What are the pros and cons of investing in a commercial property?
What are the pros and cons of investing in a commercial property? Read on to learn more. ...
Join the team and special guest as we speculate, meditate and pontificate on all things property investment. Listen now!
Some areas have seen astronomical price growth over the past few years but it looks like we may have finally hit the top of the cycle. With some indicators showing activity in the market is seriously subsiding we ask "Is Australian property in a bubble?"
Stop children, what's that sound? Everybody look to see if aircraft flight paths are bringing prices down. Well, a survey from Brisbane has studied this phenomenon and we'll be looking at the results to see if it’s all just a bunch of white noise.
And finally this week’s special guest Sam Saggers opens up about some lemons he bought when he first started investing that nearly stopped his journey before it began!
The Smart Property Investment Show gives you insight, strategies and tactics that every property investor can use.
In each episode, the Smart Property Investment team and its special guests will break down what's happening in the world of property investment, how it affects everyday property investors and how they can take advantage of it.
Andy Scott: Hello, it's The Smart Property Investment Show. Coming up in this episode, double, double, toil and trouble, fire burn and property price bubble. It's flight path furore as we look at the impact of jet planes and property prices. With Sydney having done its dash, we ask, "Where's next?" All this and more in this episode of The Smart Property Investment Show.
Hello, and welcome to The Smart Property Investment Show, where we speculate, meditate, and pontificate on all things property investment. My name is Andy Scott. I am an investor and the publisher of Smart Property Investment. I am joined as always by fellow investor and managing editor of the title Mr Phil Tarrant.
Phil Tarrant: Andy.
Andy Scott: How you going this week?
Phil Tarrant: Really well, thanks. Good to be here.
Andy Scott: Good. You sound quiet. Are you okay?
Phil Tarrant: Me? I'm all right mate. I had Chinese dinner so I'm a little bit slow at the moment. I'll pick up, don't worry.
Andy Scott: That will do it, mate. That will do it. Our special guest this week is the CEO of Positive Real Estate, Mr Sam Saggers. Hello, Sam.
Sam Saggers: Andy, these for having me. Phil, always a pleasure.
Andy Scott: Not at all, mate. Thanks for joining us today. How has your week been?
Sam Saggers: Mate, it's been pretty good. Trying to keep the dream alive, so it's all happening.
Andy Scott: That's good, mate. Positive Real Estate, obviously coming up on your tenth anniversary aren't you?
Sam Saggers: Well over a decade. Yeah, we've been punching away at it. It's been going well mate. We're happy to celebrate a decade in the industry helping people, helping investors.
Andy Scott: Congrats, mate. For those that don't know specifically, what is it that you guys do?
Sam Saggers: We do education for one. We help people understand what they can do financially. We work on property. We're deal-makers. We look at the market, we analyse the market. We help people really free themselves financially to get ahead in this world.
Andy Scott: How many clients do you think you've worked with over the last 10, 12 years?
Sam Saggers: In our club we've got six and a half thousand members at the moment. A fair few, keeps you on your toes.
Andy Scott: I bet it does. You must be doing something right. I know you picked up a slew of the Investors' Choice Awards early this year, so congratulations on that, mate. However, look, people aren't here to listen to me to ask you to tell us how great you are. Sorry about that.
So without further ado let's get cracking on with the first story: all about property bubbles. Gentleman, we are stuck in one. That's the reality. We're just going to have to face up to it.
That's the opinion that's come from a major bank. They have labelled Melbourne's inner-city apartment market as a bubble. They say it's being inflated by cashed-up foreign buyers. That was David Cray, the CBA chief financial officer making those comments. The NAB Residential Property Survey has just come out recently. Apparently in Victoria, 25 per cent of new property transactions are from foreign buyers. We've had Australian Securitisation Forum in Sydney the other week, we had Fitch ratings managing director Ben McCarthy, he said in the agency's view and I quote: "Our view is we are in a bubble." Pretty cut and dry with that.
Chris Joy as well. He is the Smart Money investment director and he's a contributing editor to the AFR. He's basically said, "I think there is a bubble. I don't think it’s a massive concern."
Sam, simple question: "Is Australia in a property bubble?"
Sam Saggers: I think certain pockets of Australia, absolutely a little bit overpriced right now. There's going to be a correction. There's areas in Melbourne which are in a bubble, let's face it. There is a small bubble about to do a pop. I don't think that's such a bad thing to be honest with you. I think a correction prices, particularly in Melbourne and Sydney, I think it'll bring some balance back to the market. When we say bubble, it's an over-inflated term. Does it mean your property's going to be worth half when the bubble actually pops? I don't think so. I think we're talking a correction of maybe five per cent or 10 per cent.
I will add, boys, that Melbourne has some great areas to buy. In fact, if you actually understand the town plan of Melbourne it's quite easy for investors to avoid areas of oversupply. In fact, if you have that concept in the back of your mind that you're bit of a NIMBY, which stands for Not In My Back Yard, you go to those suburbs and there's absolutely no supply, and they are very desirable areas. I think into the future areas like that, they just might grow in value.
Andy Scott: What about you, Phil? Do you sit there read these – because you were telling you were looking to acquire property quite soon in this market – do read these bubble stories and think, "Hang on a minute. I think I might sit on my hands and do nothing"? Or do you listen people like Sam who's in the industry – he wants to encourage people like you and I to invest anyway – he's saying “It's all good, there's plenty of areas to invest. Get yourself going. Get in there. Ignore all the news.” Where do you sit on things?
Phil Tarrant: As a journalist, and I'm going to put that hat on rather than a property investor, I speak to people all the time and one of the questions I ask, and I also get asked, is, “Is it a good time to invest?” Whether it's today, whether it's six months ago, whether it's five years ago. My answer is always, "Yes, it's a good time to invest."
It's always a good time to invest. There is always an opportunity in a market somewhere. When I'm investing myself I look at the numbers, I rationalise my investment as part of my overall strategy. Am I concerned about property bubbles? You know, there's parts of the Sydney market, there's parts of the Melbourne market where are they overinflated? Yes, they are. Am I investing in those areas? No, I'm not. For me it comes down to good old-fashioned research, grunt work, understanding what I'm trying to achieve and finding those locations that provide the best investment opportunity for me.
When it comes to property bubbles, we go through these cycles time and time again. Sometimes a property is under-priced and it's a great opportunity, other times it over-priced. It's always a good time to get into property.
What I think has happened is that our good friends at APRA have identified that property is growing at a pace which is unsustainable, and I think that's where this bubble analogy comes from. And do I agree that property price increases in the Sydney is out of control? Yeah, it was. Already we're seeing, and you're probably better to chat about this, Sam, effects of the new APRA requirements in terms of investment lending. It's really slowing stuff down. Auction rates are at an all-time low over the last two, three years. That's about right, isn't it?
Sam Saggers: It's definitely had an impact. We probably saw roughly about four or five months ago those changes come through, and it was really quite dynamic how quickly the market started to actually cool. Really the APRA changes were geared toward Sydney. Let's face it, property prices have virtually doubled in three years, four years, so it's probably a good thing that it's coming in. At the end of the day, as a resident of Australia, I want affordable housing. I want people to be able to buy their dream home. You know what? Maybe it was pushed a little bit too far, so a mild correction, if people want to call that a bubble, in my world it's a small correction and that's what we're in store for.
Andy Scott: Good stuff. I think the thing to take away really from that is that there are obviously going to be overheated places in the market, and as a serious investor you probably want to steer well clear of that, but you know what? It's probably not the doom and gloom and the sky falling and headline grabbers and headline writers would want you to believe, I guess.
Moving on. Our next story, I thought this was quite interesting. This comes from a study at the Queensland University of Technology. They looked at the impact of aircraft noise on home values. I know when I first moved to Australia where I was living at the time I was under a flight path. Used to irritate me beyond belief. My gut reaction is, "You know what? You wouldn't buy a place here. Who'd want to live here?" And you'd think that would depress property values.
They've done a study, their conclusion is, minimal if any. Sam, seems like a classic case of common sense just being wrong, basically. Living under a flight path is rubbish so it won't be good. Not being supported by any data that's out there, you obviously speak to a lot of novice investors, people who are trying educate themselves. What are some of the most common misconceptions you think you hear that you know from your experience and the data that you see that you see just do not hold up about property investment?
Sam Saggers: Obviously, if we're coming back to the flight path issue, one of my first jobs was in St. Peters, which you feel like the plane's about to bloody bonk you on the head it's that close. But if you look at that market, you would absolutely say that flight path issues have not affected that marketplace. It's grown extremely well in value. Look at other areas where the aircraft noise is quite, does impact suburbs, but I haven't seen it being relative to prices. I really haven't.
We've seen places like Leichhardt, Hunters Hill here in Sydney where aircrafts pass by, and it just doesn't affect it. In Brisbane, you got your Morningsides, Bulimbas where planes do land if they don't choose to land over the bay. I just haven't seen that type of problem is causing impacts on prices.
Andy Scott: What about yourself, Phil? I suppose we refer to them as ‘external factors’ but any sort of things that either you hang your hat on, and say, "I look for that because I know it does affect property prices"? Or perhaps as importantly things that you've learned to ignore like what, anecdotally, Sam said he realises it doesn't have any impact at all, but things that you've learned as well that “As an investor I can pretty much get away with ignoring that?”
Phil Tarrant: I think it depends on property cycles and also where within growth cycles certain suburbs are. Looking at Sam’s analogy – if you drew line from Hunters Hill to Mascot, you go over the side of Balmain, Lilyfield, Leichhardt, and then into your Erskineville, St Peters and all that sort of area. A lot of the suburbs surrounding those grew in value a lot faster than those directly under the flight path, but as populations and demand increases, those suburbs become desirable because people are priced out of the neighboring suburbs which might not have as much plane noise.
Eventually it just becomes irrelevant. I think you find that's the case with a lot of investments where people would traditionally think, "This is a bad or this is a negative attribute to it, and therefore I'm not going to invest in it," or "This is such a bad attribute, if I invest in it I'm not going to get tenants in and that's a bad thing."
But when you look at main roads these day, if I was 20 years younger and I had money to invest, I'd be looking at arterial belts around Sydney or Brisbane or Melbourne where I could be picking up land along main roads, which might not be desirable in terms of having a nice house on it, but when you look at zoning laws on these main arterial roads, they're getting high-density stuff on it right now. I imagine a lot of people are cashing in on that Sam?
Sam Saggers: We were talking about that off the air before. The reality is some of the main road investments in Sydney have turned out to be real winners. We've heard stories of young families moving to North Ryde and buying on a main road, $800,000 –a year later being offered $1.8 million just because of the zoning law changes. At the end of the day I think in dense populated areas where there's just more people than there is properties, at the end of the day, property always wins.
Phil Tarrant: There is certain things, though, you need to be considering when you're investing. This happened to a couple of mates of mine who have invested somewhere which presented a good opportunity, but when they get to the financing level – and you're much better to talk on this than I am, Sam – but they've bought a house which is near high tension power lines, and that sometimes influences the amount of money that a lender is willing to lend at a LVR.
Sam Saggers: Absolutely. If you're borrowing more than 80 per cent, if you're going into 90 per cent, particularly mortgage insurance, is the real challenge. They'll look at the valuations of the property, they'll conduct their own analysis of the area, and if within the local environment there is a challenge, it can actually affect your lending capacity. More importantly, actually can affect the person who potentially you're selling to one day, their lending capacity – which really narrows the marketplace for resale.
You have to do your research, you have to do your due diligence. A little tip for listeners: If you can get your hand on the valuation, you can always look and assess the risk rating on a valuation, and if it's greater than three, and particularly in the environment sector, of course you might just be not realising that you're buying something that has an impact or can have a local impact assessed to it.
Phil Tarrant: If you had to pull out four or five red flags that environmentally, you should be concerned about – you've got power lines close by, it being a flood-prone area ...
Sam Saggers: Bush fire.
Phil Tarrant: Bush-fire related stuff.
Sam Saggers: Obviously every area is different. It can be things like too close to recycling, for example. Rubbish dumps can be a real challenge for lenders. Like you've identified, power lines. It can have things to do with underneath the ground itself where there's been some mining impact on it. It's a broad-base, lots of things can affect it. The tip I'd say for investors is look through your valuations if you can get a hold of them.
Andy Scott: Good stuff. Thanks, Sam. Now, coming up to what you know will be my favourite part of every episode. Phil, Sam, you may not know this about me but I love a hot spot. As much as, let's be honest, more than the next person. I literally can't get enough of them. There's a new report that's come out.
Sam Saggers: I think I've actually come to hate "hot spots."
Andy Scott: No, love them. Love them, Sam, love them. This is the Hedonic Home Value Index. This is from CoreLogic RP Data. Tim Lawless making some things. Much as I love these things, I'm going to have to call Tim out on this. He basically – this report has basically come out and said “Sydney and Melbourne is done”. He then pretty much goes on to list every other place in Australia that's not Sydney and Melbourne.
Phil, you've looked at some of this stuff. You can see some of the places that he mentions. Is there anything in this at all? He's talking about south-east Queensland, northern New South Wales, Tasmania, about Western Australia, Brisbane, Gold Coast, Coast, Byron, Cairns, Hobart – the list keeps going. Is there anything in this, or is this just sort of confirming Sydney and Melbourne are done? Tim knows that people are desperate for hot spot stories, so he's just giving us what we want even though he knows that we know there's nothing in it at all?
Phil Tarrant: The thing is that guys over at CoreLogic RP Data, they got good research over there, they know what they're doing. They’ve got some very, very bright cookies in there who can crunch some data and filter that over a whole bunch of different things. Any time CoreLogic RP Data gives us something, I always consider it to be of quality. You're probably giving Tim a bit of a hard time here by calling out that there's hot spots everywhere.
Andy Scott: I didn't quite say that, to be fair.
Phil Tarrant: A lot of the places here make a lot of sense to me. I think when it comes to hot spots – and I always say this, I don't want to sound like a broken record – but the hot spot we're talking about today was probably where you needed to be investing two, three years ago. It's good to understand I think with hot spots how someone gets to a point to be able to say that this is a hot spot. What are the indicators that the person who said, "This is a hot spot" has used to say “This represents a good investment opportunity”?
That involves a whole bunch of different things: wage growth, infrastructure, what the local government's doing, what the state governments are doing, what's the migration patterns? All these type of things, which are going to indicate whether or not a property is going to go up in value. As property investors that's what we want to happen, and also deliver good yields. You want to get that from the need for good work in the areas and the need to rent.
I don't want to go down that path and that tangent, but some of these areas, south-east Queensland, yes, northern New South Wales, I don't know enough about that to comment. I like going surfing up there so I'd like a holiday house. Tasmania, I hear mixed reports about that one when you look at fundamentals.
Andy Scott: Good whiskey.
Phil Tarrant: It's good whiskey. Very good whiskey. WA, we were chatting the other day about and whether or not that's an up-and-coming area. When you look at mining investment and Perth essentially being linked to the fortunes of the resources sector, I'm not investing out there. I reckon you can get better returns elsewhere right now.
Hot spots, yeah. We could talk about them all day.
Andy Scott: What about yourself, Sam? You're always looking for the next area to purchase positive real estate.
Sam Saggers: Sure. Obviously there's some fundamentals out there where it says macro-wise maybe Brisbane's a good call. Maybe Perth's at the bottom of the market. There's a lot of dark clouds in the sky in Perth. Maybe it is the best time to buy. I actually believe that no matter what the market is you can make money out of real estate. At the end of the day the market itself, as long as it's a good capital city, people are going to wake up in 10, 15, 20 years, and the property should have gone up in value, let's face it.
I actually believe right we're looking at a time in the Australian market where potentially there isn't a wagon to jump on. Usually there's always another new wagon or a news story that you can get behind. I actually believe right now the Australian property market is pretty flat. What does that mean? It's a race to quality. At the end of the day there's been a lot of supply come into the Australian property market in all capital cities.
Most of that supply, if you ask me, it's garbage. There hasn't been great buildings being built, good supply brought to the market. If you can actually find the cream of the crop in all the suburbs out there, the best new developments, the best property coming to market, you'll find that more people want that property. They become demand. A good highlight for me, I've seen the Brisbane market sit flat for a few years now, but certain properties are going up in value, they are rising in value, and really triggers, "Why?"
When you look at the "why," it comes down to the sheer metrics of supply versus demand. There's just not enough supply of really good property coming into the market, but there is a lot of demand out there. I think the oversupply of certain product coming to the market is creating this macro noise that the markets will be quite flat, and it is quite true, they will. But if you can buy the right property, geez, you'll do well.
Phil Tarrant: I think it's a really good point. You probably see this a lot in the people you work with. I know your business, Sam, is quite diverse. You do a whole bunch of different things, one of which is helping investors into the right property.
When I speak to investors, whether I'm at a home buyer show or – and you see the same thing, Andy – they'll pick a magazine or they'll look on a website and the first thing they'll do, is they'll go to the back or they'll go to the data page, and they'll look up suburbs. They typically start with the suburb that they grew up in, and they go, "What's going on? What's the three-month growth? What's the one-year growth?” etc. etc. “What's the yield? Time on market?" And all this sort of stuff. Most people typically look to justify the reason to invest in a particular area by looking at the numbers to see whether or not it corroborates with what they think is a good idea, and I think that's completely back to front.
This sort of links into that whole hot spot stuff, in that, how do you spot a hot spot? You look at the numbers. What's going up the fastest in value? And that's where you should be investing. Well, that’s completely the wrong way to be investing. Investing takes a lot more research, it takes a lot more understanding, it takes a real rational look at what you're trying to achieve as a property investor and what your long-term game is.
Do you think a lot of people, Sam, are misdirected in how they – without the education or before the education piece that guys like you deliver, and hopefully they get through smartpropertyinvestment.com.au – that it's all a bit about face in how they go about it?
Sam Saggers: Absolutely. If you ask the average investor getting started, "Do you have a strategy? What's your outcome?" Most people actually get floored when you ask them those simple lines. They don't really know. They know they should be investing, and then I guess the concept is, "Is there a wagon out there to jump on?" Over the years I've seen certain wagons come and go in this country. I've seen mining booms, I've seen tourism burns, I've seen certainly all sorts of dynamics. Unfortunately a lot of people have jumped on those wagons based on, they sound great, short-term viewpoint looks good, and now regretting a lot of those decision.
I think it comes back to, is it a premium location? Is it a premium product? Would an owner-occupier come in, get very emotional about this piece of real estate, and pay you at auction, a huge amount for the property? If they won't do that, why are you buying it? Why are you buying it?
What I'm seeing in the market is we have seen a lot of supply come in, back to probably our initial first story was about, "Is there too much oversupply coming in to the market? Are there too many overseas investors buying?” This kind of context. Well there is a lot supply being built for supply's sake. My argument is, a lot of that product, it's just filing the gap but it is not meeting the true demographic demand for home owners and owner-occupiers. If you can pick the right property for them, you're going to have a market to really sell to.
Phil Tarrant: Something you just said then which I really identified with. You're not talking about property in the emotional sense, you're calling it a product. It sounds like if I'm buying a managed fund, it's a product. If I'm buying some other investment, it's a product. When you look at investment opportunities for you, it's just a thing. It's not any emotional thing that you're connected with. Is that something that you encourage your clients to look at a property as well?
Sam Saggers: Absolutely. You have to. You have to remove emotion. As soon as you get emotional you ruin the idea of being an investor. For me I learned early on in my investment career after making some sizable mistakes, "I need to remove emotions out of this," and just really work off what's in front of me. One thing that I like working from is really the town plan. Each city has a town plan, and it tells you where there's going to be too much supply, not enough demand. Then over and above that, really drill down in who's bringing the best-quality products to market, and how does that affect the older established market and of course the new market in that area?
I'll tell you what, if you can buy the right property with the right architect, with the right design, the right features, the right home, the right lighting, the right location – property looks after itself. Property is reliable, people are unreliable. People make the mistakes by buying the incorrect product. It's all based on emotion. Getting stuff done, ticking that box, ticking it off the bucket list. People are in such a hurry they just miss the core fundamentals.
I know you guys do a lot of research through your publications trying to share as much as you can. It's really important. People need to study for a bit, maybe grab a mentor, and get on with it properly.
Phil Tarrant: I always say I’m probably one of the most fortunate guys in real estate in Australia in that yes, I'm a property investor, but I'm a journo so I can pick up the phone and speak to anyone. I can speak to you, I can speak to raft of people who are top-performing people in their respective fields. That gives me an advantage. It gives you an advantage, Andy. You can have those same conversations and pick people's minds, but anyone can do that though. It's just a matter of identifying the type of people that can support you as you look to invest in property or look to grow your portfolio.
From that perspective, before I go onto another point about when you mentioned your own property investment story, who would you be corralling around yourself as a property investor to give you good advice or good counsel on developing a strategy and executing that strategy?
Sam Saggers: Positive Real Estate.
Phil Tarrant: Bit of a plug Andy.
Sam Saggers: I think it's a fair ....
Andy Scott: You owe me money, Sam.
Sam Saggers: Fair comment. It's important. Most of us grow up in – I don't know about you guys but, geez, talking about money in my household was a bit taboo. Every time I raised the idea of going to make money, I think my old man was like, “Is he going to ask me for some? How do we avoid this?” I think the average Australian grows up in a house which the idea of getting out there and surrounding yourself with mentors, or the idea of wealth, it's pretty foreign. By the time we get through high school or college, we still don't have any financial management in our lives.
I'd be getting a good property mentor, a strategist, maybe a financial planner. I'm a big believer in just creating a network around you and getting the job done. There's great accountants out there, great property managers. A lot people have fear about just even owning real estates. You can buy anything in the marketplace and it will get you the result. You've just got to get out there and crack on.
Phil Tarrant: That's good. Essentially it's okay to put your hand up and ask for help with this sort of stuff?
Sam Saggers: Absolutely. I do it all the time. I'm an avid investor and I certainly don't know everything. The main though, I have access because I built access around me, I've surrounded myself with great people to tell me when I'm in the wrong, and also bring me good advice when I just don't know the answer.
Phil Tarrant: You mentioned that you're an avid investor, which is good to see that you're educating Australia on how to be better investors and yet you're doing it yourself.
What I'm interested in, and it's something me and Andy always ask everyone that comes in on the show is to just get a bit inside their story in property investment. I'm not going to ask how many properties you have because it's probably rude, but I know you've got quite a few in your portfolio.
Can you tell us a little bit about your first investment?
Sam Saggers: Sure. I think, it's interesting, does the number matter? Does size matter in property investing? It's something that people always sort of say, "You've got 10, you've got 12, you've got 20." Would three good ones be better than 20 bad ones? I don't know.
Phil Tarrant: Absolutely. I'd say yes. Size doesn't matter.
Sam Saggers: Size doesn't matter.
Andy Scott: I'm a big advocate of saying that.
Sam Saggers: As for me, when did I get started? I got involved in real estate quite young. In fact, by the time I left school, my first job was really in real estate at age 18. I guess it was about 23/ 24/ 25 I bought my first property. I actually ended up buying it in an area I knew very well in a suburb I grew up in.
For me, I bought based on emotion. I thought the property just looked so good. Didn't do any research into where the property market was at. I had this fear of missing out. A few of my friends had bought two years before and actually watched them make some money in the market. I wanted to do the same, so the logical thing for me was to buy in my own neighbourhood. I actually went door knocking to find my property. I didn't use an agent because I was a real estate agent myself. I ended up getting hooked in – probably the easiest person to sell to is another salesperson. For me, I got quite emotional – caught up.
The first property I bought, it was in Putney here in Sydney. Which is a gun suburb these days, but certainly 15 years ago I was buying at the time property which was quite old, it was already 40 years old. I ended up not having the best of time with that property. I bought it at the peak of the market and I watched it lose a little bit of value, deflate.
I ended up selling the property and not making any money out of it, but I learned a hell of a lot. It made me ask a lot of questions about how do you do this right? For me, it was a great lesson. First property, best lesson I ever had.
Phil Tarrant: You say you didn't make any money off it. Is that like you sold it for more than what you bought it for, but when you think about holding costs and all that sort of stuff ...
Sam Saggers: Absolutely, yeah.
Phil Tarrant: I think a lot of people get that wrong. They might hold a property for two years and sell it at a hundred grand more than what they pay for it and think that they're an absolute genius, but then when they get back and calculate what the mortgage cost them and all the other stuff ...
Sam Saggers: Capital gains, you name it.
Phil Tarrant: It's a bit of a folly. I imagine you wish you still held that property now?
Sam Saggers: It's an absolutely great statement. I should have. The reality is time in real estate is a beautiful thing, and if I had my time again I would have held it. I also value the lesson of buying that property, not really feeling comfortable with what I had done and selling it, because it taught me some valuable lessons along the way of like, "I need to look at bit deeper into the research behind what real estate is." I think it was a great lesson in a way. It was an expensive lesson.
Andy Scott: You talk about it being an expensive lesson, talk about you realised you pretty much stuffed things up. How long did it take you from the moment you went, "I've got to sell this and get out", to build the courage to go again. Because once bitten, twice shy, right? You do something like that, especially with the amount of money that's involved, for a lot of people you think “That's enough”. You hear a lot of property investors – ATOn stat that gets rolled out a lot –85 per cent of property investors only own one property.
It makes me think there's a of "property investors" – he says doing air quotes – that have bought one and it's not necessarily gone well or it's not been gone up massively in value and huge yields and they don't necessarily sell it like you did, but it also stops them trying again and doing more. How long did it take you, and what did you get over, or did you just not care?
Sam Saggers: It's a good question. Back then I'd saved everything I had to buy that property. A small amount of money when I look back on it now, but a big amount of money at the time when you're 23/24. I saved $40,000 and put it into the market. Really, I gave that money to the real estate market. I don't look at it like I necessarily lost it, I actually didn't do my research, so I passed that gain on to someone else. Someone else came and bought my property, and that money disappeared.
For me, I had a choice at that time in my life whether to not be involved in real estate or start again. I just put together a real good savings plan, and within two years of that first problem, I was ready to go again. That time I started to do it right.
Phil Tarrant: You hear a lot when people make – I would say your first investment wasn't an absolute disgrace of an investment.
Sam Saggers: I wouldn't call it a train wreck, but it wasn't right.
Phil Tarrant: You hear a lot people that their first investment is a train wreck, and it ruins them for 10 years. They overpay for a property, then they need to sit around and wait for the market to catch to where it is and go over it before they can do something else. It's a massive problem. What is the one train wreck that you've made, though? Tell us about the worst, the biggest mistake you've made in property?
Sam Saggers: I think for me, the idea of chasing the cash-flow dream. There was awhile there where yields were all the flavour, and to follow a good yield, to get a high return, 10 per cent, 11 per cent, sometimes you have to take more risk. It was the first for me taking risk. I was pushing out to regional areas in Australia, and really, I've seen those returns really decline. Probably the one that stands out, I bought a property 15 years ago in Moree. It's worth about $120,000 at the time I bought, and it's probably still worth about $120,000. It's done absolutely nothing. It's just been stuck in this limbo land for a very, very long time.
The idea, the principle behind that real estate was “We'll chase the yield, get a high return”. Still to this day I get a 10 per cent return, which equates after all my outgoings and strata fees and this, that, and the other, you get about $10 a week. Which doesn't make you wealthy. If I had my time again I probably wouldn't have bought that property because to be blunt, there's not too many buyers in the market for that type of property. The only people who would be buying it, would be probably unskilled investors. At this point in time I don't need to sell it so I just hold onto it, but it hasn't been a great experience.
If I was to take that money and put it into a better-performing vehicle, I would probably be steering my money towards a good capital city rather than rushing off for the cash-flow dream.
Andy Scott: Sam, I appreciate you sharing that story with us and giving insight to what you've done. Obviously you built a very successful company, you've dealt with a lot of properties. I think it just goes to show even with a few missteps early doors, if you put yourself a strategy and a plan in place, there is a way that you can still move yourself to where you hope your wealth creation dreams go with the property and all of that.
That's pretty much all we've got time for this week. Sam, thanks for coming in again. Remember, you can come and visit us a www.smartpropertyinvestment.com.au. You will find all the stories that we've been talking about today, plus the ones we'll be talking about next week and of course a whole lot more information on their that's good for all smart property investors to check out.
If you like what you've heard today, please don't hesitate to leave some reviews for us, and rate us and give us five stars and all that good love. Obviously, if there's anything that you want to hear more of, or probably as importantly you want to hear less of – unless it's me – you can contact me at [email protected]. That's all we have this week. Until next time, Sam, please say goodbye.
Sam Saggers: Thank you very much, listeners, and thanks, fellas.
Andy Scott: Phil, say goodbye.
Phil Tarrant: See you later, Andy. See you, Sam. Thanks for coming, mate.
Andy Scott: This is me saying goodbye. See you soon, guys.
Property refers to either a tangible or intangible item that an individual or business has legal rights or ownership of, such as houses, cars, stocks or bond certificates.