Dive into a transformative conversation with renowned buyer's agent Cate Bakos on this week's episode. Whether you're navigating your first purchase or aiming to expand your property portfolio, Cate's insights are invaluable for every couple looking to strengthen their financial future together. Don't miss out on this essential listen for anyone serious about mastering the art of property investment!
By the end of this episode, you'll have a clearer understanding of how to navigate the property market with confidence and strategic insight, ensuring your investments not only grow but thrive.
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Dive into a transformative conversation with renowned buyer's agent Cate Bakos on this week's episode. Whether you're navigating your first purchase or aiming to expand your property portfolio, Cate's insights are invaluable for every couple looking to strengthen their financial future together. Don't miss out on this essential listen for anyone serious about mastering the art of property investment!
By the end of this episode, you'll have a clearer understanding of how to navigate the property market with confidence and strategic insight, ensuring your investments not only grow but thrive.
Resources and Links
Join the Private Podcast Community
Click here to access free courses and trainings, build new habits, and connect with us and others on the journey to financial self reliance.
Other links 👇
Money mentorship:
Click here to start putting what you've been learning into practice.
Corporate program:
Click here to find out more about our workplace program
Follow us on Instagram:
Click here to see behind the scenes of our business and learn more about personal finance in bite-sized chunks.
Can I listen to this as Terry? How did you know that the culture and dynamics of the real estate office responsible for a property sale could be one of the most important factors in how a property deal plays out for you? I definitely did not, but by the end of this conversation, I had a whole new appreciation for how many variables are fit the outcome when investing in property. So you have the back of our debt smart series. We've had plenty of really good conversations with our members around this whole asset class. And during one of these conversations, Helen and chase, who are our exemplars from episode 59, they shared with me their secret weapon when it comes to property investing. Okay. Back off is a veteran buyer's agent and has a long trail of successful probably purchases for our customers stretching back more than 20 years. And she's also a very successful property investor herself. Though she'd much rather talk about the success of our clients. Let's just say that she's firmly entrenched in the 1%. When it comes to this arena. Anyways, Helen set up a meeting. And by the end of that call, I knew that we had to add a voice to the topic. So in this conversation, Kate very generously takes us into some of the most intense moments of our career. And we decode the lessons that she learned to reveal the time tested principles she uses and that work in any economic climate. So expect to learn her most costly lesson and what it taught her about perceived versus actual value in property. The power of being ready to pounce, but also willing to walk away. How do you something called the land to asset ratio to determine the current value versus the growth potential of a property. And case projections for the Aussie property market over the next 12 to 24 months. Now Kate share some epic wisdom in this episode. But there's even more here for you because in walking us through her journey, she also shows us what building a meaningful career and life looks like. Her success hasn't come easily. And as a woman and a mother, she faced some significant challenges along the way, but her example shows how being willing to. Follow your curiosity is being willing to back yourself, being willing to take opportunities and just move in the direction of your dreams really does make all the difference. And it also shows how working together with your partner, having their support and backing really does change the equation to. She's a fantastic model for deliberately investing in yourself to build the talent stack. You need to achieve those professional ambitions. Because she didn't start out in real estate. She followed that curiosity into the industry. And then she just took these opportunities one by one to build that deep domain expertise and the specialized skills that our clients now benefit from. So even if property investing isn't on your radar right now, you'll still find this episode to be inspiring and instructive. It really does show us what the pursuit and attainment of meaningful work and mastery looks like. Hope you enjoy.
Terry:Kate Bakos,
Cate:welcome to the show. Thank you so much for your lovely intro as well. No worries
Terry:at all. And thank you for working with me. We were due to have this chat and you graciously rescheduled on the day. Yeah,
Cate:you went and got sick.
Terry:I don't know. It doesn't happen often, but no, it's been great. I'm feeling bloody good today. So I'm really excited to have this chat with you. I would love to start with a couple of real life experiences. Something that really stood out to me when we first had a conversation about this conversation was just how much you love the process of investing for yourself. And how you actually move through. I just love intrinsically what this is and I want to do it for more people. I just like doing it. And there's two quotes that I really want to dig into with you I think that potentially could help us mine some of your past to get some wisdom out of this. The first one is, only a fool learns from his own mistakes. And the wise man learns from the stakes of others. Now, as a buyer's agent, you're essentially, I guess, the product of a lot of mistakes, a lot of lessons, a lot of learning and reflection that comes from just time in the market. So, What is the most valuable mistake you ever made? The one that you dine out on now that gives you the best advice that you give to people. Can you talk us through that?
Cate:Yes. Gosh, there are quite a few because I got started in this long before I was a BA and long before any kind of formal training as well. I think picking a property that the banks don't like, that can land you in a lot of trouble, especially if you're throwing around unconditional offers. And the challenge there is a lot of buyers think that because they're fully credit pre approved, They're good to go that they can buy anything. The things that banks don't like are often the things that we get excited about. So as a buyer's agent, I don't want to buy, you know, an old church if the zoning's wrong or a converted warehouse or a warehouse that needs converting or a block of units that could be easily subdivided and flipped because they're often the properties that the banks say that's outside of our, criteria and our policy and you're on your own. Now, if you've put down a 10 percent deposit and you're unconditional. You might lose your deposit if you can't settle and you served a rescissionitis, but if there's further damages, so if those vendors have gone and bought something on the back of you being an unconditional buyer, they will then have to settle and they won't have the funds to settle. So they'll have costs, legal fees, removalists that are put on hold, all the rest of it. The nasties that we don't think about when we do something that could be reckless.
So
Terry:coming back to this, what was this mistake for you? How did you learn this lesson?
Cate:I bought a block of units in the Latrobe Valley, and four of them in the block, all on one title, so I had an opportunity to look at the little village units, so I could have subdivided them, and, you know, give them a bit of a zhuzh up, that was the plan. Banks don't like a four unit site if you're on a residential loan product. And so I had to get really creative and really work hard to get the right loan product. And at the time I, it was early days for me as a mortgage broker. So I had the boss saying, what were you thinking? Yeah. I said, well, you know, they're residential. Anyway, we made it happen. We found an obscure product with a nasty interest rate and I settled the purchase, but it caused a lot of headache. And then there's another mistake that comes, that overlays on top of this particular deal. So it looked like the deal of the century, but it caused me a lot of grief before I settled and it caused me a lot of grief after I settled. It turns out subdividing isn't that easy. You can do it. We also had a bit of a challenge there because the demographic of tenant that would be gravitating to a one bedroom villa unit in this particular suburb wasn't really the kind of tenant I want to be dealing with. So we had police calls on Saturday nights and, you know, all kinds of issues associated with the block. And we did make some money on it, but we sold it and crystallized it a quick gain because my husband said to me, You need to let this thing go, I'm not holding it, it's ruining our life. So financially it wasn't ruining our life, it was just, our Saturdays were messy.
Terry:I would love to just quickly deconstruct this here for a sec. So the dream of this was, I'm going to buy this block of four units, it's going to cash flow, it's going to be a great investment. Like what
Cate:were you thinking? Yes. I thought that for a small amount of money, back at the time, I bought all four for 180, 000, which is by anyone's measure, that sounds great. And they were genuine one bedroom villas, they weren't like studio apartments or anything like that. They had little front yards, little backyards and a carport. I thought I would do an easy renovation because the quality of the building was pretty rock solid 1960s thing. Just needed floor sanded, paint, new kitchen, new bathroom, times four. And, you know, just put a little dividing fence between them and make them feel like villas and get them subdivided. Then I've added value from a capital growth point of view. I've manufactured some growth, in other words. I thought that the proximity to the town centre and the train and pubs and shops would hold it in good stead, growth wise, and in fact it did. But I also knew with 65 to 70 per week rent at the time, times four. And then doing a nice conversion and, shushing them up inside, maybe getting 90 or 100 a week. I knew then I could have a fantastic cashflow property. I'd manufactured some growth in that would give me some reasonable capital growth. That was the plan. And that is the Holy Grail. Any investor would get excited about that as a strategy. It wasn't that easy to do though, and the headache factor was enormous. And the holding costs weren't as exciting as they sounded because the council didn't want to easily give us the subdivision, but they didn't mind sending us four sets of council rates and taxes. So that was the challenge. Yeah. So could have we stuck it out and got the subdivision through? Absolutely. But you've got to look at your quality of life and your quality of Saturday nights. And ask yourself what sort of investor you want to be. That's the
Terry:probably thing, isn't it? So that mistake is, all right. So this all might look great in a spreadsheet, but what does it actually mean to your life and is that what you actually are doing this for? It should improve your quality of life, right? Is that what you're really, what you're getting at?
Cate:Yeah. I didn't want to be. Sitting on, um, block of units that had the police on a first name basis with me, you know, aggravated this, that, and the other, and assaults, and it's just not great. And aside from that, we obviously wanted to get the subdivision through so that we had, we'd boosted our equity position so that we could leverage and continue investing, because this was at a stage when. I was in my acquisition phase and we could have done it, but there were other ways to do it, other nicer ways.
Terry:So if somebody comes to you with the same stars in their eyes now, and you're like, Oh, I've seen this before. Yeah. How do you guide them
Cate:through this thinking? I just tell them the story, just like I have with you. And if they're saying to me, that's okay, I've got the stamina, I'll talk. to them about all of the reasons why we got police calls and if that's still what they're up for. And they've got to factor in, you know, property damage when you've got someone with a bad temper and a bit of an issue with the neighbor and your properties can get damaged too. So I talked them through that. It's not the ideal journey. If someone knew the area and said, this is the brief, of course I can help them. But I think the big one was four units in one block. Not subdivided. You can smell opportunity, but you've got to have capital because the lending options for me with limited capital were not pretty. And I thought I might've lost my deposit. What was it
Terry:like when that moment where you realized, shit, I'm going to really struggle to get finance for
Cate:this? I needed to keep my husband fully updated and he said, no, you'll find a way. You'll find a way. And I did, but sleepless nights and a few arguments with a senior broker who put me in my box. I remember him saying, no, you need to sit down and listen to me. You've chosen a property that's really difficult to finance and we're not doing nothing. We're turning ourselves inside out, finding a loan product for you. And we think we've got one and you're not going to like the interest rate and it's going to come down to, do you want to settle this or do you want to let it go? Yeah. And I listen
Terry:to him. All right. I love that. Thank you so much for sharing that one. Let's go to the other side of the coin now. Here's the second quote. So the second quote is, success is dangerous because often you don't know why you succeeded. You almost always know why you fail because you have a long time to think about it. So let's have a think about this for you. What was your biggest win? And if you really reflect on this. What did you do or not do that paved the way for that success? Does something come to mind?
Cate:Yeah, I've had some good ones and sometimes it's the accidental one. You did it for a different reason and then it paid off. So for example, we were rent festers for quite a while. And when Gab was really little, she's 17 now, when she was a baby, we were in a nice townhouse and we had a two year lease. which I masterminded because I had a young one and didn't want to be getting a notice to vacate. And they put the rent up after two years and it was disproportionate. It was too much. And I know a lot of renters will say that, but they've been a bit too hard. And I could have pushed back or tried to reason with the property manager. But at the time, I just thought, maybe it's actually a sign for us to go and buy. Something now, maybe it's time. I knew a guy that was selling a property that needed work, down on the beach, literally, very, very close to the water's edge. There were two houses between us and the waterfront in Aspendale. We were coming into the GFC. Things had started to unravel in Australia. Lenders were pulling out of the market. I was still a mortgage broker. He was trying to sell his place on Gumtree because he didn't want agents involved. And the price seemed pretty good, at the time it was 365 and I thought that's really good for this house, even though it needs work. Little two bedroom, it was very cute. So I went and had a look at the property and we started conversations and he was talking to lots of others as you can imagine and I felt a little bit bent because I saw my offer shopped on the website, so Gumtree. We had an agreement at the end, it was at 325 and he said, I've got 325 if anyone can rate it. You know, come and see my house. So my husband saw that and saw red and rang him up and said, the deal's off. And so I did that. And then we, were stuck with this month to month lease that wasn't great. And then on Christmas Eve, I got this really strange text from him saying, how would you like to live? I think it said something like 60 meters from the beach and I'll take you 325. And I write back, how would you like contract signed here and now? And the price is 3. 10 and I'm not budging. So he came back and there was a bit of argy bargy anyway, he wanted to sell, he was really fearful that the market was about to crash, for whatever reason, he had a financial commitment and needed it sold and I just said, I'm not mucking around with you if we're doing it, it's Christmas Eve. We are meeting at your solicitor's office and signing contracts on the spot. He said, well, it would need to be a 20 day settlement. He must have been around a real pressure. Yeah. And I was a mortgage broker and I thought, yeah, we can do this. And I knew that the property was, you know, zoned resi, there was nothing about it that I thought would fall over. And yeah. Yeah. Yeah. My husband said, I hope you know what you're doing because 20 days is very tight, especially over Christmas, there's skeleton staff and lockdown. So we did it. I bought a bargain on the eve of Christmas in the face of GFC and we had a renovation project that we needed to get into. The house was pretty seriously needing work. So we, the house sat at our friend's place while she went on a cruise and we looked after a dog and that enabled us to create a home on a shoestring budget. In a better location, and at that stage, that's all it was. We were just looking at it from a cash flow point of view, thinking we're actually better off financially to not rent and to buy this and to live in it, make it work for as long as we can, and then see if it, it stacks up as an investment to hold. So an accidental investment by every stretch. Anyway, it's really delivered. What I got
Terry:from that though is you knew what price you wanted to pay. You knew what the terms by which you would agree to, and also how you wanted that transaction to make place. And you wouldn't budge on that. And when that became a possibility, you didn't faff around. You were just making it
happen.
Cate:Yeah. The challenge for us was. 325 was completely comfortable and when he shopped our offer, my husband felt so burnt. We found something else to buy, which is what you do when you're ready. And of course we pushed ourselves and we knew that the GFC spelt opportunity. So we'd already committed a lot of capital and we didn't have Um, the same borrowing capacity or free capital that we did at the first tranche of trying to negotiate with this guy. So when he came back, I think we're probably good for 305 and I had to scrap and save and find the next five grand in the savings accounts. So we really did push ourselves hard and I remember saying to him, if this doesn't work, it doesn't matter. It is literally all I can and will do. And my husband doesn't want to see you. So yeah. Take it or leave it. It really doesn't matter. That was where I was at.
Terry:Whoever needs the deal least wins the deal. Is that
Cate:right? Sometimes. Yeah.
Terry:I love that story. That's awesome. So you were a chemist first up. So talk me through, like, how did you get into real estate from being a chemist? How did this happen? I
Cate:was fascinated with markets, you know, I like to analyze markets and I was renting a place in Brighton and I'd watched that area just doing so well and I knew that I was never going to afford Brighton, but I wondered where I could go. And that was just me as a student thinking where could suit my budget and perform. And that was really how I got a bit of a taste of it. I was putting way more effort into studying markets and watching auctions. And reading stuff and going through all the papers and cutting out the ads. Back in the day you didn't have realestate. com. And so I'd make up a little inspection itinerary and my professor said to me, you're more into that than this. You're going to have to make a choice. And I was more into that than this, but I stuck with it. I got through. I didn't get a first class honors. My friends did. A couple of them stayed on, did PhDs, others went into, into industry. I worked at Orica and it was a bit more of a, a people facing role. I wasn't doing much, real chemistry work then. I had a couple of assignments where I'd work at plants, but not in the lab, like I was through honors. I just found property riveting. I loved it. So I knew if I could get over my shyness, I could have a future in real estate.
Terry:Yeah. And we spoke about this part too. So going from being a chemist, I'm not too sort of people facing to being a real estate agent. Yeah. Very much the other end of the spectrum. What was that like and how did it
Cate:happen? Yeah, it was great. Well, I felt like I got to dunk my toe in the water with people facing because I moved sideways within the organization from Orica to Dulux. So it was a wholly owned subsidiary at the time. And I took on a sales and marketing role, which I remember being a bit freaked out saying to my Orica boss, well, does this mean I have to sell? Like it, it does, but you're not selling steak knives. You've got it in you. I was in a really happy place there. I needed a mentor and I needed to just get my head around. What I could do to get ahead and get my head around it all, you know, dealing with painters. Some were absolutely beautiful and you'd meet their families and then others were really grumpy or someone just yelling at you cause it's all about price. I learned a lot in that business and found my fate with confidence. I really did. And when I won a prize there, I won their marketing professional of the year prize and they give you a gold watch and a nice cash bonus. I thought this is now my time. The cash bonus I can have as a bit of a buffer. I can go into real estate and if I don't make any money in the first few months, I can live frugally and, get through it. And so that's what I did. they used to call the award a bit of a curse because they'd lose good people. And sometimes it does, you know, you feel like you've climbed your mountain or Hit your pay can or it's a sign and for me it was a sign I've done this, I won the award, got this money, I haven't got kids, now's the time to get in and do it. I love
Terry:that too because you sort of, you moved like as you say sideways but you put yourself in a position to get paid to learn something and to have the money be a reflection of that skill. Yes. Tell me if I'm wrong here, but that's what gave you the confidence to go. It sure did. If I'm doing good enough here selling this, I, something I really believe in, I back
Cate:myself. Absolutely. I knew that the hours would be tough and I knew that agents are a different breed, but I also knew that I would love dealing with buyers. And you know, working with vendors was fantastic too. It's a very strong trusting relationship, but it, felt a little bit one dimensional for me because I wasn't choosing the properties. I was having to sell properties and you get a lovely vendor or they might have a dog of a property. You still have to find the right buyer and sell it. And you're selling a dog of a property to someone. And obviously. Um, they find their person and then they get their price based on what they're worth. But I wanted something that was more about the property and certainly something that was just a, a more consultative role. Yeah. That
Terry:makes sense too. Cause there's a whole, like you've got to actually quite a deep understanding of what good property looks like. I think you would find there'll be. A little bit of part of you where you're like, I wouldn't personally
Cate:do this. A thousand percent. In fact, most. That's a very fair thing to say. If I get a brief from a client and I hit the internet and start looking, it's not 50 50. I'm picking out less than 5 percent that are, great properties. And let's say 20 percent are good or okay, you've got 80 percent that you wouldn't buy.
Terry:Yeah. And that's the way it should be, right? If you're being discerning. Yeah. What did you actually take from, so the ins and outs of that process and you know, that vendor relationship, like what do you lean on now as like inside knowledge for how you think about buying and how does it
Cate:help? how vendors think and the pressure that they're under is one important thing and the total number of reasons that could lead to a sale, a selling decision. Certainly, a valuable insight was what really happens in the office. What goes on? You walk into a real estate office, you've got the reception, it's all nicely lit, there's flowers, someone's friendly to you. What's really happening at the back? Are they fighting over deals? You know, how does commission splitting work? And all of this stuff can dictate how a deal comes together and whether you're more successful or not because agents do pull rank and some offices don't have a fantastic culture. I can picket a mile or I can smell when, you know, a young agent's getting shafted or if someone's holding all the power or giving their buyer preferential treatment. You wouldn't be working with the person, won't hold your offer back.
Terry:Hit us with some red flags here. How would you know that you might be in trouble? You might be working with an organization that's got some
Cate:issues. If you've got an agent who hasn't listed the property and I'm not suggesting that a non listing agents can't do a great deal because they can, but you'll get some that will have the, the listing agent walking all over them and prioritizing their buyer pool because that's how commission works. Unless you've got a pod arrangement where you've got a younger agent or a junior agent that's working with a senior and they already have a clearly defined split. So we work together, we're a pod, we're a team and whatever I sell, you get X percent. Whatever you sell, you still get X percent. This is a training opportunity for you. That's fine because you'll get amazing service potentially from your junior agent, but when you've got a situation where you know the agent that's in control of the vendor relationship Holding back important information from that particular agent or giving them short notice or unfair timeframes. It just makes it a lot, lot harder. Yeah.
Terry:Okay. That's bloody interesting to know, that isn't, it's always a people problem, isn't it? It's always a hundred percent always a people where all it
Cate:is, and you get situations where they'll say best and highest, you know, it's a closed envelope, tender style process. Well, it's not closed envelope every time. Sometimes agents genuinely don't know what each other have and then all offers on the table made the biggest, best offer win. But other times, you know, when someone's pipped you by a thousand dollars. I remember years ago in my very first year as an advocate, I was dealing with an agent that obviously had a very strong relationship with an opposition advocate and they pipped my offer by a hundred dollars and it just made me feel a bit sick. Yeah, that was a buddy doing a favor for another buddy. Yeah. So it can happen.
Terry:So real estate to broking. So obviously this comes with a realization that, Oh, maybe there's a better way for me to be involved in this process. It doesn't require me to sell things I don't always believe in. Is that
Cate:kind of insight? I was pregnant. I had a little girl on the way and I thought, I love real estate and I do want to do something that's more consultative and around property. So I already had burning desire to do something that was more related to numbers and cash flow. Right. And my broker, the one that told me off for the units, he said to me, you'd actually make a really good broker. You've got a baby on the way, you can think about how you can recreate your career here. So I did all my training and got my Cert 4 and there was a lot of compliance, not nearly as much as now, but there was still a lot. And I had to train in Sydney and, uh, I was still juggling a job. So it was an interesting time, a newborn and a small book of mortgage clients. It was a match made in heaven for me because. Um, you can get online and process your deals and talk to assessors on the other side of the world. Well, in other locations that are offshore, you can get a lot done at night. And of course you've got during the day, you've just got this little thing that wakes up every three hours and needs a feed. So I got into a really good system with a newborn doing that and obviously not breaking world records with really high turnover, but I had enough, it was enough to keep me going. And then as she grew up and. I went to daycare and things progressed, I was stepping up, but I still, banks were doing my head in. They're difficult to work with. And as a broker, you can do all of that legwork. And then the bank says no, or the client refinances with someone clawback, whatever it is. I just have the highest regard for brokers because I think they sometimes do it really hard. Uh, yeah. If you can withstand that, you can do quite well, but I was happy to do the hard hours and to deal with the hard situations, but I just felt like my circle of genius. Can I say that? It's more suited to property. I just loved it. And I remember my other boss, I had two bosses that were partners in this business and the other one said to me, don't you tread too close to that line, you know, stay in your lane. You're not a property advisor, which was good advice because I wasn't. And I said to him, I think I want to be though. So that was why I left that business. And so after four and a half years, I then got my Cert IV in property services, went to Swinburne, did it the old fashioned way in a lecture theatre. It was cool. Loved it. Absolutely loved it. Met some fantastic lecturers that were, you know, retired agents and I just knew I was in the right spot. So after that, I got poached by an organization in Melbourne that were looking for a broker. I went in and sat down with them and said, this is where I'm at. I would really love to be a buyer's advocate in the property space. And it was the longest interview I've ever had for a job. It was such a good interview. I got there in the mid afternoon and went home when crickets were chirping and it was getting dark and they made me an offer pretty much straight away and just said, when we find the right person, you know, we'll work out the role. And so I took on a directorship there and I essentially was gifted 20 percent of nothing that I had to create. So yeah, bit of elbow grease. And, um, you know, that, that was. was definitely a great challenge for me. And I, had support. They were good, really good business. And I grew that arm of the business for them. And they grew bigger and bigger, which was, the reason for the demise of that working relationship. I didn't want to go interstate and I didn't want to manage a whole fleet of advocates and I didn't want to be working in a big business. I loved the boutique nature of it. So in 2014, I resigned and set up my own little business. Rest is history.
Terry:Now, when you come to them and you say, I would like to be a buyer's advocate, what year is this? 2010. Okay. Now is buyer's advocate a thing in 2010 or is it just a new thing?
Cate:Yeah. No, it's a thing. we use the word advocate in Victoria. They also buyer's agent. You know, the states, but it was definitely a thing and they were already working with mortgage and financial planning clients and outsourcing that portion of the task. They had a preferred buyer's agent. Obviously in house is always better if you've got the right fit. So they knew exactly what that meant and obviously saw that I had it in me. Yeah. Obviously
Terry:they're having a two hour conversation. They're going down to the depths of the detail. They're coming out. Yeah.
Cate:It was like a three hour. It was crazy. It was crazy. And they asked me a lot of really good questions, two directors. It was great.
Terry:So what was it like going from, all right, so you've had this kind of long journey and you really have done the hard yards here and it kind of reminds, I actually was listening to a biography of Estee Lauder. It's very interesting. Like she has a similar sort of obsession with. Make up and making up people's faces. She's talking about how she wants to touch like 50 people's faces a day, but she had to go around about to get there because baby, um, marriage convention was, you know, women didn't even start businesses in those days. And yeah, it feels like you've done similar in the sense of like, I've. Worked my way around the conditions of my life and then, I've got my sort of shot. So what was it like kind of finally getting to this place where you're like, here I am, this is where I'm meant to be.
Cate:Do you know what, it's a great question and no one's asked me that. I was enormously proud and I was very relieved because I knew I'd found my groove. When you find that place you're meant to be, you stop searching for where your career's meant to be. You stop thinking about where you could be and you stop looking at successful people and feeling a hint of envy as well. You're in your happy grove. But it wasn't all beer and skittles. Yeah. Because I had a little one by this stage. Gab was four. When I started my directorship and the hours were long and we were living in Aspendale and I was working in North Melbourne, which is a nasty drive during peak hour. So I had to get creative with starting work early and the plan was always to leave early, but that never happened. So I was starting early, leaving late. My little possum was the last kid to get picked up overnight at daycare and she felt it. Yeah, that's hard. And my husband was traveling because he was working. It was an intensive job by every measure, but not the hours of mine until he was traveling, then he'd be going over to suppliers in, you know, the Ukraine and Germany. And, that was very difficult because I'd be on my own. You don't go to the Ukraine and just have a week over there. It's a three week business trip. And I struggled with all of it. And I remember struggling a little bit with Ian because. He probably wanted to pull rank and say, well, I'm, earning more and you're doing this thing and you love doing it, but you know, you're a mom and you've got our daughter and he didn't use those words, but. I felt it and I was thinking, well, my career trajectory is looking amazing, but I absolutely need help at home if I'm going to make this work. And so we sensed that you feel that conflict with your partner when it's about whose job is more important. The reality is they're both important, but how are we going to raise this child? And that was a difficult period and it wasn't until I went out on my own. He could see the potential and the passion and he's 10 years older than me and he said I'm actually going to stop. I'll resign and retire and look after the books and the business stuff in the back end for you and I'll raise our daughter and to his credit he's learnt to cook and he cleans really well and presses laundry really well and I feel really fortunate because He's let me have that time to shine, but that was the hardest bit. How do we make this work? When it was looking like I could have been a victim of my own success.
Terry:That's huge. Isn't it? Like I can feel the weight of when you say how little possible is the last one to be picked up. There's been a few occasions where I've done the same, where I've had to be traveling and things like that. And you just. Yeah. It's awful,
Cate:isn't it?
Terry:You just feel terrible.
Cate:Yeah. My mummy guilt. Oh my gosh. I've got so much mummy guilt. She would ask me, can you not be last and you're probably familiar with daycare, like before and after school care, they'll charge you a dollar a minute for, I don't know what they charge you now, but a dollar a minute for any amount that you're late. And I'll just be like, at the end of the way, just give it to me. Yeah, yeah, yeah. I was late every day. Yeah.
Terry:Yeah. That's amazing too. In terms of like, because the trajectory is one thing, but the reality, because it was similar for us starting this as well. Like my partner was earning more than me when we started this. You know, cause we were like, we're going to see how this thing goes and you'd really do rely on, I guess, the strength of that partnership. What advice would you give for couples navigating these kinds of decisions together in that circumstance?
Cate:You've got to keep talking. You definitely have to keep talking and you can't let anger get the better of you. So when you're both working really hard, you're under a lot of stress and a lot of pressure. You've got to find that time when you're not under stress and pressure to talk. It can't be an argument at night, so if it means allocating, you know, Sundays or date night or whatever it is. You've got to make the time and I, credit the success of my relationship with Ian for that. We can talk, we won't have a conversation when the time isn't right because you don't want to say someone's anger or short temper or what passion in the wrong, you know, wrong kind of sense. They get passionate and angry. You've really got to time, time it right and make time for each other.
Terry:That's huge, but I know what it feels like for me, but like knowing that that person's been on you and backed you, it just gets stronger over time, doesn't it?
Cate:Yeah. Is it the same for you guys? I remember at the time thinking, Oh my gosh, no pressure. This is a guy that's been a managing director of a 65 person business. Deciding to, you know, hang up the gloves and support me. And I've got debt, as you know, we've got properties, multiple. So yeah, I felt the weight of that. And I remember saying to him, do you wanna give it a bit of time? He is like, no, you're gonna be fine. Wow. Three months in's huge.
Terry:Yeah, that's huge. So I want to come to, I guess, the best of what you've learned now too, and you can share around just prudent principles for real estate. So if you had to break it down. Yeah. So look, these principles, if you could just give three principles where you go, look, these are going to be right 99. 9 percent of the time, the things that never change when it comes to real estate. Yeah.
Cate:What would they be? First and foremost, don't sign anything without a legal review because we can go through a contract and have a look at something or we can chat to a real estate agent, but trained legal professional can still spot stuff that not necessarily I missed, but I didn't fully understand. You know, difficult deeds and all manner of things that can make a property one that did appeal and is now, it's got deal breakers, so it can rule it in or out. I can also identify red flags for high future cost issues. So a great legal review is really important and obviously an experienced advocate can look through something and I can spot red flags in a contract but I still say to every client we're getting a legal professional to review this. So, I get a referral or ask some favorite investors or ask online, you know, who does great legal reviews, written legal reviews and go for it. The next one that I'd say is a good rule of thumb that will hold a lot of people in good stead is applying a good land to asset ratio to your selections or making sure that you buy something with a good land to asset ratio. So, what I mean by that is if the land component of the property is worth, for example, 500, 000. And then dwelling itself, it's depreciated, it's maybe worth 200, 000 now, well that property has a decent land to asset ratio because the land is considerably more valuable than the dwelling. The dwelling is a bit dated, a bit aged. 200, 000 dwelling, no, it won't be a complete dump, it will be okay. And so that means that as the land appreciates and your dwelling is further depreciating, the appreciation is by far eclipsing the rate of depreciation. So you get a little bit of tax benefit, not a lot. But you're getting a property that has every success in growing further, provided you haven't bought something that is in an area or on a particular site that could suddenly devalue. Yeah. So it's only one part of the equation, but a good land to asset ratio, I aim for over 60 every time and ideally something closer to 80. Gotcha. And there's no perfect science. People say to me, what's the exact land to asset ratio? It's no value. It comes along and says you're dwelling as well. Well, you could probably talk to a quantity surveyor. It's not an exacting science, but it's a very good rule of thumb. And people say to me, Oh, so I need to buy big land. Well, no, you don't. You could buy a villa unit in the city in a ring that has an apportioned land value of X dollars. It's just making sure that you understand with the property that you're looking at, What is the land component worth? What's the dwelling component worth?
Terry:It really does speak to the, the land being the payable thing, doesn't it? It is. Yeah. Yeah. What
Cate:would be your third? My third? Oh, someone recently said to me, Oh, but how does that apply to a period property? And they're a bit like an, you know, a special car. There is an inherent value with a beautiful period property. There's no doubt about it. So land to asset ratio is not perfect science, but it's a good guide. My third piece of advice is the earlier you get in, the longer you have that property working for you and compounding growth.
Terry:This is, I think, the hardest thing to get with money, is like, the snowball's so small at the start, and you just, doesn't feel like much is happening, but what are the first markers that you kind of look for to go, see, say, look, when you see this, this is when you know the compound is starting to go for you. You can't.
Cate:Stand up too close to it and watch it because it just looks static. You've actually got to stare back and look at the chart. And sometimes it takes more than a leap of faith because you might have bought something at the top of the cycle. And then that, city gives you, you know, some average performance or some negative price movement for the next two years. Does it mean that that city is a terrible idea? No. It just means short term, you haven't made any money, you've lost some money, but it's all on paper. You won't crystallize a loss until you sell. So you have to stick to your strategy and be patient. But I think after five years, you'd like to think that there's a trend there. I certainly would. But after 10 years, that's when your property starts telling you what its behavioral pattern is. That's awesome.
Terry:Yeah. Yeah. That's really important too, isn't it? Like you reviewing it on the right timeframe, critical, because they're not, you're not trading property.
Cate:Yes. You're not. If it's a buy and hold, you have to back your strategy. The biggest mistakes I see people make are those that toy with their strategy after they've set it. They then start looking at short term performance and changing up things and divesting and. Bowing into other markets. You do your stamp duty in your agent's face to start with, but you're undermining your own strategy.
Terry:I was about to ask you the biggest mistake, and that's the one. So you had actually had a plan, and then you just deviated from the plan, try to do something sexy. Yeah. What makes people do that? Why
Cate:do they do that? They get up close and watch the horse race. It's like share trading. You can't look at what your property's worth on a month to month basis. You actually need to look at what it's worth. On an annual basis. And even if you have a year that's not so great, it's long term. If it's a dud property and it's giving you grief, like, like my block of units, that's a different story. That means it's not working for your lifestyle. Outside of that, you've already set your tolerances are for your cash flows. How negative can it be? What can I swallow? What sort of benefits can I get from this? And you don't want your tax benefits to be a reason for buying a property. It's just a, a nice benefit. You let it do its thing. You can't go changing your mind and chopping and changing your strategy.
Terry:I would love your view on this, but this is just a feeling or a kind of reflection I've had for me. So the property that we bought, you would say that we bought this at the height of the hottest property market for a long time. And if it is a 10 year plus decision, I kind of looked at it and I said to my wife, I said, you know, it's possible that people are wanting to sell now so you can actually get in parentheses good properties, more good properties on the market now than there might be in another year or two, year, three years. So if you're buying for 10 years, what do you care if you overpay in the short term if it's a 10 year thing, right? Because. You're trying to just buy a good property. That's right. How much of that do you think is true? Because I feel like the other side of the coin is you'd like trying to time the market. Oh, it's too high now. It's the wrong part of the cycle, whatever it is. Yeah. But if you are just trying to accumulate good properties, wouldn't you want to just get more good properties as much as you possibly can whenever you possibly can? And that would be the main factor.
Cate:And obviously your cash flows have to enable it, but absolutely buy when you can. and be discerning. I've also gone on the record though and said property is a very forgiving asset class. I've bought properties in my own portfolio before I was a BA that probably wouldn't have chosen them now. Not that they were disasters. It's just that they've broken some of my rules. It might be the wrong orientation or a busy street or whatever it could be. I wouldn't define them as junk. They've performed. My point is, over the long term, they've, really delivered. We couldn't really fault the end result. We could pick fault in some of the selections, but they've been fine. So my point is for those who, who in early, even if they think it's a 7 out of 10 purchase, if they did it in their 20s and they're about to turn 50, they'll probably be patting themselves on the back if they've held them.
Terry:Yeah. And again, another reflection of mine is why property is such a forgiving asset class. Just an opinion. There's only one thing I reckon that you can predict with almost absolute certainty when it comes to investing. And that is that. In five years time, there'll be more money in the supply than there is today. And in 10 years time, there'll be more than that. And 10 the best asset class to take advantage of that is always going to be property because of the leverage side of it. So of course it's probably what you're getting at isn't.
Cate:It is. Property isn't just a young person's game, but when you, starting out, it's that ability to leverage that can see your gains, eclipse that of share trading or share investing. I've seen and partaken in so many property versus shares debates, debates, yeah. And long term at the moment, you'd look at shares and say, well, they're quite viable. If I was gifted a million dollars right now, I'm turning 50 this year. So. Would I buy property or would I buy shares? I'd buy shares now because my property's done its heavy lifting and I'm happy to diversify. But also, the returns are pretty good. You've got all kinds of other risks to think about though, and you've got to then think clearly about what sorts of shares you're buying because you don't want to do something too aggressive and then bet at the farm either. Good
Terry:segue because I was about to ask you about this because this is what's, I think, unique and really interesting about your journey. Um, the human capital part of this, you were investing before you moved into real estate. Is that right? Yes. You were investing through being a broker. You're investing before you're a buyer's agent. Then you started helping other people just because you love the process. So you're actually concentrating your capital, your human capital is all in real estate and also your financial capital is all in real estate. And that starts to really go like, as you say, after 10 to 15 years of that, that starts to really go. But just recently. You've started to sort of consolidate and start to transition to a little bit more passive. And we were having a joke about investing, and you're like, I don't even know the name of the product that I'm investing in. What's that been like to kind of make that transition and move across into this different asset class?
Cate:It's a funny question, and you can tell Ian's managing that bit. We've got vanguard shares, so it is liberating, but I also don't know anything about shares. So I'm not excited enough to learn either. I'm going to stick to my knitting and let him have this one. Well, that's the beauty of it, isn't it? It is. And we're not overexposed and we've got a very good accountant. So I've put my faith in that process and it's more for liquidity. It's not, just for diversification, but I remember having that conversation with my accountant about 10 years ago and he said, I'm a bit worried about you. I'm like, yeah, You know, you're not diversifying. I said, yeah, I am. I'm in resi, I'm in commercial, I'm in different states. And he said, that's not what I meant. He meant other asset classes.
Terry:Classes. Well, you know, what's interesting, and this is what I'm interested. To sort of discuss is, I guess it's like a principle of ours is like when you're an outsider, you should diversify. And when you're an insider, you should concentrate, specialize. You are the best example of that because you are an extreme insider. So much to the point where you're like, I'm doing this for my job. And also I'm doing this with my money. So I'm concentrating there. And that actually allows you to outperform. You know, I am absolutely certain you would have outperformed hundreds and hundreds and hundreds of professional hedge fund managers. Throughout that period of time because of the way you've concentrated,'cause hedge fund managers barely even beat the index. Right. And so you've kind of been able to do that and really get this snowball happening and now being able to, as you said, move across for a little bit of liquidity. Yeah. And obviously it's just a cash flow thing. You obviously want to invest and make sure you have cash flows as you get older.'cause you don't, can't live off, you know, the bathroom of
Cate:a property. Um, that's right. I mean, our properties have done the heavy lifting for us. We've still got debt, but the portfolio is positively geared. To a reasonable tune now, so I don't want to buy more property. Accrual phase is over and I'm still
Terry:working. What is it like to kind of move from that phase into, we're actually just optimizing for income now and for lifestyle and you probably even got choices around legacy
Cate:too. Yes, we do and we will. That is a nice thought. Doing something a bit altruistic and meaningful. I think the biggest fear for me is knowing I could stop working if I wanted to. And I, I don't want to I, I'm worried about what I'd do to be honest. I'd get under vape.
Terry:I could see you like the philanthropy side of things becoming a real thing, like a another
Cate:pursuit. Yeah, I love all aspects of what I do. I, do a little bit of teaching on the side and that's always a joy, you know, talking to first home buyers and people that are thinking about upgrading who, you know, are not really buyers agent contenders. They're wanting to do it themselves. They need some basic skills and some red flags to watch out for. And that's fun. I do that on a, Tuesday night when class opens. Well, tell me more about that. Where's that? It's at our little community center here in the inner west. Melbourne? Yeah. So I stepped down from my president role within our industry association a few months ago and I, I was a little bit lost for a few weeks there thinking, Oh, I really miss the gang and I'm, you know, as president you do a lot. It was time I'd, done four years, it was time to let someone else have a go. And that was such a rewarding thing to do, but it takes up a lot of time. And so I noticed after that, Oh, I need something else. And I've been writing a book as well, which is now with the editors I've coauthored with an industry buddy of mine. So yeah, I've been keeping busy, but I think that's probably. You know, a good flavor for what I'll likely do as I get a bit older.
Terry:Yeah, more of that. And it is interesting. Like, I would love your view on when it makes sense. So obviously I think the words you just used were candidates for working with a buyer's agency. So there's obviously like a cashflow reality that kind of comes with this. But who does it not make sense for and who should really consider a buyer's advocate?
Cate:I think it doesn't make sense for someone that has the skill set and the passion to do it. So a buyer's advocate could do their own stuff. Although I would like to step in and say when I bought our home, I was very emotionally wedded to it and I should have got a buyer's advocate because I paid too much. I just had to have it. And no regrets, I love it.
Terry:You're entitled to that one, aren't you? After a decade, after a career of doing the process and being very deliberate about it.
Cate:Yeah. I think everyone can do with a buyer's agent and probably the people that can't afford it need it the most. You know, first time buyers, they absolutely could do with an advocate. And I do get to work with first home buyers, but if they can't afford the fee or it's whittling away their savings to a degree that it's impacting their borrowing capacity, well then that's really hard. Sometimes parents pay for my fee for their children, which I think is an enormous gift. They're the ones that probably really need the help. Look, most people, even if you upgraded and bought three, four houses in your lifetime, that doesn't make you an expert. You can still fall prey to something because you don't know what you don't know. Yeah. That's
Terry:a really good point. You liked the process. You did really well for a couple of decisions. Your sample size isn't huge and you need actually at least 10 years worth of experience to kind of discern the difference between luck and skill,
Cate:don't you? I think so. I do. Yeah. I mean, we all have to start somewhere. I always remind myself of that. The more people you can be involved in helping, whether it be. Real estate salesperson, mortgage broker, and investor yourself. I think I clocked up a lot of years of watching things transpire and watching mistakes. Not necessarily my own mistakes. I've had people come to me when I was a mortgage broker and they were in trouble. They'd bought something, a bit like what I was with those stupid units, bringing a really messy scenario to me saying, can you help me? And there were some I had to say no to. It was devastating for them.
Terry:Yeah. It's big, isn't it? What's your advice for someone who is just realizing now that they really do want more exposure to real estate? At this part, this time, how would you advise that person to kind of think about this now and what to do and not
Cate:do? Think about how much you think you need. To fulfill that ideal to get into property? I mean, are you doing it to make a lot of money and then sell a property, pay out your CGT and and see it on half a million dollars? Are you looking at it to accumulate some assets that are giving you a passive income stream? Sorry, rent? Are you looking at a combination of the two and whatever it is, how much money do you need by that certain date? Whether it's an ongoing rental income or whether it's a nest egg and then you have to reverse engineer it. So if you want that when you turn 60 and you need X amount of dollars, how can you get there? Is it actually feasible? Will it work for you? Because I get some people saying, Oh, I think I'd love 150, 000 a year. They've got five years left to run until they want to retire. And there's no way that it can happen for them sometimes. So it's got to be reasonable, you know, realistic, feasible. And then once you've worked out how much you need, you've also got to be comfortable with how much it will cost you in negative cashflow until that date. That's the hard one, isn't it? It does. Yeah. If it means that you're having less holidays. I remember my early years and it wasn't just a few years. It was. 20 years where I wasn't, you know, I'd get on the plane and I'd, be turning right, not left. And I wouldn't necessarily ever be getting on a plane, I'd be doing a road trip to Sydney or something. So you save money, you don't spend it. You have to be prepared to sacrifice. And if you left that late in life. It's going to be very hard to come down from that cloud.
Terry:Good advice. What about those who are feeling the pinch right now with where interest rates are and the price of things plus the price of property? You've been through a few cycles now, you've been in this industry for over 20 years, so you've kind of seen some of these ins and outs. How would you advise that person to think about this?
Cate:Well, you've got to look at your cash flow. If you've already tightened up the purse strings and you're not splashing cash around and you're living frugally and it's still hurting, you've got some tough decisions to make. But before you make those tough decisions, you have a chat to your broker or your bank. Um, and see what you can do with your loan, whether it's refinancing activity or finding a better rate. Obviously, it's toughened up for a lot of people, but we have buffers in place when it comes to loan serviceability. And for a few people that got those magical loans under 2%, now they're sitting at six and a half. They've gone past their buffer and they're the ones that I know would be hurting. So I have seen people make a few difficult divestment decisions. Not panicking is really important. And I think it's fair to say that we're towards or at the top of our cycle. And you've got to pick an economist or a set of economists that have been consistent and reasonably accurate with their, predicting and their messaging. Because if you read every nasty headline and jump at shadows, you'll sell everything and then you'll have regret.
Terry:That's the thing is that, that whole sort of like, the way things are is the way they'll always be. Whenever I've seen myself make a mistake, it's because of that, where I'm just going, oh, this sucks now and it's always going to suck, so I've got to change something. Oftentimes you don't need to change anything. You can just let the cycle change, right?
Cate:Yeah. That's a very fair thing to say. I mean, we do have that elasticity, but I also say that when we look at historical interest rate levels, we're pretty close to the equilibrium right now and a lot of people won't want to hear that. But we were never destined to stay at 2%. They were emergency measures and we've had some really difficult headwinds that we've to navigate. You know, we've got all this talk about rates coming down and I, think we probably will have a rate cut at some stage, but I don't see us having masses of rate cuts and getting back to where we were.
Terry:Yeah. Well, that's right. That was an emergency sort of like we need to stimulate. So unless there's a bigger emergency, we're not going back there and there's this huge deflation. How do you see things playing out over the next 12 to 24 months? I
Cate:feel reasonably optimistic and I am an optimist, so I'll just put that out there. We've got some pretty nasty things happening around the globe, though, that destabilize whether it's supply chains or markets or confidence. We've got very tight employment at the moment. We've had talk of a shift in our unemployment rate in order to keep things humming, you know, economically, and that's always frightening when you've Got, you know, reserve bank leaders saying we need to see unemployment increase. It's a euphemism. Yeah, they've got to lose their jobs, which is awful. And I think that's held us in really good stead, you know, market confidence in, terms of our earnings and we've had wages increasing a little bit of late as well. I don't have any dire predictions for the property market. I think that when we get past some of the shocks that we've had, namely, you know, Victoria with the land tax. That was, a lot of people have looked at that and said, that's a straw that's breaking the camel's back. I don't think it's a big straw at all. It is a straw. It's an annoying straw. We've had other headwinds. impact us as well. I feel very positively about our market longer term. And I think that we'll see the impact of the tax cuts filter through mid this year as well. And we can't underestimate those. If the lenders are looking at that as genuine additional cashflow, which I'd expect they would, well, that translates into higher borrowing power. And for all of those buyers that. bid to their limit, we'll see those limits increase. And they're typically upgrader type markets. And so I've already written a piece about this, but I feel that those middle markets with a 750 to 1 million price points, we'll see those get pushed when people have the capacity to push harder.
Terry:Yeah. That's interesting. Particularly, yeah, those tax cuts, if they do happen and they coincide with any rate cuts later on in the
Cate:year as well. Yes. Yeah. Most definitely. And even talk of right cut is sparing on a little bit of market confidence and it's really, it's confidence that counts for everything. Yeah. That's
Terry:a good point. It's that jaw burning going the other way. Yeah.
Cate:Yeah. So true. The
Terry:last thing I want to ask you, and I really appreciate the time you've given us here, but. I just think the way your career's kind of played out and the way you've kind of followed your nose when it comes to your curiosities, how do you think about having a meaningful career and how would you advise your own daughter to kind of think about that process and finding her right spot?
Cate:I think that all accumulated knowledge is good. You don't have to be on one clear pathway when you're young, I beat myself up about that and I remember freaking out when I was a mortgage broker that was feeling a bit disenchanted with the banks. Have I turned my career into a mess here? Could have I stayed in corporate? You've got to recognize that what you learn makes you better and stronger. And I think there's absolute merit in doing what you love. Because if you love your work, then it doesn't feel like you're going to work.
Terry:And it's the best way to escape mediocrity is to be pursuing mastery. And the only way to do that is to love
Cate:it. Yeah, I absolutely do.
Terry:Kate, thank you so much. Um, where can people learn more about you and what you're doing with Flyers Advocacy?
Cate:I reckon I've oversaturated my website, so that's a good place to start. There's so much stuff on there. So I'm Kate with a C, katebacos. com. au. I've written a book and there's, bit of information on the website about that. And I do a regular podcast. What's the podcast? The Property Trio. The Property Trio. Yeah. So I work with David Johnston and Mike Mortlock on that one. So between the three of us, I'm a property buyer, Dave's a property planner and Mike is a quantity surveyor. So we get a bit geeky and we talk figures all the time. Lovely, lovely fellas. And yeah, it's been going there for about four years.
Terry:Very good. Well, look, if you found this conversation insightful and you found it valuable, I think there'll be a lot worse things you can do than jump onto Kate's website, have a look around. There is actually thousands, is there thousands of articles on there? There's a lot.
Cate:Yeah, I've been going for 10 years writing a blog a week. There's a lot on there. So it's like 520 odd blogs at the very least and lots of other stuff. You're a really
Terry:good educator and something I didn't mention is, Favourites of Ours Helena Chase bought their first property through you and did unbelievably well through making that decision. It's something that they emphasized. What am I talking to Helen? And then she was the one who introduced us. And she said that you gave them all these resources where you actually gave them an insight into your thinking through these tools so that they could actually see why you were making certain recommendations. And as a buyer's agent, you don't actually have to do any of that stuff, right? The person can just trust you to do it. But I think that's something that's different about you and when I jumped onto the website, I could absolutely see it because you don't build a resource section like that unless you have a real commitment to teaching. So if you are interested in learning, jump on there and have at it.
Cate:Well, and thanks to Helen and Chase for introing us. I've enjoyed this conversation so much and I'm so pleased we're industry buddies now.
Terry:Ah, good stuff. Thanks again. We'll have to do this again in the short to medium term. Count me in. Yeah, you say
Cate:the word. Thanks Kate. Good to see you.