{"id":31291,"date":"2021-03-19T13:32:11","date_gmt":"2021-03-19T00:32:11","guid":{"rendered":"https:\/\/propertynoise.co.nz\/au\/?p=31291"},"modified":"2021-03-19T13:32:11","modified_gmt":"2021-03-19T00:32:11","slug":"100m-plus-portfolio-but-no-house","status":"publish","type":"post","link":"https:\/\/propertynoise.co.nz\/au\/100m-plus-portfolio-but-no-house\/","title":{"rendered":"$100m-plus portfolio, but no house"},"content":{"rendered":"

PHOTO: Oscar Ledlin strongly believes in commercial property investment over residential.<\/strong><\/p>\n

REPUBLISHED WITH PERMISSION – API<\/a><\/p>\n

With the backing of a property portfolio worth more than $100 million, commercial investor Oscar Ledlin certainly has the financial capacity to buy himself his dream home, but owning his own house is not part of the young entrepreneur’s ambitions.<\/p>\n

Instead, Mr Ledlin intends to continue to develop and amass commercial and industrial assets as he builds his wealth, while renting the house he and his family live in.<\/p>\n

The 28-year old\u2019s rapid rise is a remarkable story, which started when Mr Ledlin entered his first property investment at just 21 years of age.<\/p>\n

At that time, Mr Ledlin was working at his father\u2019s concreting business part-time while earning a business and commerce degree at Monash University, and while he grew up on construction sites, he decided that being a concreter wasn\u2019t part of his future.<\/p>\n

To get out of concreting, Mr Ledlin said he decided to pursue property development, having been inspired by the transformational process involved in the jobs he worked on with his father.<\/p>\n

He had saved around $50,000 from working while studying, and decided to attempt to acquire a duplex site on the Mornington Peninsula, not far from the family home.<\/p>\n

\u201cI went to the bank and said \u2018I\u2019m here to borrow some money, I\u2019ve found a development site and I\u2019ve got my deposit, which was just over 10 per cent, but the bank said I couldn\u2019t show serviceability,\u201d Mr Ledlin told\u00a0Australian Property Investor Magazine<\/em>.<\/p>\n

\u201cI was devastated. At the time, I didn\u2019t actually know what serviceability was, but the bank manager went on to explain to me that it was based on my inconsistent income from my part-time and casual employment.<\/p>\n

\u201cSo what I did was I left the bank, went and registered Ledlin Developments Pty Ltd.<\/p>\n

\u201cI\u2019d just turned 21 and thought I was the smartest man in the world, and for whatever reason I thought I could go to the bank and speak to the business relationship manager and ask for a business loan instead.<\/p>\n

\u201cI went back with a two-day old company with no trading history, and of course had my finance application denied again.<\/p>\n

\u201cThis disheartened me a little bit, but I pleaded with the bank to give me some advice and they said I could use my deposit and get someone else to show serviceability and go guarantor on the loan.\u201d<\/p>\n

Mr Ledlin then approached his father to act as guarantor, who said he would partner with him on one condition – that he invests into commercial property, as he could pour the concrete and save on the development costs.<\/p>\n

\u201cResidential was definitely where I thought it would go, only because I hadn\u2019t considered commercial,\u201d Mr Ledlin said.<\/p>\n

\u201cAs a kid, residential development and investment was all that I had heard about and all that I had read about, and I hadn\u2019t had exposure to commercial property.<\/p>\n

\u201cNow, having extensive experience for my age in the commercial sector, I quickly fell in love with the commercial side of property.<\/p>\n

\u201cI\u2019m very entrepreneurial-minded and I really enjoy understanding how we can better design commercial properties that are more functional, that perform higher for their commercial use and achieve a better commercial result for the occupant.\u201d<\/p>\n

Once he fell into commercial development, Mr Ledlin said he has never had any interest in exploring residential development or residential investment.<\/p>\n

\"Oscar<\/p>\n
Curating a community carefully is a big part of Ledlin Development’s offering.<\/strong><\/em><\/div>\n<\/div>\n

He said the vast array of different assets under the commercial property umbrella, ranging from offices to warehouses to shopping centres and service stations, created several advantages for an investor.<\/p>\n

\u201cGenerally speaking for commercial property, the greater yields are what\u2019s most attractive and what\u2019s also attractive is the way that outgoings are the responsibility of the tenant rather than the landlord,\u201d Mr Ledlin said.<\/p>\n

\u201cUnder a typical commercial lease all the outgoings are paid by the tenant – owner\u2019s corp if applicable, for standalone buildings there is water rates, council rates and all maintenance requirements are settled by the tenant rather than the landlord so the net yields are just grossly higher than they are in residential.\u201d<\/p>\n

While many Australians believe that commercial investment and development is a complicated process, Mr Ledlin said it was not drastically different compared to residential investment.<\/p>\n

He said that purchasing a property and entering a sales contract is almost identical to a residential buy, and then leasing that property to a tenant is also a remarkably similar process.<\/p>\n

\u201cThe only differences are the returns are much higher in commercial property and the tenant pays a lot of the outgoings, if not all of the outgoings, and the lease terms are longer so you have to lease a property less often,\u201d Mr Ledlin said.<\/p>\n

\u201cThere are three pillars that I really advise people to explore when considering any commercial property investment.<\/p>\n

\u201cThe first one is the rental yields and the second one is the lending criteria – from the outset it is good to get a solid understanding of the funding criteria.<\/p>\n

\u201cYou need to really understand the funding requirements of your chosen lender for that particular asset.<\/p>\n

\u201cTypically in commercial property the deposit amounts are slightly higher than they are in residential, but I think it\u2019s also important to note that the median house price in Australia is getting close to $900,000, while there are commercial property investment opportunities for much lower than that.<\/p>\n

\u201cWe are bringing out a new venture where we are about to launch a commercial property product for $99,000. So while the percentage might be higher for the deposit, the barriers to entry in commercial property is actually much lower.<\/p>\n

The third pillar that Mr Ledlin said he advises to explore is vacancy rates for that particular asset class.<\/p>\n

\u201cThere are a number of different property assets that fall beneath that broad umbrella of commercial property and the particular asset classes that Ledlin focuses on have a 1 per cent vacancy rate in southeast Melbourne,” he said.<\/p>\n

\u201cThey are incredibly tightly held commercial properties and very low risk additions to any investor\u2019s portfolio.\u201d<\/p>\n

Mr Ledlin\u2019s development company, Ledlin Developments, specialises in small warehouses and suburban strata offices, while he retains several properties at each business park he develops to add to his portfolio.<\/p>\n

The company is gearing\u00a0up to launch a new commercial-industrial product called a flexi-unit, which\u00a0is contained in a complex of mini warehouses but also includes luxury fittings such as polished concrete floors and LED lights, while communal facilities, co-working spaces and bathroom facilities distance the offering from a standard storage or warehouse facility.<\/p>\n

\u201cIt\u2019s like a hybrid between a mini warehouse, storage unit and a co-working office space all compiled together,\u201d Mr Ledlin said.<\/p>\n

\"Ledlin<\/p>\n
High-end finishes not typical for warehouses are key to Ledlin Development’s point of difference.<\/strong><\/em><\/div>\n<\/div>\n

\u201cThey are strata titled, so you own the unit and the land underneath it, and also a proportion of all the common areas and bathrooms and the like.<\/p>\n

\u201cThat product is targeted at trade users that are in and out during the day and it will be largely driven by e-commerce as well.\u201d<\/p>\n

And when it comes to Mr Ledlin\u2019s own house, he said he doesn\u2019t plan on doing anything but renting for the foreseeable future.<\/p>\n

\u201cI rent my house, I don\u2019t own my house and a lot of people just can\u2019t understand why I run a successful business like I do and have a commercial property portfolio like I do and pay someone rent to live in a house that I call my home,\u201d he said.<\/p>\n

\u201cThere\u2019s a real stigma in Australia towards renting your home and there\u2019s an esteem held in owning your own home, and I think it\u2019s largely unfounded and based on non-evidential support and quite frankly doesn\u2019t make sense.\u201d<\/p>\n

Mr Ledlin said many Australians are coaxed into property ownership ambitions from a young age, hearing phrases like \u2018rent money is dead money\u2019, \u2018you\u2019re paying someone else\u2019s mortgage\u2019, and \u2018you need to get into the property market\u2019.<\/p>\n

At the same time, Mr Ledlin said an important part of Australian culture is that you take advantage of your youth and travel or explore different career paths – ambitions that he believes are counterintuitive to home ownership.<\/p>\n

\u201cFor me when deciding to continue renting, flexibility is the biggest consideration,\u201d he said.<\/p>\n

\u201cI\u2019ve lived in four homes in five years as my personal circumstances have elevated. I\u2019ve been very fortunate to have had a very successful five years, I\u2019ve been free to move from one property to the next as I\u2019ve entered a relationship, I\u2019ve been able to move from a small home to a bigger home, then we got a puppy so we moved once again.<\/p>\n

\u201cFor young Australians, we finish school and it\u2019s almost a race to see who can be the first one from our graduating year to commit to a 30-year mortgage, and I just think that\u2019s wild.<\/p>\n

\u201cOpportunity cost is another big consideration. What would we be doing with our financial lives if we weren\u2019t committed to such a large commitment in a mortgage, the deposit and the ongoing costs?<\/p>\n

\u201cThere are a lot of young Australians who have entrepreneurial goals and endeavours that are strong-armed by a prior commitment to a mortgage.<\/p>\n

\u201cEstablishing a business is easier than ever with the internet but it still requires funds and we are adverse to risk when we have large financial commitments.\u201d<\/p>\n

Aside from being able to pursue entrepreneurial endeavours, Mr Ledlin said investing in commercial property rather than residential had significant financial benefits also.<\/p>\n

\u201cWe have record low interest rates in Australia right now which is fantastic for borrowing money, but we also have record low rental yields,\u201d he said.<\/p>\n

\u201cSo when we are looking at the average home loan interest rate, as of the end of January I think it was 3.49 per cent.<\/p>\n

\u201cFor the particular market that I\u2019m looking to rent, townhouses and those types of properties, yields are around 2.5 per cent.<\/p>\n

\u201cIt\u2019s cheaper for me to rent a property than it is to take out a mortgage and pay the interest-only component of that mortgage.<\/p>\n

\u201cAnd as a homeowner, you are responsible for any maintenance, when the aircon leaks or the hot water system breaks, you are responsible.<\/p>\n

\u201cThere are rates, body corporate fees, land taxes – these are all the responsibility for you as the homeowner.<\/p>\n

\u201cAs a tenant all I do is pay my rent and I\u2019m on my way, so it is drastically cheaper to rent a property than it is to own a home at the moment.\u201d<\/p>\n

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