1 session inside Boa
Scott O'Neill
Founder, Rethink Investing (Rethink Group)
Scott O'Neill is the founder of Rethink Investing, a commercial property buying agency, and Rethink Group, which holds eight companies including Rethink Financing, a legal firm, an insurance arm and Rethink Renewables. He started as an engineer at ASX-listed Adelaide Brighton, bought his first property in 2010 for $480,000, and quit corporate life once his portfolio was producing around $120,000 a year in passive income. He now holds a property portfolio valued at over $150 million and pivoted his agency from residential to commercial in 2017.
The session
What Scott teaches
Use a 3 to 1 rule before you touch commercial property
Scott's sequence is two or three residential houses first, held for three to five years, then one big deposit into a commercial asset. Residential lets you borrow more, has a lower barrier to entry and is harder to stuff up while you learn. He is blunt about entry-level commercial: under $500,000 cash, buy resi all day. Above roughly $700,000 you are in the game for commercial.
From De-risking your business with commercial property →Judge a commercial yield against the market cap rate, not in isolation
Scott's range is 5 to 9 per cent, with most good deals between high 5s and 7 per cent. Anything above 7 per cent implies more risk: regional market, shorter lease or inflated rent. The real test is buying at a yield above the suburb's natural capitalisation rate. Buy at 6 per cent where the market cap rate is 5 per cent and you have bought 20 per cent under value.
From De-risking your business with commercial property →Run the return-on-equity maths before you park profit in property
Scott's worked example: a 6 per cent yielding asset at 65 per cent leverage and a 6 per cent interest rate returns about 5 per cent pure cash flow after debt. Add 5 per cent per annum capital growth and you are at roughly 16 per cent return on the equity you put in. A 7 per cent asset takes it to about 21 per cent. If your business margin beats 15 to 20 per cent, keep the money in operations instead.
From De-risking your business with commercial property →Buy multi-income assets and create equity by strata titling
Scott's third deal was a four-unit block in Port Macquarie for $425,000 renting at $800 a week, clearing roughly $20,000 to $25,000. He added integrated fire safety systems, fireproof separation, separate water meters and enough car parks to convert one title into four, each valued at around $250,000 rather than the blended block price. He found these by keyword searching realestate.com for "unit blocks", "multi-tenant" and "multi-income".
From De-risking your business with commercial property →
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Session notes are free. The recordings, the live advisories and the founders in the room are for members.