Sam Gordon is a very successful property investor and buyer’s agent. He is also the founder of property buyer’s agency, Australian Property Scout, who owns 20 rental properties.. His business helps clients get the best possible deals available whether on or off the market. Gordon is one of the most successful property investors in Australia and he wants to impart some of the wisdom he has learnt along his journey.
Join us as we reconnect with Gordon and find out more about some of the projects he has been working on since the last time we spoke with him, he talks to us about a special goal that he achieve recently, we delve into the mindset that he needed to have to achieve everything he has so far in his career, what he predicts is going to happen in the next 12 months, and much much more!
To start off this episode, Gordon reminds us of his background and fills us in on his property investing journey.
Sam Gordon: I've been investing now for a little over 10 years. I bought my first property back in November 2009, which was a little two-bedroom unit in Wollongong real estate and essentially renovated that one, and lived in it for about a year, and then turned it into an investment. When I realised I could pull equity out of that deal and recycle that into another one, that’s where I started learning more and more about investing and got a little bit more serious about it.
And from there it pretty much grew. And within about two years of that first one, I bought again. I did a small development for my next deal, and then I kept that deal, but then rolled those profits through equity into more high cash flow deals.
Because that's what I essentially really needed in my portfolio. I was a very low-income owner. I was only on probably about $40,000 a year. So, the high cash flow was really, really important to me. And I went out, and I purchased. And there were another 4 investments in a 12-month period. And I really boosted up my cash flows. And then, pretty much it was a journey from there, from being between about 25 to 28.
I went really aggressively and grew my portfolio from, I think it was about 7 properties to, what was it? It was 18 by the time I was 28, and it was a pretty aggressive kind of expansion there. Had a lot of growth on the back of one, buying really well with what I was purchasing, but also in good growth corridors.
I think the portfolio equity, and even at that point, got up to about—I think it was up about just over $2 million. The passive income was about $68,000 at a time when I decided to walk away from work which was—I think I just turned 29 when I decided to do that.
An Amazing Property Journey So Far
Tyrone Shum: Basically you're financially free because your portfolio is paying for you, you know, without you having to work. That's amazing.
Sam Gordon: It was awesome. So, I've kind of walked away from work on the back of that passive income. I traveled for about 6 months. And then, kind of, off the back of that, that's when I decided to become a buyer's agent. It really is my passion: going out and buying property and buying property for other people and helping them along similar sorts of journeys to mine, and kind of helping people create financial freedom the way I did.
And probably I guess the really big thing with my journey was I had a goal of 10 properties before I turned 30. And then when I hit that, I think I was about 26 or 27, and it shifted, right. Like I changed the goal, and so the goalposts moved to 20 properties before 30. And so, I turned 30 in January this year. And in December I purchased myself a site that I'm developing into a duplex. So, I kind of essentially, in my opinion, I got around the 20 out of that one. I was pretty pumped with that.
Sam’s Mindset Behind His Achievement in 20 Rental Properties
To be able to build a property portfolio with over 20 properties before the age of 30 is seriously impressive, and we find out about the mindset that allowed him to achieve that.
Sam Gordon: I think what it was, I was around that 25, 26 years of age—I had a few things that happened in my life that kind of completely flipped. What I was looking to do as a career that I wanted to go down that kind of got shut off from me. So pretty much what was left was my passion for property.
And so, what I decided to do was stick with the job that I wasn't happy in but was providing an okay salary and leverage that to go as hard as I could with property. So, I had done a huge amount of research over those. Pretty much since I bought the first one, I got bitten by the bug of the renovation and the pulling out the equity.
And I did a huge amount of research in those ensuing years. And it was essentially in that time that I kind of formulated—I pulled everyone's different strategies together to create my own. And it was pretty much from that, that really, when I made the mindset shift that: ’You know what? I'm going to go for this. I'm going to go as hard as I can to hit these goals, create the passive income to do what I want, and essentially live life on my own terms.’
That was pretty much what it was for me making that decision that I was just going to go for it. And I knew I'd already up-skilled with everything—I guess, with personal development, with how I was going to do it. And I had the time with what I did. I never took holidays, in the sense of I never traveled overseas or anything during those years.
What I did was if I had four weeks or a year of leave, I would go and renovate properties. And so I'd force substantial value on those properties, or I'd go out and do a scouting trip as well. And I'd just focus all my time into trying to find these deals and renovate those deals. And that's essentially where I was kind of creating the equity and essentially then recycling it out into more deals.
And the matter went through a lot of different things. I've done strata titling and subdivisions and granny flats. And, you know, these different things, we've created good equity and good cash flow. And essentially that's what it was: continually formulating and reinventing and just doing everything I could to do it.
We learn about an incredible moment that happened recently that was years in the making for Gordon.
Sam Gordon: When I first started reading, I started way back when reading all the property mags back when I first bought that Wollongong real estate investment at 19. I got my hands on as much content as I could get. And in Your Investment Property every year coming into the New Year, they'd award ‘Investor of the Year’.
And I remember when I turned 20—that was a year like when I first read probably that edition winning that award back then—and I remember just being like, you know what, that was one of my goals as well. I'm like, ‘That's what I'm going to win, and I'm going to win it before I turned 30’. That was all part of this big plan of what I wanted to do. So, that was essentially it.
So, it was this year. It was a funny story because I had a couple of mates that kind of wrote in for me and said, ‘Look, you should get in touch with this guy’. Because I knew I was running my businesses well. And they go, ’Man it’s going to be mad if you win this thing. That's going to be awesome’. And I didn't really like people knowing my portfolio though. Like most of my mates didn't know. They thought I had a couple of properties, [and owned] my own home. That was it.
And then when they contacted me, I sent all my info in. And then I had to verify it with all the land rates and then the rental incomes, you know, ledgers, and show everything. I didn't hear from them for like two months, and I didn't even think about it. For the first couple of weeks, like I was really excited, ‘I hope I get the call and then I forgot about it’. I got busy with work, and then, all of a sudden, I got this private number call me. And I was just like, ‘Hey, it’s Sam from Australian Property Scout’, and they were like, ‘You’ve won investor of the year.’
I just wasn't expecting it. And I don't know, maybe that was cool, you know, even better that I wasn't expecting it. It was awesome, and I was pretty pumped to win it.
Beyond Sam’s ‘Investor of the Year’ Award
We find out just how much has changed since he won that investor of the year award.
Sam Gordon: It was definitely an influx to the business. There were definitely a lot of people that wanted to work with me and, I guess, leverage the same things that I'd done in my portfolio, and help do the same things. So, that was great. Honestly, it's my passion. I literally do it when I wake up in the morning ‘til I go to bed at night—like I just do it at all hours.
It's been awesome that people can kind of… I guess, it's the credibility that comes with that. The fact that I won that award and then I think it makes people feel more comfortable working with me because they know I'm someone that's done essentially what they want to achieve. So, that was a big one that came with it. And I think just a little bit of, I think I finally stopped at that point and thought, ‘You know what? Maybe you did all right’. I did it all right out of it.
He shares with us the two properties he needed to achieve his goal of 20 properties under the age of 30.
Sam Gordon: Essentially what it was, I have a lot of different avenues in my business that I'd go down and help other people with. And essentially we were looking for a few development sites for my clients. I kind of signed on a bit of a bunch to cover through at once to acquire a site or multiple sites. And that was essentially how it came about.
We got a massive discount on a fair few pieces of land for different clients and myself. And I essentially just bought a couple of them for the same price as the clients. And it was just like the deal was stacked up, and there was actually a couple of left over. And it was more than I was planning to put into the last couple of properties, you know. Obviously, development sites aren't cheap, and obviously, the construction on it as well, but they were there.
I got offered them at the same money, which was a great price. And I just decided to pull the trigger on those as well. Because it was a funny thing. When I started the business I was doing so much research, but I didn't have all that many clients on my books—and I still don't. I'm not a huge organisation. I kind of like the term ‘boutique’. I don't have a huge load of clients, pipeline clients. It's manageable and I love that. But what it means is that quite often is that deals will come through, and I don't have anyone for them. Sometimes I just have to buy it.
That's essentially what it was like. It was just the opportunity there. I'd almost like half, not half-forgotten about the goal. But I just, like, I was more focused on my clients and trying to get them the best deals that I could. And then it just almost fell into my lap at the same time I was doing these deals. It was for other clients going through at the same time. And it just made sense. So, I pulled the trigger on it.
Tyrone Shum: Tell us a little bit about the sites that you purchased. You said they are development sites. What can you do on them?
Sam Gordon: What I do—and I've done this for probably close to 10 years almost. The second investment was the same one as these. So, the block's got to be significantly below market. And typically the way I do it is I will source it off market through a developer—and I've got developer relationships in certain areas.
Essentially, what they do is when they’re releasing a stage, the easiest thing they can do is pre-sell a bunch to me just to clear their books. And then they'll put the other ones on market at a higher amount and then they don't care. They can let them sit there for a while because they've cleared out what they needed to complete that stage. And so, essentially, a lot of the time, it's those that we pick up. And sometimes they can be like, we're talking $250,000 to $350,000 is the block price. And then we're developing either single homes or duplexes on them. And the upsides on them are quite significant.
This is my fifth one that I'm going through now. So, it’s definitely not my first rodeo, and we're definitely, you know, getting some really good margins off these as well.
On Development Sites and Rental Income
Gordon goes into more detail about his developments and tells us the kind of margins he expects to get out of it.
Sam Gordon: Typically, if we're doing the full, just a specky build. Like a standard, sort of, you know, 200, 250 square metre home. And we're typically either keeping them and renting them or flipping them back to the market, depending on the client's brief. We're typically doing them for, say, sub $600,000, and they're pulling over $700,000 on a sale price or a reval.
And then sometimes, if we go down the duplex version, you're looking more towards $700,000 or over. But we're pulling revals or end sale prices over $900,000. So, we're making quite good margins on these deals. I don't do heaps of them, you know, if I'm being completely transparent. I don't do heaps of them. I normally take on a bit.
A couple of clients will sign on in a row. And when I have a certain amount, that's when I'll hit up my contacts. It is one form of the business and one form of my personal portfolio that I've done really well with.
I remember last time we spoke about my trident formula and half of them are really strong below-market buyers with good cash flows in capital growth locations. That's one form of it. And then there's the positive cash flow ideas, which are essentially what you need to retire, the big cash flow deals. But then on the back end or if you need chunk deals, then we'll go down that development arm. They're not for everyone. They're not for when you first start out. But when you need those chunk deals to essentially pump some funds back into the portfolio, that's when we'll go down that avenue and throw those in as well.
Gordon explains about the typical time frame between settling on a development site to when you can expect to get rental income.
Sam Gordon: Typical turnaround time, like turnaround timeframe, is typically up to about 12 months. So, typically, we will purchase them just before they register. If you're taking everything into the equation, if you're not selling and you're holding, we typically get them down to about 8 to 9 months.
If you do look to sell them, typically it is over 12 months to go through that whole process. But it's, as you say, it's not for everyone. Most of my clients when they come through are starting their portfolios, or they've only got a couple of portfolio properties and they're trying to build it out. I will always say, ‘Let's build the foundations first’. Let's get the foundations exactly right. Let's then put some high cash flow ideas in there. And then let's look at some chunk deals to either accelerate, pay down—or what I love to do is I'll do them and then I'll keep rolling that development money that I put in, keep putting that into more deals.
But the profits that get spit off—I'll go and put that into high cash flow deals or into the foundation properties. But that's once you're a few deals in; you definitely start with that. But that's honestly how you can just keep rolling when you get to that point. You can honestly just keep it moving, especially if you're using those cash profits and putting it straight into a high cash flow deal.
You're going into a 7-year and 80% lend on a unit block or a house and granny pulling 9%. You know, some of my unit blocks are at 10%, 11%. A lot of my granny flat deals are 9% yields, that is $15,000 to $20,000 a year positive, all day long.
Strategies to Getting a Good Property Deal
A lot of beginner investors might be wondering how they can find a good deal. Gordon delves into some of the strategies that will help.
Sam Gordon: The majority of our staff, especially at the moment with COVID and whatnot, I reckon, at the moment, we'd be doing 70% to 80% of our deals off-market. So, it's agents coming to us. I've got a huge amount of connections all over the country where I've invested personally for myself and for clients as well.
And essentially a volume of that is coming through off-markets. And essentially what it is is an owner is much more willing, especially, you know, with COVID and all the rest of it. And if the tenant doesn't want to go to the market, like they don't want to do opens and all the rest of it. Sometimes, the agent will condition them and say, ‘Well, there's nothing wrong with it. It makes it quick, easy, and transparent for everyone’. And they're like, ‘Look, if you don't want to take it to market, we have this buyer’; they literally will do one inspection.
We'll suss out the numbers first. If the numbers work, it will be one inspection, and then the deal is done. And essentially like the perfect thing. The thing that works really well for us is a simple fact that there's no competition in that sale.
And a lot of the time, the sellers, like, you know, for the ease of a transaction that's done, it doesn't have to go to market, we don’t have to pay for advertising. We don't need to upset the tenant. We potentially then walk out and then a 3-month campaign with no rent. All these different factors that typically a vendor or a seller has to deal with. We essentially will take that out of the equation—but, I guess, in exchange for maybe 10% plus off the purchase or, you know, off of what is fair market value.
So, that's where we're getting ridiculous value for clients at the moment. And some of those are up towards like we're settling. And, quite literally, I'm talking very close to capital cities, we're settling and getting 15%—like getting a reval and we've made 15% in 90 days from what we settled the property for. And then they're pulling that money back out and we're rolling it in with a 10% deposit on the next one.
And I've got clients that have honestly come in and came to me with one deposit. And within 12 months we've purchased three properties off that one deposit. And there's you know, I've got other clients who've come to me with two deposits—like $100,000—and we've purchased six properties in about eight or nine months. Literally, just rinsing and repeating that strategy.
It all comes down to purchasing the property for a really, really good price. And essentially, that goes back to me being a small boutique agency again. Like, I'm not huge, so I can focus on making sure each deal fits that criteria for each client. And that is a repeatable process—the same way I did it with mine. So, it's working really well.
Gordon reiterates the importance of making money as you come in rather than waiting for your property to grow in value.
Sam Gordon: Especially in a market like now, like if you were waiting for growth before you went to your next one and you bought at the end of last year at earliest, you're probably waiting to the start of next year. Because we're not going to see any. There’s a very slim chance of any huge gains or 10% gains where you can pull that money out and go again.
So, if we're still buying into those growth locations, but making that margin, you know, anyone that tells you, you know, ‘You pay market value in a strong growth location’, I honestly think that they've probably just got too many clients on their books, and they're not willing to work hard enough to do it.
I'm telling you, we're doing it every week. We're doing it for clients. And it's definitely possible. It's just putting in the hard work and getting those deals to come through.
We hear more about one of Gordon’s very successful clients and how he has been able to help this client build their portfolio.
Sam Gordon: I've got a lot of clients with similar stories. But he came to me right at the very start of when I started the business, and he wanted to kind of ramp up his journey. He'd come from another buyer's agent, who'd paid market value for a similar property. And he said, ‘If you can beat this, I'll buy as many properties as you can bring me’.
And essentially, this other buyer's agent literally had paid $317,000 for a property—and the street behind it, three doors down, we bought the same one for $280,000. So, $317,000 to $280,000—it was a $38,000 difference. And I found it, I think in, in three weeks. And he said, ’Man, I'm a client for life’. And I was like, ‘All right. Well, let's do it’.
He came to me with two deposits. So, he had about $100,000. He was happy to go at 10% deposits to 90% lends. He had decent servicing, and he essentially said, ‘Look, how do we scale this? How do we take it?’ And I said, ‘Look, what we'll do is we'll find this first property. And then while that's going through settlement, we'll find you another one’. And then essentially what happened: As the second one settled, the first one was coming very close to being 90 days since we settled it. So, in that, after the 90 days, we were able to get another bank valuation. We got it valued at $335,000. We'd paid $280,000. So, it's $55,000 equity sitting in that deal.
He was able to refinance that back out and fund another purchase. Now, the second one we bought, by the time we funded the third purchase here, we tapped into that equity. That was a very similar number. And he's funded that into the next one. We literally just kept repeating it and I think in about nine months, he's onto his sixth purchase now.
And I convinced him to maybe look down the avenue of looking towards some cash flow. So, we're paying $280,000 to $290,000 per property for these. Some were in Brisbane; some are in Adelaide. And he was making anywhere between about $35,000 to $55,000 on each of these deals. Actually, I think it was about $40,000 to $45,000 to $50,000 for each of these deals.
But the cash flow was sitting at about between $350, $360 a week. So, it's still decent, like 6.5% plus yields. But after he bought six of them, I said to him, ‘Look, it might be time to maybe look for a high cash flow deal. Let's go out. Let's do a house and granny’, and we've got that going through at the moment. And I think he was running the numbers on it last night. We did some updated numbers because the house is settled.
So, the house was rented for more than what we thought, which is excellent. And the granny flat is about to be rented. We just signed a lease on that as well. So, I think it came out about $15,500 a year positive on that. And that's at a 90% lend, like that's not putting $100,000 into the deal. He literally put like $50,000 into the deal, and he's getting that sort of return. So, he's stoked, and he's ready to keep going.
Start Property Investing With $50,000
To gain a better perspective on how he was able to build this portfolio, we hear about how he funded all of his investments.
Sam Gordon: He's married—and he and his wife, I think he earns about $150,000. I don't think the wife earns crazy figures. I can't remember exactly what the wife earns. But it's not crazy figures. Like they came to me with $100,000, which you think about, most people would have $200,000, $300,000 equity sitting in their home.
So, to pull out $100,0000 of equity—or start it however you want, but say $100,000 in equity—, you'd probably only need really to start it.You only need $50,000 to $60,000—probably, not even. I started my portfolio on $30,000 a year. Like, it's usually possible. Like, even when I was working my job and hit 18 properties, the most I ever made was $85,000 a year.
I never made any more than that. And I still hit that many. It's managing each thing as we go. And for him, I knew his servicing was strong enough to sustain building that portfolio around growth and below-market buying. And we could leverage it and keep building it. But then, I knew we'd get to a point where ‘Let's throw a high cash flow deal in there to make sure the servicing stays strong’. But essentially, that portfolio, I mean, interest rates here at record lows.
But each of those deals, even those normal bread-and-butter, they're low maintenance houses, most of those properties—and they're all running at about $3,000 to $4,000 a year positive. But the granny flat deal obviously was a huge amount on top. So, even if I think we worked it out, even if rates went back up to, I think they had to get to 6% before he ran neutral. And then when he ran neutral, he had all that appreciation of all the properties. So, he'd probably still be $20,000 a year positive on that.
So, it's possible. It's just creating a strategy and then executing with the correct deals.
With everything that is happening in the world at the moment, it’s hard to predict what’s going to happen in the near future. But we learn what Gordon is hoping to achieve within the next 12 months.
Sam Gordon: Personally, I've got my little duplex going through. I'm just personally—I'm just going to focus on that with my own portfolio. I don't think I'll ramp it up unless some crazy deals come across my desk, and I don't have anyone lined up at the time. Unless something happens, I don't think I'm going to be picking anything up for myself. But it's honestly just going to be focusing on clients.
I want more people like this client of mine now. I want more people like that and build portfolios like that. My client base is so varied. I'll have guys and girls in their young 20s through to you know, 50, 60-year-old men and women and couples coming to me, and I'm helping everyone. But I love being able to do what I can do.
I just love it, man. I really resonate with it. It's a passion. It honestly is such a passion. And I kind of thought maybe I'll do this for, I don't know how long I thought. Because obviously, I got the portfolio. I have an income there, and I thought maybe I'll just do this for 5 years and help people and see how it goes. But I don't see myself ever getting sick of it, man. I just absolutely love it. Being able to pull those results.
And I think what I love about the boutique side as well is so many of these guys can just pick up a phone and call me. And I think they get blown away when I answer the phone or they text me late at night—and it's like 10 o'clock at night—and I write back to them and they're like, ‘Man, I just wasn't expecting it. Like I was thinking like two days later to get a reply or something’, or like, you know, ‘maybe a subordinate to kind of jump on and he wrote back to me or whatever’.
I'm just going to keep running this. I just absolutely love this side of things and focusing on building other people's portfolios. It's a funny feeling, because it almost feels like you might have played video games back in the day. When you've played a game and you went through it, right—and you made all the mistakes but you finished the level, and then you go back like six months later and play that game again. And, you know, all the things, all the mistakes and all the little pitfalls—that's kind of like what it is now with property.
I've made a lot of mistakes on the way through, and I can hold these people's hands on the way through and avoid all those mistakes. That's honestly like how I think I got it. Like, it's kind of cool like that. Like, again, ‘No, you don't want to do that. You don't do that’. Like, ‘This is the path. This is this strategy forward’. And it's awesome, and I love it.
Thoughts On the Property Market’s Future
We get Gordon’s prediction on what could possibly happen within the property market in the near future.
Sam Gordon: I can't 100% see what's going to happen at the back end of these holiday periods on people's loans coming off, JobKeeper ending—all those sorts of things. That is a thing that obviously people have to take into consideration: that we don't actually know what's going to happen with it. But I can tell you right now on the ground: All the places that I invest, the stock levels on market are ridiculously tight.
Now, if the stock levels on the market are ridiculously tight and there's still plenty of people looking to buy, prices are not going to fall. Like, if anything, that's a precursor to them rising. There's no precursor at the moment that I'm seeing prices going down. Combine that with ridiculously low interest rates, you know, record-low interest rates.
What I hope is that if people have put loans on hold and stuff, they've saved any additional income in case, you know, the worst happens, and they don't have a tenant at the back end. But for the most part, I'm seeing the same thing on the rental side as well. We're having no problems leasing the stock that we bring to clients. What I always negotiate for clients is early access for our property managers. And 9 properties out of 10 that we will bring that we have settled, have a tenant lined up for the next day.
That's what I've always done for myself, I've always done for clients—and it hasn't changed in this environment. I just can't personally, I don't see anything catastrophic happening. You know, all these people talking, you know—I can't even understand why the banks are releasing these reports, reckoning what they think is going to happen. I just don't see it happening.
If anything, definitely in the markets we’re in, the markets are still running hot. And we're definitely working really, really hard to keep the good deals coming. So, that's just my take on it, but I guess we'll see what happens.
Tyrone Shum: You can come back in 12 months, and we’ll say, ‘Hey Sam, were you right?’
Sam Gordon: I'll tell you one thing. I can't remember who interviewed me, someone called me a few months ago when it first started, when the pandemic first kicked off and they go, ‘What do you think is going to happen with the market?’ And I said, ‘I reckon we've got like a month. We've got like, you know, maybe 4 to 6 weeks where the panic is everywhere, and people will cut stock and just the fear. The absolute fear of what's going to happen’.
That was probably the busiest I've ever been in the business of both people coming to me, finding deals. And the amount of deals that were coming to me—it was unbelievable. The absolute steals for some of these properties that we were getting, because people just panicked and was like, ‘Just want to sell it. Just want to sell it’.
And then, a lot of stock cleared, a lot of people pulled listings off the market that didn't need to sell. And then, all of a sudden, there was this massive shortage of stock. And that window, that immediate window that was there was gone. So, now, like the next window of opportunity is what I said before about finding the off-market with the agents. But that window of opportunity that I called—I got it right. So, I was really pumped with that.
I realised I was talking to one of my good mates who is a really heavy investor as well, and I kind of spoke to him about a couple of weeks ago. And he was like, ‘That did actually happen’. So, we had a little bit of a laugh about that one.