Strategic Investor of the Year 2020: Sam Gordon

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All that 19-year-old Sam Gordon wanted was a fast car, and he was prepared to empty his bank account to get it. Fortunately, his father redirected him towards a wiser investment.

“My dad gave me the nudge towards property after I was wanting to blow all my savings on a hotted-up car. I took his advice and bought my first property in November 2009 – a unit in Moss Vale – and did a cosmetic renovation on it. And I was bitten by the bug,” Sam says.

He soon landed a tenant for his unit, but it didn’t take him long to realise that he had a negatively geared problem on his hands.

“I was making barely anything at that time, clearing $584 per week. I couldn’t afford the negative cash flow associated with the property, and being a green investor I didn’t know what strata was or how to work out or manage my cash flow,” he explains.

AT A GLANCE
Years Investing:
10
Current number of properties: 15
Portfolio value: $5.190m

It was a visit to the dentist that jump-started Sam on a path to expanding his knowledge of the industry.

“I picked up a property magazine at the dentist’s and started learning everything I could by reading all the great stories and what others had done. My strategy just evolved from there!”

As he was a low-income earner, it took Sam years and multiple jobs to recover enough financially to save for his next deposit. Then he took another blow when a sketchy buyer’s agent cost him.

“I trusted someone I thought was a reputable buyer’s agent, and they burnt me by $10,000 at a time when I certainly didn’t have that money to lose,” he says. 

“I didn’t let it stop me though, and instead worked even harder to find the absolute best way forward and to make the best decisions I could.”

In 2012, he was finally able to purchase his second property, a house in Moss Vale priced at just over $350,000. Today, the property’s value has more than doubled. 

Subsequently, over several years, Sam went interstate for his next four purchases, located in South Australia and Queensland. However, his best deal was back at home in Moss Vale, where he purchased his first duplex in 2017.

“I sourced the land for about $100,000 below market because no one else saw how to fit it on the block – it was a very tricky block. I worked the block, built wholesale and received a $270,000 equity uplift, as well as positive cash flow to the tune of about $12,000 per annum!”

When a property was eventually constructed on the land, it reaped a high rental yield of 7.1%. 

“I saved myself a lot of money on the landscaping by doing almost everything myself. With over $15,000 per annum depreciation and one set of rates, as well as cheaper insurance, it was a great deal!”

Open land and high cash flow

In the past decade, Sam has refined his buying criteria and strategy to strengthen his cash flow.

“I always buy below market price and almost always in a metro market. I also only invest in markets with a tight vacancy rate so that I am not caught without a tenant,” he says.

“There has to be a twist so I can always extract my capital back out of the deal to recycle into the next investment.”

Sam considers three factors when he looks at potential investments.

“I typically invest in three different types of deals: my ‘bread and butter’ – properties I buy below market value in a highgrowth location with strong cash flow; high cash flow properties targeting high rental returns to supplement my income and provide that consistent income stream; and manufactured-equity deals – small developments that keep capital rolling in,” he says. 

“Applying a combo of these deals allows me to keep moving forward, and so each property is assessed via different criteria.”

Sam’s favourite investment strategies are ones that allow him to add value, thereby increasing cash flow.

“I source vacant land with higher-than-average development potential, such as dual occupancy or duplexing, and build as close to a wholesale price as I can. I then extract the majority of my money out of the deal through a revalue by the bank and a refinance. I keep rolling that capital into the next deal, and with the dual income the property is always cash flow positive after all expenses,” he explains.

“Every purchase you make means you buy a little bit more of our country, and there’s something about that that makes me feel really good about what I do”

“My second strategy is to source high cash flow unit blocks that require renovation, and strata or community titling so I can break them off into individual titles. After a renovation, I can again get a valuation done.”

With age and experience has come wisdom, and Sam has learned to take out loans with greater care as well.

“I went hard when I was younger and had much higher LVRs to get me into deals. But I am a lot more conservative in this space now. I always keep my cash fl ow strong, and my LVRs on all properties have to remain below 80%.” 

Big dreams

Sam’s main goal is for his portfolio at present is to generate $250,000 in passive income per annum, but he’ll up the ante once he hits his mark – as he did before.

“I would ideally like to hit this with an LVR position of 30% on the portfolio. I like the idea of a low debt level and therefore a much lower risk profile,” he says.

“My initial goal was to acquire 20 properties whilst still in my 20s and reach $50,000 in passive income. Once I hit that, I reset my aim to $250,000.”

In addition to some “ambitious accumulation plans”, Sam is also looking to work on his first big development project. 

“I would like to kick off my first decent-sized development. I have strata-titled and renovated unit blocks, and I developed small parcels of land; however, I would like to do a small subdivision next year and then continue upsizing with each deal.”

“Every purchase you make means you buy a little bit more of our country, and there’s something about that that makes me feel really good about what I do”

He is aiming to step out of his comfort zone and make his first commercial investment.

“I am just a hardworking young fella who wanted to build himself a future to be proud of, and it just evolved from there into something really worthwhile. I am quite excited for what’s ahead and don’t intend to slow down,” he says.

“I absolutely love investing within Australia – every purchase you make means you buy a little bit more of our country, and there’s something about that that makes me feel really good about what I do!”

KEY MILESTONES

2009
At the age of 19, Sam buys and renovates his first investment property in Moss Vale after a gentle nudge from his father. However, the property is negatively geared, so despite having a tenant Sam struggles to get his finances together to support it.

2012
After a period of taking multiple jobs, Sam is finally able to save enough for a deposit on his second property – a house in Moss Vale. This investment is one of Sam’s most successful, as its current value ($750,000) is more than twice the original purchase price ($355,000).

2015
Sam makes his first interstate buys in SA’s Elizabeth North and Smithfield Plains. Both properties generate strong yields of around 8%.

2016
He looks into the Sunshine State next and purchases a couple of houses for $212k each in the suburbs of Churchill and Silkstone.

2017
Back in Moss Vale, Sam buys his first duplex, which becomes his most successful property deal. With the block’s “tricky” position, he is able to get it below market value. He builds wholesale on the block, generating significant equity and strong cash fl ow.

2019
He kicks off the year with a bang, going back to SA to purchase a block of four units in Mount Gambier. These units all reap very solid rental returns of 10% and up. He buys one other unit in the area that is seeing considerable value growth.

2019
Sam returns to Queensland, buying a townhouse in Woodridge and a house in Goodna. Both properties are high yielders, producing 8.1% and 7.8% returns, respectively.

2019
Sam is getting ready to work on building his second duplex in Moss Vale on a site he purchased for $270,000.

 

Top Suburbs : reservoir , chermside , eagle vale , willoughby east , south brisbane

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