{"id":6673,"date":"2015-12-18T01:00:46","date_gmt":"2015-12-17T14:00:46","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=6673"},"modified":"2015-12-18T01:00:46","modified_gmt":"2015-12-17T14:00:46","slug":"4-essentials-for-investment-selection","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/4-essentials-for-investment-selection\/","title":{"rendered":"4 essentials for investment selection &#8211; Cate Bakos"},"content":{"rendered":"<p>&nbsp;<br \/>\nIn today&#8217;s show<strong> Cate Bakos,<\/strong>\u00a0a buyer\u2019s agent from Melbourne,\u00a0gives us her 4 essentials for investment selection and why we ask the wrong questions.<br \/>\n&nbsp;<\/p>\n<h4>Transcript:<\/h4>\n<p><b>Kevin<\/b>:\u00a0 My guest this time is Cate Bakos. Cate is a buyer\u2019s agent from Melbourne. Cate left a career in chemistry to go into the property industry back in 2003 and in 2013, was a finalist in the Telstra Business Woman of the Year Award and a finalist in the REIV Buyer\u2019s Agent of the Year Award.<br \/>\nHi, Cate. Always good talking to you. How are you?<br \/>\n<b>Cate<\/b>:\u00a0 I\u2019m well. Thanks, Kevin. Thanks for that lovely intro.<br \/>\n<b>Kevin<\/b>:\u00a0 And you were a chemist, were you?<br \/>\n<b>Cate<\/b>:\u00a0 I was \u2013 an industrial chemist.<br \/>\n<b>Kevin<\/b>:\u00a0 Okay, well, what a change to property. It just seems like a natural fit. I love the way you think, Cate, and I particularly want to talk to you about a topic I heard you talk about, which was the essential elements for successful investment selection. We\u2019re asked all the time \u2013 aren\u2019t we \u2013 \u201cWhat should I buy, what can I buy if I had $500,000, and what are the next hot spots?\u201d Are they the key questions? Are they the essentials, Cate?<br \/>\n<b>Cate<\/b>:\u00a0 They\u2019re the common questions, but they\u2019re not the <i>right<\/i> questions.<br \/>\n<b>Kevin<\/b>:\u00a0 Okay, well tell us. What are the elements you look for?<br \/>\n<b>Cate<\/b>:\u00a0 Right. Well, I think, for me, there are four essential elements, and if you can get all four, you\u2019re on a really successful journey. It is simple, but it\u2019s not easy getting all four, but once you understand them and you search for them before you put pen to paper and sign a contract, you better insulate yourself for a good journey.<br \/>\nThe first one is the obvious one. It\u2019s the element that everyone wants to achieve. It\u2019s capital growth. We always aim for outperformance capital growth, but capital growth isn\u2019t the only facet that we should focus on. The most important one that we really should pay attention to is actually the rental yield equating to the yield that the investor needs.<br \/>\n<b>Kevin<\/b>:\u00a0 Just on that point, is there an ideal number?<br \/>\n<b>Cate<\/b>:\u00a0 Yes, the ideal number is the amount of surplus income that that investor is happy to put towards the property in terms of outgoing out-of-pocket expenses. We can take into account tax deductibility and other benefits, but I try to run the raw numbers, and I look at purely what the outgoings are and what the anticipated incoming rent is. If that differential is a higher figure than that investor can comfortably cover, then they\u2019re biting off more than they can chew, and this is probably the facet out of all four elements that can bring a good investment strategy undone.<br \/>\n<b>Kevin<\/b>:\u00a0 Okay, so that\u2019s two. What\u2019s number three?<br \/>\n<b>Cate<\/b>:\u00a0 Number three is going for a property that is most likely going to have ongoing tight vacancy rates. If you\u2019re going to an area that has plenty of vacant properties sliding around it, then you are destined to have a bit of hardship when it comes time to finding a tenant. Obviously, having weeks of no rent ticking by unravels the profit that you can make in that property.<br \/>\n<b>Kevin<\/b>:\u00a0 Okay, and the fourth one?<br \/>\n<b>Cate<\/b>:\u00a0 The last one is quality of tenant. You have to look at the target tenant you\u2019re likely to attract in the property that you\u2019re choosing, understand exactly what those kinds of tenants are looking for and what they value, and make sure that the type of tenant you\u2019re likely to get is one who fits comfortably with your profile.<br \/>\nIf you\u2019re going for a more eclectic blend of tenants or tenants who are likely to have financial hardship or students, you need to be prepared to deal with all that goes with that type of tenant.<br \/>\n<b>Kevin<\/b>:\u00a0 The four are capital growth, rental yield, a tight vacancy rate, and tenant quality. Now, you said at the outset, \u201cIf you can get four, that\u2019s fantastic; if you can get three, that\u2019s great.\u201d Would two be sufficient to get you across the line, or is that a bit suspect?<br \/>\n<b>Cate<\/b>:\u00a0 It will make it a really bumpy journey. Particularly, if that rental yield element is not fitting well, that will mean that the property will cost the investor more than they\u2019re prepared to spend on it, and ultimately, they\u2019ll want to fire sale it and they\u2019ll feel that they had a property that didn\u2019t perform well or they\u2019ll feel really negative about the whole experience.<br \/>\n<b>Kevin<\/b>:\u00a0 Tough question now without notice, Cate, but if any of those were not negotiable, which one would it be?<br \/>\n<b>Cate<\/b>:\u00a0 The second one. I always say to everyone, calculate what sort of yield you need first and then with everything else that remains on the table, pick the strongest capital growth performer. But if you do it the other way around, you might find that you\u2019re taking on a property that you can\u2019t afford in the long term to hold.<br \/>\n<b>Kevin<\/b>:\u00a0 The second one you said was rental yield?<br \/>\n<b>Cate<\/b>:\u00a0 That\u2019s right.<br \/>\n<b>Kevin<\/b>:\u00a0 Yes, so rental yield is not negotiable. Would capital growth, therefore, be the second most important?<br \/>\n<b>Cate<\/b>:\u00a0 Yes, I think capital growth is because if you can weather the storm with vacancy rates or you can handle getting bad tenants or challenging tenants, then your property will still perform.<br \/>\n<b>Kevin<\/b>:\u00a0 Makes sense. Those last two \u2013 that is, tight vacancy rate and tenant quality \u2013 probably go a bit hand-in-hand really, don\u2019t they?<br \/>\n<b>Cate<\/b>:\u00a0 Not necessarily. You can go into some areas that have very, very tight vacancy rates and the quality of tenant is not one that would suit every investor out there.<br \/>\n<b>Kevin<\/b>:\u00a0 Very good point. Always makes sense, Cate. Thank you so much for your time. Cate Bakos, a buyer\u2019s agent, Cate Bakos Property in Melbourne.<br \/>\nThanks for your time, Cate.<br \/>\n<b>Cate<\/b>:\u00a0 Lovely to chat, Kevin.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>&nbsp; In today&#8217;s show Cate Bakos,\u00a0a buyer\u2019s agent from Melbourne,\u00a0gives us her 4 essentials for investment selection and why we ask the wrong questions. &nbsp; Transcript: Kevin:\u00a0 My guest this time is Cate Bakos. Cate is a buyer\u2019s agent from Melbourne. Cate left a career&#8230;<\/p>\n","protected":false},"author":176692471,"featured_media":6444,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[32,10,11,13,17,25],"tags":[101],"class_list":["post-6673","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-buying-a-property-topic","category-kevin-turner-sponsored-channels","category-kevin-update","category-latest-story","category-property-investment","category-sponsored-channels","tag-podcast"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>4 essentials for investment selection - Cate Bakos - Realty Talk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/channels.realty.com.au\/realtytalk\/4-essentials-for-investment-selection\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"4 essentials for investment selection - Cate Bakos - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"&nbsp; In today&#8217;s show Cate Bakos,\u00a0a buyer\u2019s agent from Melbourne,\u00a0gives us her 4 essentials for investment selection and why we ask the wrong questions. &nbsp; Transcript: Kevin:\u00a0 My guest this time is Cate Bakos. 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