ABOUT SAM DECKERT
- Occupation: IT Solution Architect
- Custodian since: 2005
- Age: 32
- Family: Single
- Property portfolio value (including principal place of residence): $4 million
- Number of houses you own (including principal place of residence): 8
At 32 years of age, Sam Deckert is one of Custodian’s youngest clients. He owns his own three bedroom apartment and seven investment properties. He purchased his inner Melbourne apartment in 2005, and since 2008 he has aggressively built his investment portfolio.
In just four years, Sam has purchased seven investment properties. He purchased three properties in the first two years and in 2010, he bought four properties including two adjacent ones in Sydney that are currently under construction.
WEALTH BUILDING JOURNEY
Sam has always been a good saver and money manager. He started saving during high school, and at one point invested his savings into shares. The lack of control, volatility, and break- even outcome of that experience led him to form the opinion that the stock market was ‘a little too similar to gambling’. After further mixed results, Sam sold his shares and focused on saving for a house deposit in a high interest online account.
During this period, Sam began to appreciate the old adage that ‘success = preparation + opportunity’ and so he took the time to learn about different approaches to wealth building. He read a lot of books from authors such as Robert Kiyosaki, Sean O’Reilly and Anita Bell. Aside from purchasing a nice car while studying at university, he knew he had to be strategic about managing money to achieve his wealth building goals.
In 2001, Sam completed his degree and started working full time in IT. He rented a three bedroom apartment with friends on St. Kilda Road, Melbourne. Sam continued to save for a deposit in a high interest cash account. It was definitely the hard part of his wealth building journey, and required a lot of patience. He wasn’t earning a lot at the time, but as his savings slowly grew he felt a sense of progress and was motivated to keep going. In 2005 he finally had enough money saved for a deposit. Sam loved the apartment he was living in with his friends, so he approached the owner and made a deal to buy it. It was a lot of money for a man in his mid 20s – over $500,000 – and his friends and family were a little concerned. But having carefully planned his approach, Sam went ahead and his flatmates began paying him rent.
Sam was thinking ahead. The rent and tax deductions enabled him to rapidly repay the loan. His strategy was to reduce his non-tax deductible debt on the apartment, while at the same time using the increasing equity to purchase additional properties.
After his experience with shares, Sam was attracted to residential property.
“I like its ability to provide great leverage, making my money work harder. I also like the stability and consistent long term growth.” He also likes it because the banks do too. “Banks consider residential real estate one of the most secure asset classes, and are willing to use it as security at a higher LVR than alternatives such as shares. This enables me to duplicate more rapidly and achieve greater compound capital growth.” When Sam was ready to buy his first investment property, he looked at several options including buying an apartment off the plan. After having some negative experiences, he chose not to proceed. He also began to appreciate the importance of land content. In 2008, he was chatting to a client who recommended Custodian – and he’s been with them ever since.
In 2008, Sam bought his first Custodian property in Brisbane; in 2009 he bought two properties – one in Brisbane and the other in Melbourne; and in 2010 he purchased another four – one in Brisbane, one on the Gold Coast and two adjacent properties in Sydney. The initial properties were financed using the increasing equity in his apartment, and the others using a combination of the equity in his apartment and the capital growth in his first investment property.
Sam considers his worst wealth building moments dealing with outstanding issues related to his Melbourne property after inspection and handover. He had been frustrated by the time it had taken to have these matters resolved. Sam was able to get through this challenging time by remaining focused on the big picture and not taking the situation personally.
His best wealth building moment was when he finally had enough for a deposit, and was able to start taking action. “Ever since then it’s been a lot more exciting – the planning, reviewing and optimising. Taking action. It’s an ongoing endeavour and I like to think of each property as a business. I look at how I can maximise my return and what can I do to be more efficient,” explains Sam.
Sam says that his best investment decision was backing his planning, and making that initial decision to proceed with the purchase of his apartment.
Sam likes to push himself and make the most of life. This approach (and the current stamp duty exemptions) motivated him to purchase the two additional properties in Sydney at the end of 2010. That same year, he also achieved his goal of completely paying off the mortgage on his apartment.
“I am a very focused person, and I made sure I hit that long term goal. I no longer have any non-tax deductible debt,” he says proudly.
At the moment, Sam is pleased with his position and he is consolidating.
He says, “I’m now saving as much as I can into an offset account, to build a buffer that can cover my costs for up to six months if something unexpected occurs. That’s my current goal. I’m happy with my portfolio structure, and consider myself well positioned for the long term.” Sam’s goals aren’t all about financial security. He hopes to have his own family in the future and intends to help support his parents in their retirement. He adds, “I plan to live it up a bit more, to take advantage of what I’ve created. Once my buffer is in place and I’m comfortable from a risk perspective, I’ll be looking to work less, travel, and buy a nice car in the near term. Using the buffer in the offset account is a very financially effective way of personal spending.
I’ve had some attractive business opportunities recently, but I haven’t pursued them due to the potential risk. Once I’ve consolidated and established the buffer, I’ll have a lot more flexibility both personally and professionally.”
MANAGING CASH FLOW
Sam enjoys the business side of managing his investments and the challenge of making his money work harder. He has developed his own computer program that allows him to effectively manage his portfolio, tracking his budget, cash flow, balance sheet, goals, risks, to do list, savings, loans, insurance, real estate agents, compare investment opportunities and model future scenarios. It is sophisticated enough to cater for personal considerations such as income, superannuation, tax and personal expenses as well as other factors including inflation, interest rates, rental and capital growth, cash and non-cash tax deductions amongst others. Most importantly, according to Sam, is it allows him to keep an eye on his current cash flow after superannuation, tax, and personal expenses as well as model the ‘what if’ risk scenarios.
Taking this approach means Sam doesn’t often have to think about his investments unless “someone brings it up, like my property manager if there’s an issue or if I have to chase outstanding issues related to construction. Otherwise I only worry about it once a month when I make my payments. All the rent goes into the one account and the loan payments are made from that account. I top up what is needed for the payments with my salary. I try to keep it simple to make it easy to track what’s happening and to also enable the structure to scale – it can get quite involved having eight properties for which you are receiving rent and bills that all need to be accurately tracked for tax time. This reduces the amount of administrative overhead required.” When Sam first bought his apartment, his friends continued to live with him and pay rent. After they left, he took the opportunity to maximise his rental return and tax deductions by fully furnishing one of the bedrooms and updating the depreciation schedule.
He explains, “I recognised that there was a lot of demand for fully furnished rooms, and that I could increase the rent significantly with only a minimal investment. I calculated the Return on Investment payback to be about seven months – so the decision was easy and it’s worked out well.
Always look for a way of making an investment more efficient, property often provides this flexibility with a little creative thinking.” With seven investment properties, Sam takes advantage of the PAYG tax variation available to property investors. “It really helps me manage my cash flow throughout the year – and better that I have it working for me rather than sitting with the government!”
Sam has an investment philosophy of hoping for the best while planning for the worst. He is conservative in his estimates, has a financial buffer, income protection and maintains a plan for worse case ‘what if’ scenarios.
He is also very thorough with his due diligence before committing to a purchase. For example, he researched the likelihood of flooding for his four properties in Queensland, located in Warner, Goodna, Redbank Plains and Pacific Pines.
“I obtained flood reports from the council, looked at nearby bodies of water, gauged the risk and determined what kind of insurance I needed. I added an insurance policy comparison tool to my property tracking program which has since come in very handy.
I determined that Goodna and Pacific Pines were a higher risk, so I ensured that I had complete insurance coverage for flood. This was very fortunate when the recent floods started. I’d just received the keys to my Goodna property and had recently advertised for tenants when the floods hit. My property in the development is the closest to the creek. It’s a sloping block and the house is mostly elevated, especially at the back.
“The water went higher than the 1970s floods due to the simultaneous water release from the Wivenhoe Dam and the king tide. On the Wednesday, the water went over the back fence, well over a metre high, and under the house. It was about an inch away from the floor and covered the water tankSam on his Ducati 1098S motorcycle. He hopes to own a Lamborghini in the future.
underneath. Fortunately, by Thursday water levels receded and the only work that needed to be performed on the property was emptying and cleaning the water tank and performing a general clean-up. My Brisbane agent Prue Burke from Ray White was excellent during the whole process, as was the Builder MPH Constructions who were onsite during the floods and emptied and cleaned the water tank without charge.” It is also important you understand all the elements of what you are undertaking, and how changes can influence your overall situation. Do some thorough ‘what-if’ scenarios.
Just as importantly, make sure your investment goals align with your life goals – and ensure you compare the two on the same timeline.
Consolidating for Sam also means reducing his exposure to some of the risks. He explains, “For example, inflation and subsequently interest rates are on the way up, with the largest planned mining projects not yet even in production. I’m planning to mitigate this one by establishing a financial buffer.” “I wanted to build an investment portfolio of new, high land content, affordable houses in areas well positioned for long term growth and Custodian has enabled me to do that.
Having limited time outside of my day job combined with being a detail oriented person, Custodian has helped me to look at the big picture and take action – the process would have taken much longer if I had tried to do it myself,” says Sam.
INVESTMENT ADVICE LIFELONG LEARNING
“Take action!” says Sam. “I hear so many people talking about waiting for this or that to occur before investing – whether it is for prices to drop or some other circumstance that is not ideal. Long term, the key is to take action when you can afford to.” Sam understands the importance of lifelong learning. He often attends seminars, especially on accounting and taxation, to keep across what is happening and how it applies to him.
He says, “You can often find new ways of optimising your structure to achieve your goals. Those ‘ah ha’ moments are fantastic – when you discover you could be doing something in a better way, enabling your goals to be realised faster.” While Sam is very much in the growth phase of his wealth building, he does what it takes to keep motivated and continues to push himself to be the best he can be. Fitness keeps him motivated and feeling alive and he rewards himself from time to time. His current ‘toy’ is a Ducati 1098S motorcycle – but ever since watching the film ‘Cannonball Run’ as a child his dream has been to own a Lamborghini, which he hopes to be able to realise in the future.
“Life is short. Unfortunately there is never enough time to do everything I’d like to, but I prioritise what’s important to me and make it happen,” explains Sam.
As for his current focus on wealth building, Sam says, “Ultimately, it’s not all about the wealth. I aim to be fulfilled without it. If it all goes away, I’ll just start again – and with what I’ve learnt on the journey so far, it should certainly be an easier process.”
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