Expensive lessons: Q&A with Sam Saggers

I grew up at the lower-middle class end of the spectrum but I was surrounded by wealthy kids who lived really well. I was very envious of these kids, but I became friends with many of them and their families taught me many lessons.

Wealth is a habit: rich people have the habit of living well. They pass that on – they teach, share, network and help each other. Having grown up exposed to seeing wealthy families at work, I knew I had to work hard and invest well to ever have a shot at being a millionaire!

I wanted to learn to become wealthy from the get-go. I had seen what property could do for the rich families, who all had massive real estate portfolios and would show me lots of their investments.

Q. What was your first property purchase?

I bought a two-bedroom unit that was from the 1970s, in Sydney, near where I lived. It was $250,000 at the time of purchase. It was in an area I knew and was comfortable investing in. Looking back, it wasn’t the greatest deal I’ve ever bought but it was a good learning experience. I was in my mid-20s and the property gave me many practical learning experiences.

The lesson that I’d bought the wrong property in the wrong market cost me $30,000 in hard savings

Q. How big is your portfolio now?

I have a portfolio across Australia and New Zealand. My current real estate portfolio is worth $11.1 million, across many different properties in different areas.

I know people like to talk about the number of properties, but I think market exposure is more important. I have 18 properties and I’m 39, so I’ve purchased roughly two a year – not bad, considering I started with $30,000.

Q. What was your biggest investment mistake? 

My biggest mistake was also my best lesson. I was young and naïve when I bought my first property. I was so happy, honestly believing that all I had to do was buy property and watch its value increase.

We all pay for education in one way or another – the lesson that I’d bought the wrong property in the wrong market cost me $30,000 in hard savings.

Looking back, it was my naïvety that resulted in me buying a dud. I obtained the property well after the growth cycle had hit its ceiling and I failed to negotiate well. I got caught up by my own emotions until I fell in love with the property and just had to have it. At the time of buying the property I didn’t look at the true income and expenses, I didn’t conduct research at arm’s-length and I had no idea about the cash flow or growth potential.

The decision to hand over my life savings of $30,000 as a deposit was entirely emotional. The property didn’t perform, nor could it. I was too late. The boom had come and I had bought at the wrong time. I couldn’t add much value to the property, so my big lesson was to make sure you buy a property that is either going to perform under market conditions or that you could add further value to.

Q. How long do you hold onto properties for before you sell them? 

Property is reliable, people are not! I stand by this statement. I find that people should not sell property if they can avoid it. Property will double in value over time, whether it takes five years or 15, and most people are better off just holding on if they can.

I find most people don’t maximise the benefits of property because they themselves become unreliable. People will often sell because they are simply going through a life change – losing a job or starting a family. People tend to hold property for less than four years then change their goals and move on. Property works best over the long term. I prefer people to learn the concept of holding forever, and I try to do that myself.

Q. What’s the biggest misconception Australians have about property investing? 

The biggest misconception is held by younger investors (either young in age or experience) – they think they cannot afford real estate at all because it is “too expensive”.

The truth is property has always been well balanced compared to incomes in Australia, and today Australia is still a land of opportunity. It just takes some knowledge to shut out other notions.

An unfounded fear is that the ‘great Australian dream’ has already ended – hence new generations abandoning ownership and preferring to rent for life. It doesn’t need to be that way. Anyone can make money out of real estate.

I have seen a flight attendant on $50,000 a year buy a few properties and end up buying her dream home in five years. It just takes some smarts to get the job done. She was determined and smart. I have also seen others on $150,000 a year blow their money on silly things and not challenge themselves to invest at all. People just need to get on with creating a plan.

They just extended the working age to 70, so people just can’t afford to retire. Having a real estate wealth plan is so important. It’s not about what you earn – it’s about taking some action.