On this week's YIPtv we caught up with Sam Saggers of Positive Real Estate to pick his brain what, for him, are the big investment deal makers and deal breakers.
Video transcript below:
Anna Temple: On this week’s YIP TV, we caught up with Sam Saggers of Positive Real Estate to pick his brain about what for him are the big investment deal makers and deal breakers. Saggers says that firstly he’s always on the lookout for drivers of capital growth.
Sam Saggers, Positive Real Estate
Sam Saggers: When I’m looking at real estate opportunities I’m always looking for drivers of capital growth, where yields are strong, when infrastructures on them improve, where the economics of an area is going to do very very well. In fact I’m looking for population growth and also supply and demand details. If that all stacks up, well then I look closely at the deal. I always look for a property which is going to be well served by the community, which is going to get good access to roads, transport and also the school system.
I think it’s really important particularly to buy near good schooling. Education is really important and I know families pay extra to live close to good schools. As for the property itself, why not choose a property where the highest and best use of that real estate isn’t yet determined, meaning you can add value, perhaps that’s through land or subdividing a bit of land at the back or building a second dwelling or even through renovation. Perhaps you’re buying a property which you could tie it up and add some value and at the end of the day there are some great properties out there, if you can link it to a good community and a great marketplace, you can do very well in real estate.
Anna Temple: With so much property on the market, Saggers says investors need to develop their own cheat sheet a system to help them quickly identify which properties will stack up and which won’t.
Sam Saggers: So many people spend too much time on real estate which just isn’t going to stack up. It’s really important to create yourself a little bit of a cheat sheet to fast track identifying which ones or which properties are the best. I use the back of a back of a coaster routine. If you can’t pinpoint that the property is going to make you money and what we call that in real estate is often cash on cash return. What do I identify is if the property is going to, if I put my deposit into that property and if over a short period of time I can recycle that deposit out through capital growth, it instantly gets a tick from me. Also I look at other market variables, like if the rents are going to be strong in the area, if they are going to be growing, that’s really important. Also I come back to the drivers of that local market area. If there are the proper growth drivers like strong yields, infrastructure spends, good economy, great when it comes to supply and demand, I just tend to steer clear of those properties. So it’s sort of a way of quickly deducing whether you’re going to actually buy into a good marketplace and a good property.
Anna Temple: Saggers also stresses the timing of investment in accordance with the suburbs market cycle is key.
Sam Saggers: Look there is so much real estate out there in the marketplace, there are certainly some properties which you shouldn’t buy in. In fact there is over 15,000 suburbs in Australia and actually about 14,000 of those suburbs in any one time are performing. So it’s really important to understand where to buy and where not to buy. If a property is in a good market place, but that marketplace is at the top of its property market cycle, I would still avoid that area. It could be a good 5 to 7 years before that property actually performs. Also I look for little things in my due diligence, things like building in personal valuation. If the property doesn’t come close to performing under that due diligence it’s important to probably walk away. The final piece of the puzzle is rental returns. If you can’t get a good yield, I believe you’re going to end up overexposing yourself, you’re not going to be able to service real estate for the next property that you go and purchase, so make sure you don’t buy a property with a really poor performing yield.
Anna Temple: This is Anna Temple reporting for YIP TV.