Host: Sometimes those high yielding rental properties can actually be quite risky, can’t they? Because they can be mining areas or places where the jobs are temporary and that’s why you can get high returns on them.
Paul Glossop: Yes, absolutely. That’s the key point here with cash flow, Michael’s raised some good points. Is the fact that if people are chasing replacing their income through essentially buying a property that’s got a high yield from the outset and still getting a 80% loan to value ratio on that property. The likely outcome is that they are probably going to break even and best as after a few years good, bad and different outcomes, you’re essentially not really going to be earning money so you need to have the mindset that property, especially in the early foundations stages, is for capital growth. The cash flow will keep you in the game. Now some of the mitigating aspects we look at most certainly vacancy rates. Vacancy rates are going to be your friend, not necessarily just looking at top line vacancy rates, understanding the underlying aspects of where the demand is and what property types are most in demand for renters. Because vacancy rates don’t just assure…Your low vacancy rates rather don’t just assure you of good quality tenants that are going to especially be in your property for the majority of the year, but they also mean that there is probably going to be more demand, and that in turn means you probably going to have more choice and choice is key when it comes down to selecting quality tenants. Now whether that be in a secondary market or a prime in a city market. More choice means you are going to be able to select someone who you think is going to be deemed or your property manager is going to give you advice on who you deem to be the best tenants. So there are some of the things that I would personally consider.
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