WARNING: this is going to make you jealous.
A Sydney couple has seen the value of their property investments – which include residential and commercial real estate – jump an incredible $25 million in just two years. And it’s all due to some clever buys, strategic thinking and spectacular growth in the commercial property market.
Scott and Mina O’Neill, who started investing with money they saved from various student jobs, went from an already impressive portfolio worth $22 million in 2020 to $47 million in value this year. Their 26 properties spread across the country deliver them more than $2 million a year in gross rents – and all the lifestyle perks that come with it.
That includes an up-market house in swanky Sydney suburb Bellevue Hill and a holiday home in Greece. Mr O’Neill, originally from the Sutherland Shire, said they would never have seen this kind of value jump investing in residential real estate alone.
He attributed their success to focusing on the commercial market instead. “There’s been a real flight to buying commercial property. The growth has been huge. Almost everything has gone up in the last two years,” he said.
It’s also helped that the couple run a top buyers agency that supports their investing, but their portfolio was started on much more humble beginnings and before they were successful in business. The couple’s first purchase back in 2010 was a $460,000 house with a granny flat in the Shire. They used $60,000 in savings for their upfront costs. He was 23 at the time, she was 22. They continued buying residential properties in high growth locations in the years after, often drawing out equity to fund purchases after seeing value growth on their investments.
Their first commercial purchase came in 2014 – a $640,000 minimart in Perth – and it turned out to be an excellent money earner. It set the blueprint for the kind of properties they targeted next: smaller complexes leased by “recession-proof” businesses like doctor’s offices. It’s just so happened that the value of these types of properties has, in some cases, doubled in only a few years. Fast forward to recent years and the O’Neills have been buying up multimillion dollar properties, while selling up older residential investments, and Scott said that the higher value sites were where the true growth and earning potential lay.
He pointed to a recent purchase to illustrate his point: a retail complex with a KFC and Hungry Jacks that they bought for $9.8 million. The complex generates them nearly $600,000 a year in net rent, which pays all their mortgage obligations with money left over.
“You’d never get that kind of return in the residential market,” Mr O’Neill said. “Imagine buying a $9.8 million house. Even if you rented it out for $3000 a week, you’d still be negatively geared.” Mr O’Neill, originally trained as an engineer, said the high rents generated by commercial properties were what made their property empire possible, adding that about $23.5 million of their portfolio value was debt.
“We can’t pay that with our salaries. It’s all set up like a business. When you’re dealing with large commercial properties, there is so much income involved.” He added that many investors don’t realise just how much money can be made in the commercial space.
“We are seeing high growth like there was before in residential, but commercial is not as affected by rising rates and there hasn’t been the same pull back. “Building costs are also going through the roof and building new commercial premises is becoming more expensive. That’s pushing prices up. “Some (markets) are growing quicker than they normally have, 10-30 per cent annual growth.”
Mr O’Neill, the founder of Rethink Investing, said the growth surprised even him. “At the start of Covid, I expected no one would want to buy commercial. It recovered fast. Then we realised investing in property was becoming a priority and prices just went up. It’s been heavy.”
