{"id":31786,"date":"2021-04-18T13:35:13","date_gmt":"2021-04-18T01:35:13","guid":{"rendered":"https:\/\/propertynoise.co.nz\/au\/?p=31786"},"modified":"2021-04-18T13:35:13","modified_gmt":"2021-04-18T01:35:13","slug":"how-to-retire-before-30-through-commercial-property","status":"publish","type":"post","link":"https:\/\/propertynoise.co.nz\/au\/how-to-retire-before-30-through-commercial-property\/","title":{"rendered":"How to retire before 30 through commercial property"},"content":{"rendered":"

PHOTO: Mina and Scott O’Neill have written a book to help others on the pathway to financial freedom through commercial investing<\/strong><\/p>\n

REPUBLISHED WITH PERMISSION | API MAGAZINE<\/strong><\/p>\n

Sydney-based investors Scott and Mina O\u2019Neill have put together a pathway to retirement before 30, creating a roadmap for others to emulate their success in building a $23 million portfolio in just 10 years.<\/p>\n

Mr and Mrs O\u2019Neill recently launched a new book detailing the ins and outs of commercial property investment, and its advantages over investing in residential property.<\/p>\n

While the husband and wife team made their start in the residential sector, they evolved to become firm believers in commercial property at an early stage of their investment journey.<\/p>\n

Mr O\u2019Neill said he and his wife\u2019s first property investment was a home in Sutherland near Cronulla, which they acquired in 2010.<\/p>\n

\u201cIt was a quiet period in the market at the time, I remember there were all these \u201840 per cent crash\u2019 stories in the media, and we bought the property because it had good cash flow. It had a granny flat on it as well. It was a $480,000 purchase, but it was renting at about $600 per week rent,\u201d Mr O\u2019Neill told\u00a0Australian Property Investor Magazine.<\/em><\/p>\n

\u201cEven after the mortgage and all of that, we had about a $200\/week surplus. We thought \u2018even if the market falls, who cares, it\u2019s cash flow positive\u2019.<\/p>\n

\u201cSo that\u2019s how we\u2019ve always invested, every time we\u2019ve bought it\u2019s had a good cash flow scenario.<\/p>\n

\u201cThat property doubled in value in about six years, Sydney was booming and we leveraged off of that to purchase a number of other properties, and then those properties also started growing.<\/p>\n

\u201cWe got into unit blocks, but yields were starting to get harder to find, and that\u2019s when we transitioned into commercial property.\u201d<\/p>\n

Instead of getting a gross yield of around 5 per cent in residential, Mr O\u2019Neill said the investments in commercial property were providing net yields of 9 per cent to 10 per cent.<\/p>\n

\u201cIt was multiple times better cash flow from a net perspective, and that just sped up everything for us,\u201d he said.<\/p>\n

\u201cWe currently own 32 properties and are purchasing another couple, and the portfolio\u2019s value is sitting at around $22 million to $23 million at the moment.<\/p>\n

\u201cCurrently we have nine commercial properties, which will soon be 11, and the rest are residential.\u201d<\/p>\n

In addition to yields, Mrs O\u2019Neill said the other major advantage with investing in commercial property was the quality of the tenants involved.<\/p>\n

She said the best-performing commercial properties were those tenanted by national brands, which are reliable in paying rent and often stay in the same property for a long period.<\/p>\n

\u201cUnlike residential where you have three-month, six-month and 12-month lease terms, these terms are five years and above and a lot of them do stay for the long term because sometimes you get tenants that do fitouts and they spend a lot of money on the property,\u201d Mrs O\u2019Neill said.<\/p>\n

\u201cAnd if you have someone that does a fitout for a dentist\u2019s practice, for example, they\u2019ve spent a lot of money on it and they\u2019re more likely to want to stay for the long-term as well.\u201d<\/p>\n

The couple\u2019s strategy is based on diversification, not only in asset type but also geographically, with exposure to markets in Sydney, Brisbane, Adelaide and Perth.<\/p>\n

Mr O\u2019Neill said industrial property including warehousing and logistics were their top pick for commercial investment, but their portfolio also includes specialty retail and office assets.<\/p>\n

\u201cWe buy existing properties, always with a tenant in place,\u201d he said.<\/p>\n

\u201cWe don\u2019t develop because we actually buy below replacement cost in most cases as well.<\/p>\n

\n

\"Mina<\/p>\n

While the O’Neills got their start in residential investing, they built wealth quicker through commercial property.<\/strong><\/em><\/div>\n<\/div>\n

\u201cThere are many markets where you can do that, and you can pretty much get a return from day one without having to muck around with bills and obviously while the returns are this good you jump on them.<\/p>\n

\u201cSouth East Queensland has been a big hit market, but this is the beauty of commercial, it\u2019s really asset by asset and example by example.<\/p>\n

\u201cWe don\u2019t go out in the middle of Woop-Woop and buy property, we\u2019re going to be sticking to capital cities generally or major regional areas.<\/p>\n

\u201cYou have to be open to new markets because stock is so low as well.<\/p>\n

\u201cIf you want to buy in your own suburb it might be two or three years before you see a worthwhile deal. It\u2019s pretty different from buying a home, where you target one suburb and you hang on the internet every day waiting for a listing. We look Australia-wide.\u201d<\/p>\n

Prior to writing their book,\u00a0Rethink Property Investing<\/em>, the O\u2019Neills had toyed with the idea of an early retirement, spending an extended time in Europe living off the proceeds of their portfolio.<\/p>\n

But while that extended holiday was a fulfilling experience, Mrs O\u2019Neill said the couple soon found themselves wanting to do more than just enjoy a lavish lifestyle overseas.<\/p>\n

\u201cOriginally we started off doing it ourselves and then we developed a passion to help others,\u201d Mrs O\u2019Neill said.<\/p>\n

\u201cIt started with friends asking to help invest in certain areas and we\u2019d give them examples, and then it got to a point where we said \u2018we can actually help people\u2019, and I actually prefer doing that.<\/p>\n

\u201cIf you\u2019re doing something that you\u2019re really passionate about and you know what you are doing, you can give really good examples to others as well.<\/p>\n

\u201cThat\u2019s how we started, and with the book, it\u2019s the process of getting people to understand in print that commercial works as well, it\u2019s just the next stage of property investing.<\/p>\n

\u201cWe definitely didn\u2019t want to sit around being bored, and I guess the book is an extension of education as well to the public in that respect.\u201d<\/p>\n

The other big factor in wanting to publish a guide to commercial investment, Mr O\u2019Neill said, was a lack of mainstream education around how to get into commercial assets.<\/p>\n

\u201cCommercial is just, for lack of a better word, just a bit boring and unsexy, no one cares about it because what are you going to do, discuss the square metre rates for industrial property? It\u2019s unrelatable, but the people in the know are all over this stuff,\u201d he said.<\/p>\n

\u201cMost mums and dads actually own commercial property, they just don\u2019t know it.<\/p>\n

\u201cIn your super fund you\u2019ve got a listed commercial property fund as one of the dozen or so shares you\u2019re in, it might be Stockland, Westfield or Goodman Group, for example.<\/p>\n

\u201cPeople just don\u2019t know much about it, which is the point of our book.<\/p>\n

\u201cWhen we started to try to research what to do because we wanted higher yields, we were looking at it from a cash flow point of view and it was a solution, not an interest.<\/p>\n

\u201cBut then it turned into an interest, because when you buy these commercial properties they are all unique and you\u2019ve got to know the business that you\u2019re buying into.<\/p>\n

\u201cThat might not interest a lot of people, but if you break it down and look at how to get the best possible cash flow for your money or return on equity in this economy, it is commercial property.<\/p>\n

“Residential can\u2019t even compare to it, especially now that residential is getting so expensive.\u201d<\/p>\n

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