In this episode he shares an update on his portfolio’s status and whether or not he reached his goal of 31 properties by 31 years old. Along the way, he delves into the wild ride that has been the last 12 months, the average size of his deals, and the background of the properties he’s currently buying— plus, he reveals how he does it all, and still manages to find time to eat and sleep!

Timestamps:
00:59 | Where Is He Now?
03:40 | Levelling Up
07:51 | Talking Numbers
13:18 | A No Brainer
14:47 | Halfway Through
16:24 | Stumped
18:13 | Managing the Portfolio
22:41 | Secondary Deals

Resources and Links:

[00:06:26] Because I'm young, people are like, 'Why wouldn't you just hold on to that forever?' But it's just like, I've done really well out of the deal. And in my mind that market wasn't going to go any further for quite a while. If anything, I thought was going to come back a bit because it was COVID driven acceleration. 

This is Property Investory where we talk to successful property investors to find out more about their stories, mindset and strategies.

 

I’m Tyrone Shum and in this episode we’re speaking with Sam Gordon, owner and director of Australian Property Scout. 13 years after starting his investment journey and nearly a year after his last update, he shares a status update of his portfolio. Plus, hear a fascinating case study and his secret to maintaining order in what many would consider an incredibly challenging role.

Tyrone Shum:   

The last time we caught up with Gordon, he was aiming to have 31 properties in his portfolio by 31 years old. Now 32, he’s back with an update that’s sure to smash expectations. Having started investing when he was a teenager, his whole portfolio has been a long time coming, and a lot has happened in the past 12 months.

Sam Gordon:   

[00:00:59] It's funny that different parts of the journey that kind of come into it as well, because you go through your first... if we're talking a large number portfolio, you go through your first number, you hit walls, and you hit hit roadblocks and whatnot, then you go to work around them and keep going. 

  

[00:01:11] And I think once you kind of get to this level, this is where it starts. It really snowballs. You've got different equity and serviceability and whatnot because of the portfolio and what it's already produced. So it's been a crazy year, it's gone from the 31 by 31, to the 40 by 32. So it's been a wild year, to say the least.

Tyrone Shum:   

[00:01:33] I was going to say that it sounds like you haven't slept at all. Most people don't usually even buy one or two properties in a year, you've gone ahead and bought nine additional properties in 12 months.

Sam Gordon:   

[00:01:43] That's it man, that's it.

Tyrone Shum:   

[00:01:47] What brought that on? Because I think when we last spoke, you mentioned to me that, 'Okay, I'm going to take a bit of a break, I've achieved what I've wanted to and built a substantial portfolio', which is substantial. For most people out there, having that many properties is a dream come true. But for you, you've taken it to this next level. And it's amazing to be able to hear what you've achieved and done.

Sam Gordon:   

[00:02:05] I appreciate that. I think the difference. Especially the past 12 months, obviously I run the business, Australian Property Scout Buyer's Agency. So we're sourcing property for people and whatnot. 

  

[00:02:18] It's the deals that kind of come across the desk that either people turned down, or maybe they get crushed by a building and pest, and we've already gone through the process and thought it was a great deal. And then everything's kind of come through and it's had these issues. 

 

[00:02:29] When these issues pop up that the average investor might not be able to take on or potentially even just for liability reasons, it's just too big to let an investor and a client take that risk. So then as those deals crash, or as they come through and we know they've got those issues, they're the sorts of deals that I'll pick up for myself. Because I know the upside's there. And I've worked on a lot of these deals before, big structural renovations, builds, all that different sort of stuff. 

  

[00:02:51] So knowing how to rectify those issues and having the capital behind me as well to be able to take on those projects, that's where a lot of that comes through. Because it sounds crazy. But the volume of deals that we see come through the business and turn down and also buying everything as well, it seems like a crazy number to buy in 12 months. 

  

[00:03:10] But for us, it's a deal every month or six weeks or something that comes through, it's like it's a great deal, but there's too much going on with it. And I was like, 'Oh, I may as well put it in the portfolio'. So it's essentially just that.

Tyrone Shum:   

[00:03:24] It's because you're in the business day to day. So for you, it's like the norm, whereas most investors, they're either working [a] full time job or running a business and so forth, and they don't see these deals as frequently as you do. And you go, 'Wow, this is a great opportunity. I might as well make the most out of it'.

Sam Gordon:   

[00:03:40] It's a crazy journey, too, it's like [what] we were talking [about] before, like, it's just leveling up as you go through and all these different deals and the appetite for risk and everything as well. And it all kind of comes into it. And yeah, mate, it's been crazy. A crazy old run, that's for sure. 

Tyrone Shum:   

[00:03:54] I know nine properties is going to be quite a lot to talk about in an episode like this. So rather than go through every single one, let's pick out probably the top two that [have] been the most, let's say, challenging. And maybe just talk about that, because I'd love to be able to hear what these properties have done. 

 

[00:04:08] And also to understand how you've been able to acquire these in such a tough environment. Because a lot of people are saying interest rates have gone up. Inflation is very high. [The] cost of building has gone up as well, too. And lending is even harder nowadays. Obviously, in your situation, you've managed to do it, because you've proven that you've purchased an additional nine. What happened, how did that come about?

Sam Gordon:   

[00:04:31] So there's a lot of different things that came into the equation. So I could see there [were] a few areas where I own property, and I could see they were going to come off the boil. When COVID was easing, I knew they were going to come off the boil because they were COVID driven migrations, especially out of Sydney. So I owned a lot of property south of Sydney. And so I saw those kind of markets changing. 

  

[00:04:54] There was a couple of [what] I call Big Bopper deals, like properties that I've done quite well on and they had a huge amount of equity still in them. And to access that equity, and to pull it up, and especially moving into a higher interest rate environment, I knew there was gonna be [a] huge amount of additional costs associated with that. 

  

[00:05:11] So instead, I was selling them down. I sold one down in particular that was the big one. I cleared about $600,000 profit on it. But it was about $700,000 in terms of net equity, but then I also cleared the $600,000 debt that was associated with it. 

  

[00:05:26] So when you're kind of wiping out these big chunks of debt, but then also walking away with, like, a big bag of cash, essentially, like this big bag of profit, it allows you to have that capital to be able to roll into deals. 

  

[00:05:36] And if you're rolling into deals with 20% deposits, especially if you're doing renos and stuff in cash as well and pulling it out, but you're increasing the yield. It's moving through the environment like that.

  

[00:05:49] It's that snowball effect. It can be hard to fathom starting out, getting to this level. But you cut your teeth on so many different types of deals, you know exactly how they work. You put your 20% in at this level, and then you're executing with cash and whatnot and refinancing it back out. 

  

[00:06:06] If you've got an 8% [or] 9% [or] 10% yield on the deal you've just executed, and you're still sitting at a reasonably low debt level as well— because of what you've done on the deal— then that's what the banks love, and they love to see it. 

  

[00:06:17] So it's been a pretty, pretty crazy journey around all that sort of stuff. But that's essentially how it all moves along. And a lot of people are averse to selling property. 

  

[00:06:26] Because I'm young, people are like, 'Why wouldn't you just hold on to that forever?' But it's just like, I've done really well out of the deal. And in my mind that market wasn't going to go any further for quite a while. If anything, I thought was going to come back a bit because it was COVID driven acceleration. 

  

[00:06:48] So I was recycling the debt and pulling that equity back out, it just made sense to then go on to the next phase of the portfolio. So making changes like that, that's what really can take things to a different level.

Tyrone Shum:   

[00:06:58] And that's what I heard, a lot of successful property investors who have been able to take that to the next level, they've had to make some hard decisions to sell either underperforming assets, or take the profit from something that's really good at this point in time because of the market. And then move on. 

  

[00:07:11] Because I know a few investors who have also got substantial portfolios in the Sydney boom back awhile ago, they sold their properties here and then took that cash to be able to reinvest back into Queensland, before the boom up there happened. And they've acquired quite a number of properties and they're much better off than holding just one property.

  

[00:07:11] I did exactly the same thing, so I know exactly what you're talking about. It's kind of like that velocity of money, the multiplier, like what are you doing? You can leave it in there, and it may do something for you, or you pull it out and put it somewhere else where it's going to do something for you and keep multiplying and building. So it's all about compounding, leveraging.

  

[00:07:44] So you turn it from one to, like, nine.

Sam Gordon:   

[00:07:47] That's it. That's it.

Tyrone Shum:   

[00:07:48] Which is a better result, I think. 

Sam Gordon:   

[00:07:50] I agree mate, completely. 

Tyrone Shum:   

[00:07:51] And I guess in terms of average size of the deal, what kind of value are we sort of averaging in terms of these deals that you're purchasing, or do they vary?

Sam Gordon:   

[00:07:58] They do vary, they vary a lot. So probably the bottom end of what I work in is kind of around $300,000. A lot of the time, the $300,000 ones are the ones that I might be doing decent renos on as well to push them up to $500,000 value or something post reno. 

  

[00:08:13] Up to probably deals in terms of purchase price and whatnot up around about $600,000. So it kind of ranges between the $300,000 and $600,000. We invest in a lot of different markets. So I see a lot of different opportunities. And [it] really just all depends what comes through and what makes sense.

Tyrone Shum:   

[00:08:27] And are you doing it all over Australia? Or do you focus on specific states or markets at this point in time still?

Sam Gordon:   

[00:08:33] We buy all over Australia, and I invest all over Australia as well. But it's always specific markets within those locations. So at any one time, there's different areas that are growing, there's different areas that are falling. 

  

[00:08:46] A lot of people have this thought or this view that the Australian market moves in this one direction. And yes, during COVID, the market kind of all went up. But now you're looking at the post COVID era. And you look at last year in Sydney, Melbourne had significant falls, even Brisbane came back a bit as well. 

  

[00:09:03] But you look at other cities, you've got your Adelaides and your Perths and a lot of regionals and whatnot that actually had significant growth. And if you actually drill down into the micro levels of it, the cities look like they did about 10% to 15% but certain areas had 25% to 30% growth in a year where most of the country fell. 

  

[00:09:19] So I guess to answer the question, we buy all over Australia but it's specific pockets that will produce the best results. [That's] obviously what we're focused on.

Tyrone Shum:   

[00:09:26] So really trying to find those ones that actually produce the results and obviously chasing those markets is probably the ideal thing rather than just sit and hold on one market and that's it.

Sam Gordon:   

[00:09:35] You spread the diversity. So you're kind of always moving in different ways.

Tyrone Shum:   

[00:09:39] So coming back then to, say, let's just choose two of the properties. Which ones have you so far purchased this year that you're currently doing? Maybe just talk a bit of background about one or two of them that have been so far reno or structural etc. Give us some background history on one of them.

Sam Gordon:   

[00:09:42] Probably the biggest one— because I know we're talking about the big renos that we're doing and whatnot as well— the biggest one was I bought these two properties side by side. And one of them was in okay nick, and the other one was a bomb site. It was no good. We couldn't believe people were actually living in there. It was considered a knock down. 

  

[00:10:15] So it went under contract for $350,000. They did the building and pest and crashed it. This was off market as well. It was actually sold to someone internally within the office that I bought it from. The building and pest came back and they crushed it. And they brought it to me as a block of dirt. 

  

[00:10:30] So I went [and] inspected it with my building and pest inspector and my builder. And we went through it all, and we worked out that we could essentially rebuild this house. And the ballpark would have been somewhere between $150,000 to $200,000. Which isn't that far off a new build. When you do, let's say, a four by two, you're probably looking at around $300,000 to build something like a four by two. So you're still probably $100,000 to $150,000 less. 

  

[00:10:53] But the difference is, this is in Queensland, in Brisbane. You do a deal like this, and you rebuild and you have legal height underneath, and you have essentially split level home and stuff. You can rent those for between $650 to $700. 

  

[00:11:03] So I was looking at this deal, going, 'Well, I can rebuild this property, yes, it's going to be a big chunk of change to rebuild it'. But instead of knocking it over and building brand new, it was $100,000 in front and my rent was going to be circa $200 per week more. So I was able to do this on that deal. 

  

[00:11:20] So negotiate extremely hard on the building and pest, pretty much ran them through the model that was going to be knocking down and rebuilding. It was circa, like, $100,000 off the price of what this previous contract had been. And I bought that one for $250,000.

  

[00:11:35] The craziest thing about it, as well. The dude was in a bit of financial pressure, like he was trying to get out of it quickly. Like he knew he was taking a haircut. But he needed to get out really quickly. He had a primary residence in Sydney and with big debt. And the one that was next door to it, he owned the two. So the other one was fine. It was a good little play. But yeah, this one I put for that. 

  

[00:11:55] The craziest thing about this deal is it's actually an 814 square metre block, corner block. So it's also strata titled. So I'm gonna strata off a corner block and build on that one as well. And then own the other one. 

  

[00:12:12] So I'm trying to make a decision, we're running the numbers at the moment with the builders whether I'll build on this thing and sell it, or whether I build on it, build specific purpose building and and hang on to the rental as well. So it's a bit of an insane deal. 

  

[00:12:26] [The] minimum rental yield, even if I hold the thing as is going to be around about 10.5% to 11% as a yield. So it's pretty strong. And there'll definitely be a few hundred grand in terms of lift as well. 

  

[00:12:39] But again, it's a crazy deal. You know what I mean? Like, we're not paying market rate, we picked it up quite cheap, but then also being willing to put that much into a reno. That's fraught with a lot of possibilities on it as well.

Tyrone Shum:   

[00:12:51] That's the challenge. A lot of people go, 'You must be crazy to put $200,000 into a reno', up in Queensland, smaller, but you've only spent $250,000 on this one. It's like, 'Wow. What for?' Now it makes all sense, because most people don't usually spend that much. But I think you've obviously run the numbers to make sure it stacks up. 

  

[00:13:06] Plus, there's even more upside. You said you can even strata title, you get another upside of potentially selling that off to get your cash back. So it looks like you've really gone through and and seen, okay, there's lots of different opportunities. Whereas most people go, 'Yeah, it's just a buy and hold kind of thing'.

Sam Gordon:   

[00:13:18] Well, the crazy thing as well was $350,000 was considered a discounted price. So don't get it for $250,000. And let's just say worst case, and it is $200,000, because that's where we're running. [The] best case is $150,000 [and the] worst case was $200,000 if different things needed to be fully replaced. And we're actually going through the reno at the moment, it's already started. 

  

[00:13:37] But let's say it's worst case at the $450,000, in terms of $250,000 purchase with a $200,000 reno. That property on completion, even if I didn't build it, just having that size land content as a corner block, like, that's a $650,000 [to] $700,000 home. So it seems huge, and, like, yes, as a reno cost base, it is huge. But when you work out all the numbers, it's just an absolute no brainer.

Tyrone Shum:   

[00:13:58] I mean, if the value of the home is worth $650,000 after your reno, you'd literally have got it way under market cost, and also, too, you factor that in. So you literally could say that you purchased it for $450,000 instead of worth $650,000. Again, it's just a no brainer. Which makes sense. 

  

[00:14:13] I guess it's a risk appetite and risk profile for each investor. Because as you said, your investor wasn't initially interested in doing it, because of the fact that there's too much of a risk. But because you've got experience and you've got 30 odd properties under your belt, you've done multiple developments, you've done multiple renovations... 

Sam Gordon:   

[00:14:28] And I've already got the team there. 

Tyrone Shum:   

[00:14:29] You've got the team as well. 

Sam Gordon:   

[00:14:30] It's already done. Not as hectic renos, but pretty close. Like, pretty gnarly ones as well. This is definitely the top of the pile, but I knew I had a team that could execute it for me as well.

Coming up after the break, he shares how close this project is to being complete…

[00:15:07] The whole thing will be essentially a brand new essentially two storey house once it's finished, fully certified.

How he finds the time to get everything done and still make time for breathing and sleeping…

[00:18:57] People think having a 30 or 40 property portfolio is a massive headache. 

He explains how property portfolios aren’t too dissimilar to a weekday meal.

[00:23:18] Last year it was funny, we're moving into these different areas, and I bought a lot of... I call them bread and butter deals.

And that’s next. I’m Tyrone Shum and you’re listening to Property Investory.

Tyrone Shum:   

Thanks to his incredible team with the renos and his discounted purchase prices, Gordon is no stranger to getting a property up and running quickly. This latest project is no different.

Sam Gordon:   

[00:14:47] We're around about halfway through now, I've probably got another about two or three months to fully finish it off. So essentially went through, like, a rebuild process of the structures of the home and then essentially, like, a full internal fit out again, of the living areas kind of up and down as well. 

Tyrone Shum:   

[00:15:00] You literally gutted the inside, too.

Sam Gordon:   

[00:15:03] Everything, man. It's $200,000 dude, it's a decent chunk. The whole thing will be essentially a brand new essentially two storey house once it's finished, fully certified.

Tyrone Shum:   

[00:15:13] So are you saying that the reason why you kept it was because structurally the whole building itself was strong? There [were] no issues with that roof and walls and all that kind of stuff? But inside you just want to gut it. So you can actually redo a whole brand new layout that way. But what was originally the size of the house inside?

Sam Gordon:   

[00:15:28] It was just a three by one. It was a[n] old, like, weatherboard high set Queenslanders. So it's a standard three by one design. Underneath was like kind of semi built in in a garage, but not legal height. 

  

[00:15:39] But if you go through this rebuild process, you can actually essentially knock out that bottom level or lift it. That's what we're going through. So you go through the lift, you actually rebuild the lower level stumps and structures and whatnot there as well. And then you can get that certified as actually additional living space, put the carport at the front, so you don't need the garage to put the carport out the front. And then you've essentially got a three by one and then a three by one underneath as well. And yeah, it's pretty crazy.

Tyrone Shum:   

[00:16:03] That's phenomenal. So downstairs, was it always enclosed off before? 

Sam Gordon:   

[00:16:07] It was, yes. 

Tyrone Shum:   

[00:16:08] So all you're doing now is you've ripped all the walls up, lifted it up, restumped it, and then get legal height. How much more did you guys have to lift it up by?

Sam Gordon:   

[00:16:14] It wasn't actually that far off? So 2400 is your is your legal height limit [and] I think it was running at about 2250 to 2300. 

Tyrone Shum:   

[00:16:22] So it would be pretty silly not to do it.

Sam Gordon:   

[00:16:24] It's very close. Sometimes you can target that stuff as well and make good coin out of it. But it's tricky as well, because certain slabs underneath, I found this early. Again, this is why sometimes a bit of a liability if you don't know what you're doing in this front. 

  

[00:16:40] But there can be some slabs that aren't compliant. And you can run into issues and have to repour, that can add $15,000 [to] $20,000 underneath. And then you're stumped sometimes. It's just not as easy sometimes to be able to do this thing. 

  

[00:16:40] That's why you need these builders that you can really trust and you've worked with. That's why it's confidence to take the project on. But it is a cool little strategy. You can definitely do a lot with that as well.

Tyrone Shum:   

[00:17:02] So let's just say, for example, if you found out that this had stumping issues, or the foundation wasn't solid enough, would you still [have] done it? Or would you have walked away?

Sam Gordon:   

[00:17:12] Even if I'd knocked the house down and actually rebuilt, I still probably would have made really good money on it. So I still would have bought it. And I was running everything making sure what could be done on it, like worst case scenarios and everything. 

  

[00:17:24] But that's why I took the building and pest inspector and the builders along as well. So, no, we haven't had any issues. And it's already been stumped and everything now, like, structurally now she's sweet. Just got to go to do the fit out now.

Tyrone Shum:   

[00:17:35] Internals is easy. Once you get the hard part, because, usually, say, for example, I've worked in a few developments with a few developers, and it's getting into the ground is the hardest. If it's building apartments getting into the ground, if it's got rock there and you hit rock, you're in trouble. And that's going to cost a lot of money to get rid of it. 

  

[00:17:51] Whereas if you have an easy smooth sailing to do the foundation, then everything else inside, you just get it done. So it sounds like you've really gone over that hump already and now you're progressing really well. So in about two or three months they'll be ready. And you'll be able to just rent it out.

Sam Gordon:   

[00:18:06] I've got everything going through for the strata subdivision [and] everything as well now, so that's gonna be a cool little project to knock over as well. I'm happy with that one.

Tyrone Shum:   

[00:18:13] My question is, how do you find the time to do it? Especially when you're running the buyer's agency business, especially when you've got your portfolio to manage? It's no small feat, you'd definitely need, like, almost a full time property manager to help you with regards to managing your properties. Last also, developments, meeting the builders, etc. How do you?

Sam Gordon:   

[00:18:13] It comes down to having the right team. So in terms of managing my portfolio, I'm pretty lucky in the sense of I have a full time assistant with the buyer's agency as well. So she helps me a lot in terms of the property management side. 

  

[00:18:45] But there's actually [a] funny thing, [and] we'll go over the other stuff in a sec. But it's funny with that, because I've talked... I can't remember if I've spoken to you about this before, but I speak about it every every now and again in terms of, like, clustering properties. 

  

[00:18:57] So people think having a 30 or 40 property portfolio is a massive headache. It probably would be if you had for each region, or if you spread them right across. Let's say you had 20 different locations with two properties in each and had 20 different property managers, mate, that'd do your head in. 

  

[00:19:12] But I think I've got, I think I've worked it out, six or seven, maybe it might be seven or eight now in total in terms of property managers that I've got managing a 40— it's not a 40 property portfolio, it's like that strata subdivision one that I'm going going through at the moment, I've got a lot of secondary dwellings. So I've got 40 properties, I've got about 55 rentals. But it's spread between seven or eight property managers. 

  

[00:19:31] So these guys know you're a huge part of their business. And it's very good money for them. We're also like, I'm a very transactional, like, I know what I'm doing when it comes to the rental side. So we move quickly when things need to be fixed, I'm not, like, a painful owner, so to speak. 

  

[00:19:46] And they respect you and they'll work really hard for you on that front as well. And if they don't, you give them a flick and you move on to someone else that you know is going to be able to do the job as well. So kind of clustering a portfolio that large with so few property managers that really want to look after your product, you don't have as many headaches as you should. 

 

[00:20:02] And I know people, they might have one [or] two [or] three properties, they probably have more headaches than I do with my portfolio, because they might not have the right property manager or they're not managing the property manager correctly as well. Or they think when a couple little maintenance things come through, it's the end of the world. Which we all start with when we buy our first deal, but it's kind of having a little bit of thicker skin with actioning things quickly that need to be actioned or bidding things that don't need to be done. And just managing it really effectively from that front. 

  

[00:20:30] So it's not as big a stress as you think. I pretty much just have the assistant go through all the statements and everything just to make sure everything's flush and everything's all good. But again, it's only seven or eight statements for that many properties over the years. So it's pretty good, man, it's pretty tidy.

Tyrone Shum:   

[00:20:46] Because I think what what it sounds like you've done is you've been able to actually find a group of properties within, say, a region or area that you're [an] expert in. And then from there, you just continue to buy in those areas, as soon as the market changes. So that way, you can actually get those deals, and then you just continue to work with that same team. 

  

[00:21:01] Because I can't imagine if you had 40 properties split all across Australia, different builders, different property managers, it would be a nightmare to manage. But now that you've actually put it in that perspective, it makes more sense. So that's probably the reason why you've intentionally chose those areas, because depending on [the] market cycle, you go back and buy more eventually.

Sam Gordon:   

[00:21:18] That's it. And you've got those different people that you trust in there. The same thing you said before about, like, how do you find the time to manage the builders and this and that and everything. And, like, realistically, the builders we use, like I use the same builders pretty much cover me per state for the states that operate in. Which might be three builders across the whole country is all I need to deal with. They prioritize everything they do with us, because we do so much business together, they always look after us. 

 

[00:21:42] A lot of the time where there's some quite decent builders that we work with, we're pretty well their only client or one of their only clients, because there's so much volume that they know if they do a good job, they keep this and they just work on our staff. 

  

[00:21:56] And it actually works really, really well. So they'll do our renos and they'll do our builds. And it's just that continual thing. So they just run everything for us a lot of the time. So we'll work with them a bit from the project management side, we've got an in house project manager as well. So a lot of time, I need to do very little liaising with the two of them and then they'll run everything. And they run everything for the clients. And then for me, I say just look at me as a client, just run my stuff as well. So it's just like, it all goes through and it works awesome, I love it.

Tyrone Shum:   

[00:22:22] It makes sense. It's such a smart strategy. So basically, all your clients would probably also use the same resources and tools as you are, because that's how you get the volume through. And then whenever you have a job for one of your properties, you'll send that across. And that's the reason why the builders like working with you, because there's enough business for them, it's pretty much full time for them.

Sam Gordon:   

[00:22:38] That's it man, it is, it definitely is.

Tyrone Shum:   

[00:22:41] So that renovation sounds really amazing. Any other ones you want to share, maybe a second one that you've recently been working on?

Sam Gordon:   

[00:22:47] I've actually built in... it's actually quite funny man, because I've built in quite a few of those similar style deals. Maybe not on that level, but where the ones come through and they might be decent little renovations. So we do quite a lot of even like the secondary dwelling builds, we've been talking about. Maybe not always the strata, so actually putting it on its own title. 

 

[00:22:53] But secondary dwelling sort of style deals where you're achieving those higher than average cash flows, you've got two rents on one title, different things like that. Especially in an environment like now, the high interest rate environment, these are one of the only plays that's coming in with significant cash flow. 

  

[00:23:18] Last year it was funny, we're moving into these different areas, and I bought a lot of... I call them bread and butter deals, which are your growth properties, great location, buy them below market value, all the good stuff on that, but they don't have that additional lever to pull for the cash flow.

  

[00:23:34] I look at them, they're my foundations we build the portfolio on. So you kind of scale with that. But then when they've done their growth run, it's kind of the same as the one I sold south of Sydney. When they've done their growth run, I sell them off. And when I sell them off, I can either re leverage into more deals or I use it for debt reduction. 

  

[00:23:48] So a lot of people would look at [a] portfolio my size and go, 'Shit, he's got, let's say a little over a $20 million portfolio, he's probably got $15 million worth of debt'. But I'm actually sitting at less than a 50% LVR. And it's because I go through debt reduction and work it like this and buy in the right markets that grow. 

  

[00:24:04] So I'd accumulated a lot of bread and butter style deals during 2021. There [were] a lot of different markets starting their growth cycles, I was buying in quite early, I was accumulating a lot of those. 

  

[00:24:17] And then this year, I knew interest rates were going to start making their run. I was like, 'I'm gonna start building some additional cash flow'. So I started moving towards more of these cash flow ideas as well, building those into the portfolio and moving through the execution. 

  

[00:24:29] So a large number of them would be very similar to, say, a deal that I'll probably explain to you now. 

 

[00:24:42] $325,000 purchase price, $15,000 reno that went into it. And then you might be building, depending on where you're building and the quality of what you build as well. Because there's different states you can build different quality products. And when I say different quality I mean different configurations. 

 

[00:24:56] So some states you can actually get three bed, two bath secondary dwellings in, you rent them for, like, the same as, like, a four bed, two bath in the same area because they're brand new. And so you're getting, like, this huge income stream off this one asset type. And so I've run through quite a few deals like that. 

  

[00:25:12] And so you might be building, again, because it's a bigger build. And you might be building in brick on a slab, but three beds, two baths, you've also got an ensuite and bigger unit. So you might be building more in the high one hundreds for a product like that. 

  

[00:25:24] So all in you might be, say, $500000 [or] $550,000, but you're getting $800 plus a week, and you're pulling above 8% yield, you've got these two dwellings, and one's brand new [and] the other's in good nick, so you've got appreciation side as well. So literally, you might be sitting at $10,000 a year in net passive, but then you've also got depreciation on it. So like, you declare the whole thing, but you're writing a massive portion of it off as well. 

  

[00:25:47] And so I just kind of went through a bit of an accumulation of those sort of style deals. Normally, like, bigger renos than, say, like, a $15,000 one. But the $15,000 ones are actually great ones for clients. So you might do those but the bigger ones are the ones that I was kind of picking up this year that comes through, needs a full gut, might not have any one of the books, it's a $50,000 [or] 60,000. Or you might strip the whole thing out, two new bathrooms, kitchen, full repaint, refloor, full kit and caboodle on these things.

Tyrone Shum:   

[00:26:12] That's a bit too much for the investor, they might go, that's a bit too much they want to put in.

Sam Gordon:   

[00:26:16] A bit too much, especially on, like, a little project like that where they're putting in the extra for the secondary dwelling as well. And building those out. And again, that is kind of 8% plus yields, depending on the areas. Because some of them that I'm doing are, like, right near the beach. So you're right near the beach, I'm gonna take a slightly lesser cashflow, because I also know it's... for one, exceptional growth location, but also in a very desirable location, pocket beach wise and whatnot as well. 

  

[00:26:41] So I might take a slightly less on the on the yield, because I know I'm gonna get an above average growth rate on that thing as well. So it's just been a funny accumulation of that sort of stuff. And yeah, like I was saying to you, picking through this stuff, it's like, it's probably a bit too big for a client, I'll just pick it up.

Tyrone Shum:   

[00:26:55] You mentioned your portfolio is at about $20 million at the moment. What kind of rental or average return are you getting across the portfolio at the moment? Because if interest rates are going up, as they're going up close to the seven mark, does that portfolio cover enough of all the debt and so forth to be able to do what you need to do?

Sam Gordon:   

[00:27:04] My portfolio still very, very positive, like very heavily positive. Even though we've had a lot of obviously increases in terms of rates, the amount of cash flow that the portfolio generates, because obviously, as well, I've accumulated so much over the years that a lot of my stuff, like I said before, is at a very low debt level. And then I do these higher than average cash flow plays as well. 

  

[00:27:34] And some of the deals that I bought that when I did the deal were maybe 8% or 9% in terms of a yield, there's been so much rental growth as well, price growth and rental growth, that now those things [that] were 8% or 9%, with the rental growth [that has] come through, they're now at, like, 15%. 

 

[00:27:47] I've got some now that on purchase price are over 20% yields. And this is where a lot of people, they take that short term view of like, 'Oh, it's only 7.5%', or maybe it's 8% or something like that in terms of percent. And they deliberate on it. 

 

[00:27:58] And it's like, you've got to look at, like, what's it going to be sitting at in five years? And when those rental rates go up, because that's one of the big things. And I think a lot of people have missed lately, the fact that when inflation rises at a pretty intense level that we're going through at the moment, a lot of the time, rents, which is a household expense, also climbed quite rapidly as well. 

  

[00:28:17] So it's almost like it's a double edged sword of thing, which is there's good and bad that comes with it. So everyone's focusing on the bad side. But I'm looking at the good side and I'm going, 'This is awesome'.

Tyrone Shum:   

[00:28:24] Because that's the thing, it's time then, really. The longer you have your portfolio, the more it actually grows. And especially when you said debt reduction, due to the fact that there's capital growth, you've been paying down the debt as well, that allows you to have a really, really positive portfolio. 

  

[00:28:26] And it's just a matter of time. If you said 13 years, that's not long at all, when you compare it to how many other people studied in medicine for 15 [to] 20 years, they could build a portfolio like yours, and not even have to work.

Sam Gordon:   

[00:28:52] It's crazy what you can achieve in a couple of years. And then in 10 years. What you can achieve in a decade if you commit to this thing will blow almost everyone's mind. If you literally mapped it out properly of we're starting with this amount, this is what we do, if you really committed to it, what you can do in two [or] five [or] 10 years is insane.

If you learned a lot from the episode, stay tuned for future episodes where Sam Gordon and I will continue to share with you more property stories from his own journey.

Also, did you know when you work with Sam, he’ll include a strategy session to help you put together an actionable property plan to help you build your portfolio just like him. Having a solid plan is the difference between success and failure.

Simply visit australianpropertyscout.com.au and fill out the contact form, or TXT 0499 88 10 40 and quote “APS”.

Thanks for listening!