Investors In Focus – Scott & Mina O’Neill

“I love cash flow, as it helps with lending and makes your investment journey less risky because you’re not betting solely on growth”

In less than 10 years, Scott and Mina O’Neill have managed to build a portfolio of 32 properties worth over $20 million.

But what’s even more impressive is that not only has the O’Neill’s portfolio generated significant capital growth, it is also high yielding, providing a consistent yearly cashflow of approximately $900,000 per annum in rent!

For Scott and Mina,  a large part of their strategy these days involves investing in commercial property which is something many property investors either avoid or simply don’t know much about.

Scott’s journey into property started after he had entered the workforce and began to realise that his job as an engineer wasn’t all he’d hoped it would be. The travel and hours made employment and income less predictable.

“We jumped into investing in 2010 with our first purchase in Sydney and paid $480,000 for a property. That same property is now worth over $1.1 million. It’s more than doubled. This initially helped us get into other properties.  A big reason why that exact property was so good was it was dual-income, so it had that extra cashflow.”

“We made $12,000 positive cashflow per year after all costs. That cashflow gave us an idea….. what if we just buy ten of these? Even with the debt, we’re making $120,000 a year and we’d have over a $120,000 passive income if we just kept repeating the process. This simple idea of multiplying that first investment result started our obsession with building a large positive cashflow portfolio”.

“Initially we were chasing more multiple income properties since they offered the best cashflow we could find at the time in the residential markets. For example, our third property was four units on one title in Port Macquarie. Our fifth property was three units on one title on the Gold Coast. Our sixth property was five units back in Port Macquarie on one title. Every time we bought, with a few very small exceptions, we were making positive cashflow on the properties.”

At the time, however, the husband and wife team weren’t purely focused on cashflow and were also very aware that they required growth in order to build their portfolio quickly.

“We weren’t just chasing cashflow, we were chasing equity gains too and that is the key to it. You don’t just go for one or the other. Most investors I talk to are really just thinking one side of the fence. They either want cashflow or growth. And the guys that chase growth, go for super low yields where they’re negatively geared. And they don’t really fully factor in the costs of how that actually affects your overall portfolio.”

“They look at it as, what if this property doubles in value in ten years then that’s great.  But then once you add up the negative cashflow of the opportunity, the holding costs and the fact that the maintenance might be a lot more than you thought or the fact that the growth may not be as good as you thought, all of a sudden those long-term hold strategies really don’t do much for you.”

“A lot of people finish at three, four properties, but we just basically made it a full-time job to keep going, looking at ways to expand it and, yeah, more creative ways other than just buy and hope, which is what a lot of people do.”

After initially looking at dual-income properties, Scott and Mina discovered that they were also able to generate strong positive cashflow if they turned their focus towards commercial property. They were then able to quickly add more properties because of their strong capital base and the fact that commercial properties are often positively geared investments.

“We just bought another commercial property recently for $750,000. It’s a warehouse with a showroom at the front of it. It has an established business in it with a 5+5+5+5 year lease. The property is located on a highway, with great signage potential and produces $65,000 in income a year. Once you take all the costs out of it, even the mortgage on it, we’re left with about $40,000 per annum after all costs on a fairly cheap purchase in our opinion. Essentially, the price is similar to a two-bedroom unit in Sydney. Yet we’re getting 1,000 square metres with a tenant that’s on a five-year lease with a further 15 years’ of options.”

“With commercial, you can get it wrong, of course, like anything. But when you buy the right type of property, it’s literally a no brainer. And a lot of people focus on the negatives of commercial. They look at those terrace house-style shop fronts on highways where there’s one in ten vacant. They look bad. People see them and you’ve got to ask yourself why they’re vacant. And most of the time it’s because there’s just no foot traffic or it just doesn’t offer the customer a real solution. And maybe the rents are too high so businesses don’t last well when things slow down for them.”

While Scott and Mina’s move into commercial property is a big reason why they have been able to skyrocket their portfolio so quickly, they have learnt some valuable lessons along the way.  In their early days of investing, they thought about getting into development but found it wasn’t a good fit.

“We were really getting pulled towards the development side of things. We’d bought a couple of properties with the idea to develop. And the reality is we just didn’t have the time or want to actually develop because when you look at the numbers, including all of the taxes involved and your holding costs, it’s not worth the extra effort managing these things.”

For newer investors, the couple suggests they should find a strategy that fits with their personality and then think longer-term.

“Buy the types of assets that you want to hold into your retirement. When you do that, it’s normally going to be more cashflow focused. Cashflow will also get you out of your job, not growth. Growth will help you build a bigger portfolio though.”

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