17 Feb Smart investors target the tenants they want
In today’s show Cate Bakos talks explains that it is the smart investors who target the tenants they want and make sure the property fits their needs. Find out how best to do that.
Kevin: One of the key things when you buy an investment property is to think of the end game. I’m not talking here about what the property is going to be like, but who is it going to appeal to? You must have, in your mind, the ideal tenant. You get a great tenant and you’ve got yourself a very good investment property.
Cate Bakos is the person who first talked to me about this. Cate Bakos is a buyer’s agent from Melbourne. Her website, of course, is CateBakos.com.au. She joins me.
Good day, Cate.
Cate: Hi, Kevin. How are you going?
Kevin: Good. I really appreciated you telling me about this because it made so much sense to have that end tenant in mind when I’m selecting an investment property. Tell me a little bit more about that.
Cate: Basically, lots of different areas will cater to lots of different tenants. It doesn’t need to be as dramatic as regional versus metro. There are certain locations within the metro city that have completely different target tenants. It might mean that we’re near a hospital and we’re catering to contracts, medicos, doctors, nurses. It might mean that we’re in a regional town where families really value a particular attribute to the property.
But if you don’t understand what the target tenant wants, then we often get it wrong and it means that you might have a higher propensity to tenant turnover or you might not be able to easily get a tenant every time the property is up for rent.
Kevin: I was talking to Cherie Barber who is the renovation queen and she was telling me that when she does a renovation, she thinks about the end user in mind. I know you’re talking about an investment property, but it’s the same principle really, isn’t it?
Cate: It is.
Kevin: You wouldn’t put into a house something that’s not going to appeal to your target market.
Cate: I recently had an example where I put an investment property forward to an investor client of mine and his query was that it didn’t have a large enough dining area. It did have room for a small table in the kitchen, but it didn’t have a separate dining area.
This property was in a really hot little location where cafés were abundant and the tenant could just walk out the door and pick from a range of restaurants and cafés. I had to point that out to him that young people who are living in the environment like that are paying the premium to live amongst all of that, and they’re not necessarily chefs.
In fact, another client that I placed in the same suburb, interestingly, went back to do their final inspection a year later and the new oven still had the stickers inside it.
Kevin: That’s a pretty telling point, isn’t it? I guess “Walk a mile in my shoes” is the lesson if you’re going to be an investor. Take off your own preference hat and look at it through the eyes of the person who you’re going to be wanting in there as a tenant, Cate?
Cate: That’s so true. It’s absolutely true. I go to regional areas with clients, and understanding what the families in those regional areas want is vital because if you get it wrong, you’re facing with the prospect of having a property that you’ve bought for yield not actually renting quickly and not delivering the yield that you intended it to.
Just by understanding those target tenants… For example, in Ballarat, an area that I’m quite fond of, a large powered shed and a house with ducted heating can make the difference of $50 extra per week if you have both of those items.
Understanding what little changes can be made or what aspects that you should be looking for when you’re selecting the property are important. That can really make the difference between having it instantly tenanted and getting a return as strong as $300 a week versus $250 if you haven’t got those items.
Kevin: Cate Bakos, thanks so much again for your time.
Cate: Thanks a lot, Kevin.