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Sam Gordon, pictured with partner Morgan, has a $43m property portfolio.
High school dropout Sam Gordon has come a long way since making a living shovelling bags of putrid animal feed for a paltry $38,000 a year.
The 34-year-old former farm labourer from the Southern Highlands recently signed contracts on his 76th property and now owns about $43m worth of real estate spread around the country.
His impressive portfolio, started when he was 19, earns him a whopping $2m a year in gross rental income.
About 60 per cent of the value is held in equity thanks to a clever buying strategy that’s allowed him to “manufacture value growth” on his investments, while avoiding substantial debt.
Sam Gordon owns 76 properties.
“I buy the properties most people wouldn’t touch,” Mr Gordon said.
“They’re usually really rundown. Banks often won’t lend on them because they’re uninhabitable. I buy them in cash or with really low debt loans and renovate.
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“The trick then is to take out the equity I’ve created by refinancing the loan and using that money for the next project.”
Mr Gordon said making this strategy work required buying in locations where home values were rising quickly.
Another vital ingredient is finding properties where the potential rent is well above the mortgage repayments. He said he has also got “creative” with his borrowing.
One of his reno projects in WA.
The home pictured after the reno. The value doubled in a year.
“I would spend a lot of time doing the research on where to buy,” he said. “It has to be growing locations where there are opportunities to buy under value.
“You also have to know when to approach different types of lenders at different times. Some projects suit second tier lenders, others it’s better to go to the big banks.
“What I found was a game change when it came to getting loans was being a rentvester. Banks look at loans on your residence as a liability. It limits what you can borrow. If you’re renting, it’s a lot easier to build up your investments faster.”
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His first property was a two-bedroom unit in Wollongong purchased in 2009 with savings he had built up since he started his farm labouring job at age 16.
He renovated the property himself and used the equity gained to purchase his next property – a unit in Moss Vale.
He said he likes to buy properties no one else will touch.
This approach of buying at cheap prices, increasing the value through a self-done renovation, and refinancing was used to buy subsequent properties.
He did this until age 28 when he had enough passive income to quit his job on the farm. His earnings at the farm had been about $90,000 at this stage.
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“The worst part about working on the farm was the heat,” he said. “In summer you’d hauling bags of stock feed while it’s 40 degrees. It was particularly hard because there was a drought.
“The stock feed created all this dust. It got everywhere. The feed made from blood meal was just terrible, it had this putrid smell.
“The thing is that it kept me motivated. I knew I didn’t want to be doing that as I got older. All my free time I put into renovating properties. That was basically my holidays.”
The properties Mr Gordon normally targeted for renovation usually needed specific changes, he explained.
Mr Gordon said he loved cars but he got to where he is today by avoiding fancy purchases.
He preferred them to be free from structural issues but he wanted them to need big overhauls of features that would add value to the home.
“One of my best projects was a Perth home where there was no ceiling in the kitchen. I bought it last year and after a $33,000 reno, plus all the price growth in the area, the value has doubled.
“Projects like that keep you in a strong position to keep going because your equity position is stronger and your cash flow position is good.
“I think one of the biggest mistakes most investors make is focusing too much on capital growth potential and now paying enough attention to cash flow. You really need both.”
He did most of his early renovations himself.
He added that there were plenty of opportunities for new investors to make money in the current market.
“Last year was one of my busiest years because there is a lot of apprehension about rates and a lot of people sitting on the sidelines stressing out so lots of opportunities to do renovations have popped up.
“I think if you’re clear about what you want to accomplish with property you can start forming strategies that can get you there.
“I was never able to rely on parents to help me out but one thing I did get from them was crazy work ethic. They taught me you can’t sit and do nothing. You have to go out there and make things happen.”