Bondi’s Andrea Cancelli shares how he built a $7.7m property portfolio in the past four years. Picture: Christian Anstey
Bondi resident Andrea Cancelli was inspired to start investing after receiving an unusual gift from his father when he turned 18.
“Instead of gifting things that normal people do like cars and video games, I got a thousand euro in a stock trading account,” he said.
“So from a young age I started having fun with stocks and then start up investments.”
This sparked a passion inside Mr Cancelli who has built a $7.7m property portfolio in just four years.
The 32-year-old grew up in a small town in Italy before studying finance in Milan and London.
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In 2017, he decided to embark on a new adventure in Australia and turned his investment interests to real estate. He said everyone was “hyped up” on residential real estate and the concept of negative gearing.
“To be honest I never bought into it too much,” he said.
“My thinking has always been ‘why wouldn’t you invest in something that is giving you profit every year?’”
It was commercial interest that caught Mr Cancelli’s attention.
“Commercial investments are much higher returns in terms of annual cash flow, up to 7-8 per cent and residential investments are between 2-4 per cent,” he said.
Mr Cancelli, who works in the finance industry, said he came up with a “simple strategy” of buying great properties at the end of their leases.
Mr Cancelli bought three commercial properties in Brisbane and one in Perth. Picture: John Gass
“I renew the lease and get the property revalued for more,” he said.
“The only way to grow the portfolio is if you focus on things that are cash flow generative and you get a revaluation right away.”
Mr Cancelli thoroughly researched the market and worked with Rethink Investing which has acted as a buyer’s agent to help him carry out his strategy.
His first property purchase was in Brisbane in 2019 when he bought a warehouse/office for $700,000 using his savings as a 20 per cent deposit.
The lease on the property had nine months left so Mr Cancelli organised a new lease, went to the bank with “security of income” and had the property revalued for $900,000 in 2020.
“I was buying an asset that no one wanted,” he said.
“The reason I went for it when the 10 people before me said no … if the tenant extended the lease then I am going to have immediate capital growth which I can use to buy another property.”
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Mr Cancelli used a strategy of buying a commercial premises nearing the end of its lease.
In 2020, he bought an industrial warehouse also in Brisbane for $1.4m using equity from his first property as well as savings.
“I got it revalued the year following in 2021 to $2.1m,” he said. “I bought it with the lease expiring in three months. The tenant extended and there was this immediate uplift. Now it’s worth $2.5m.”
Mr Cancelli decided to repeat his successful strategy a third time in 2021 in Brisbane, buying another industrial property for $1.55m and having it revalued soon after at $1.9m.
He mixed it up for his fourth property, buying a retail complex in Perth for $2m in 2022 which has since been revalued at $2.4m.
“The strategy was again the same, it had four units and two of them were vacant,” he said.
“I rented them out and it immediately grew in value.”
Regardless of the type of commercial asset, Mr Cancelli has stayed true to his strategy recording total purchasing costs since 2019 of $5,702,500 with his portfolio now valued at $7,700,000.
Mr Cancelli’s fourth property was a retail complex in Perth. Picture: Sharon Smith
“By taking that risk if it goes well, and you can get a better lease in place, then the value goes up immediately,” he said.
He said if tenants decided to leave, he was covered by choosing a property attractive for new tenants due to location, proximity to infrastructure and accessibility.
“The confidence of finding another tenant derives from all of the homework that you’ve done,” he said.
“If things went wrong I would have to wait three to four months but once I found a tenant I would have ended up with the same result.”
Covid saw Mr Cancelli’s industrial property values increase massively and he is making healthy profits from all four properties with further options to refinance.
However rising interest rates have seen his portfolio’s interest costs climb from 3 to 6.5 per cent.
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Mr Cancelli’s advice to potential investors is not to rush into buying a house or unit too soon. Picture: Simon Bullard
“The costs have doubled but the beauty of commercial investing is I get more cash flow so I can pay the interest confidently,” he said.
Mr Cancelli said his advice for people keen to jump into real estate investing was “unpopular”.
“Don’t buy a house or a unit too soon because if you do that you are going to have a massive cash outflow every month,” he said.
“It’s very hard to build a portfolio if you have a massive cash outflow.
“If you switch gear and focus on cash flow generation every month then it becomes much easier. If you don’t need to pay $5000 every month for a mortgage it helps you save.”
Mr Cancelli has held off buying a home to allow him to escalate his commercial portfolio.
“It depends what your goal is and can be a little bit annoying,” he said.
“For example I live in a unit and I’m fighting strata to change the windows. If you own your own place you could just do the work. It’s a trade off and you make compromises to suit your plans.”
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