sellers appoint auctioneers - they know it is the most efficient way to maximise their revenue," he says.

Buying at auction has become tremendously competitive over the last few years, driving up prices to the point where the benefit to private purchasers is marginal. What auction does allow is the purchase of an unmodernised property and (of course) at a cheaper cost than the same property in good condition. However, the margin between the two is nearly always so fine as to be virtually the cost of renovation. The only way to turn a buy like this into a bargain is if you do the renovation work yourself, rather than hire a builder. Careful budgeting will help and this is a subject we will look at more closely next week.

So if money isn't the issue, what is the attraction of buying at auction? Well it allows you to decorate or renovate entirely according to your own taste. You have a blank canvas to impose your ideas on.

To find out about council properties coming up for sale, contact the local authority in the area where you are looking. Also ask local auction houses to put you on their mailing lists.

Next on the list of likely bargains is ex-council flats. Bought by tenants under the right-to-buy scheme in the 1980s, these are some of the cheapest properties it is possible to purchase. There are many attractions, not least price. A decent flat in a low-rise 1920s or 1930s brick-built block in a good neighbourhood will be desirable and will usually sell for significantly less than a similar street flat.

However, there are other areas of the ex-council market where values have nose-dived since tenants first bought in the 1980s, principally flats in high rise tower blocks or in blocks from the late 1950s and 1960s, many of which were built to very poor specifications.

"Buying a high rise flat can be fraught with danger," warns Chris Cullen, regional managing director of Halifax Property Services. He advises any potential purchaser to obtain first class legal advice about the pros and cons of any such move, and likewise to carry out a full survey. A good surveyor should be able to assess some of the problems that could arise in the common parts of the building for which the owner may be liable. It is these open-ended liabilities, which it slowly became clear some owners in these developments would face, that destroyed the market. Many found themselves sitting on an almost unsellable property rather than a hoped-for nest egg.

The up side is that these properties are, of course, incredibly cheap - a two or three-bedroom flat can cost a few thousand pounds. But the resale price could have fallen even further when you come to sell, while it is almost impossible to obtain mortgage finance in most cases. If you do choose to go down this route, be warned that the bargain you buy may prove an extremely unsound investment.

Another area where properties with development potential are flooding onto the market is former public houses. Following legislative changes, some of the big brewers have been forced to sell off large chunks of their tied estates.

Many of the pubs were barely profitable. Some have been snapped up by leisure companies which will continue to operate them but others are still lying empty and offer remarkable conversion potential.

Contact local commercial agents, which will usually have a few such properties on their books, to see what may be available. With the current improvement in the property market, many of these buildings are being bought by developers and this is driving up prices but there are probably a few bargains still to be had. Again, good legal advice is a prerequisite, especially over planning permission to convert to residential use. You should also invest in an in-depth survey.

Mr Cullen recommends bargain hunters also look at the semi-detached and detached bungalows built by councils in the 1950s, often overlooked by buyers. Many, he says, are located in desirable neighbourhoods and are relatively cheap. Some will need substantial work on the external walls, but that should be seen as an investment that will pay off in the longer term.

Other potential bargains include office spaces, country houses that have fallen into disuse, and old industrial developments. The fashion for New York-style warehouse conversions has seen a multitude of these properties developed in London's East End and in areas just off the City, but the fashion has yet to catch on to the same extent in metropolitan areas outside the capital.

Next week: renovations on a budget.