Sydney-based engineer Scott O’Neill was able to build a 28-strong property portfolio worth more than $11 million in a span of seven years — an achievement that he credits on good education and mentorship as well as the right mindset about wealth creation.
Going from one to 28 properties is no easy feat, according to the property investor, but setting realistic expectations at the beginning of his journey made it possible for him to keep moving forward despite coming across different types of hurdles.
“[It entails] a lot of hard work—expectations are key… You've got to think, what's it going to look like in 10 years? I don't care about a $1,500 cost here if it's gonna grow by 300 grand. [It’s all about] thinking on a macro level, a long term method—that basically takes the sting out of any little bad day to day events [that] you will always inevitably have with property,” he said.
Scott shares the five-point guide that helped turbocharge his portfolio and secure him $300,000 in income each year:
1. Buy based on the numbers
According to him, buying a property should not be dependent on “property hotspots” determined by the media nor the “sentimental feeling” that a property will turn out to be a good buy. Instead, property investors must do intensive research on the data that would affect the growth of their asset.
“You really got to write the numbers down and that may involve trying to find out where the population's growing the fastest, [whether] it's a suburb next to another suburb worth $100,000 more, or [if] vacancy rates are tighter than the other areas so [that] the rents are going to grow a little bit quicker,” Scott explained.
“You can start to analyse the numbers to get a better result out of your investing.”
2. Build relationships with agents
For Scott, this is one of the most important lessons that can set any property investor up for success.
“The only way to get a good off-market deal… is to have an agent send you the property [first] before it goes online, he said.”
“Over half my portfolio was bought before it's been listed online and, in some cases, I've got deals that would've been snapped up by 50 other investors if it was on realestate.com or Domain.”
3. Cash flow is king — just like in any other business
Scott believes that cash flow is the key to moving forward in property investment and it should remain as one of the top priorities of investors who are in the business of creating wealth through property. His strategy to maintain a balance in his portfolio is to purchase two high cash flow properties for every high growth property he buys.
“I still like to keep a minimum 6 per cent yield. It's not easy, you've got to look long and hard for it,” Scott said.
“Without [cash flow], you're never going to retire anyway. I don't know why people put cash flow so far in the back in their priorities because these properties still will grow in value.”
“It's like we're not going to be buying in the middle of nowhere… It just might mean you need a house or a granny flat or something with multiple incomes or [you need to be] buying it below its market value. Things like that can keep the cash flow up.”
4. Never follow the crowd
Whether there’s good news or bad news according to the media or the people around you, it pays well to go against the current as a property investor. The year 2010 was considered one of the worst time in the recent history of Australian property markets and it so happened that it was also the same year when Scott decided to start his property investment journey.
“It dropped the Sydney market, it actually didn't really pick up until 2012. The market was very soft and everybody was saying don't buy, don't buy, it's gonna drop 30-40 per cent on the spot, and I was terrified [because] it was my first time,” he shared.
However, instead of procrastinating, he decided to jump in, follow his guts, and trust the numbers.
“But I just basically found a property that gave me a good enough cash flow so I wasn't relying solely on growth and it allowed me to get one of the best buys of my life because there was no one else buying at the time. There were many good deals around,” Scott said.
5. Take only good advice
There will be many people who would want to tell you what they think is the best way to go, but a smart property investor is always able to tune out noise and just take in all the good advice from the best people.
“Everyone's got an opinion on property [because] everyone lives in it. Everyone may have spent 30 years paying a mortgage, but it doesn't necessarily mean they're someone to listen to with investing because markets change. They might be stuck in an old school patent that worked 20 years ago, which won't work the next 20 years,” Scott said.
“Never take advice from those that are not in a position that you want to be in… Less than 1 per cent of people own six or more properties in Australia — that means that less than 1 per cent of people [has] done considerably well with properties as well. So listening to the other 99 per cent is probably not wise.”
Tune in to Scott O’Neill’s bonus episode on The Smart Property Investment Show to know more about his journey towards building an impressive 28-property portfolio which secures him $300,000 in income each year.