Commercial real estate is one of Scott O'Neill's main passions for investment. As head of Rethink Investing, he has helped more than 1,500 Australians create wealth through commercial real estate. But O'Neill is also aware that, like any other type of property, you must actively manage your commercial property once it has been added to your portfolio. Adjustments can be made to use it more effectively, and O'Neill particularly wants to dispel the urban myth that the value of commercial properties will not increase.
"Commercial properties can have significant growth potential," says O'Neill.
"The important thing is to make sure you have the right information before proceeding with the purchasing process."
Commercial properties often involve complex leases. It is therefore essential to ensure that sellers disclose the correct information before the start of sales. You need to know what type of lease has been defined and if any incentives have been added, says O'Neill.
"If you go alone, you will miss some traps," he says. "But when you have all the facts at hand, you're also in a much stronger position to negotiate future leases."
O'Neill cites one of his first commercial properties as an example of this principle. Although only one property, he had three separate titles, two owned by a convenience store and the other by a local fish and chip shop. Both were long-term customers – and perhaps more importantly, businesses were unlikely to be affected by external factors such as e-commerce. While the property offered positive cash flow from the beginning, O'Neill acknowledged that there were a number of opportunities to improve it – and therefore its return on investment.
"The most obvious opportunity was to raise the rent," says O'Neill. "So, over time, I renegotiated the lease to get a better deal, an increase greater than the growth of the CPI that was already built into the lease."
"In consultation with your property manager, you can find a way to … maximize your capital and your income"
However, O'Neill points out that increasing the value of your property is not about harassing tenants.
"You can not just raise the rent arbitrarily," he says. "You have to offer a real benefit to the tenant. As a result, we worked on a number of fronts with tenant consultation, including renovations that modernized the property and modified the lease to ensure mutually beneficial terms. "
There are other options for increasing yields, O'Neill points out. Subdivision to add more tenants may be an option, especially if existing tenants feel they are not using their space effectively. In addition, the exterior of a building can often present opportunities for profit through the rental of advertising space.
"Working with your Real Estate Administrator, you can always look for ways to improve property and maximize your capital and income," says O'Neill.
"A dollar for a dollar, your money can go further – it's just important to make sure that you have all the correct information at hand and that you can make informed and mutually beneficial decisions."
Scott O'Neill is the founder and director of Rethink Investing, a BRW Fast 100 real estate investment company specializing in the search for rare, positive-purpose properties all around Australia ( commercial and residential).
Scott is an experienced and active investor who was able to retire from his daily job at the age of 28.
With a current portfolio of 32 properties with an approximate value of $ 20 million, Scott is one of the most successful young real estate investors in Australia.
He has a passion for all aspects of the property, especially to help others find the best deals. Because of this passion, he founded Rethink Investing.
Want to learn how to start investing in commercial property?
Contact the Rethink Investing Expert Team at Ph.1300 965 551 or visit www.rethinkinvesting.com.au
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