Building a $7.7 Million Property Portfolio: Andrea Cancelli’s Journey

In the vibrant coastal suburb of Bondi, Andrea Cancelli has made waves in the real estate investment scene, amassing an impressive property portfolio valued at $7.7 million in just four years. His journey from a small town in Italy to becoming a savvy investor in Australia is not only inspiring but also offers valuable insights for aspiring property investors.

An Unconventional Gift

Andrea’s foray into the world of investing began at the tender age of 18, thanks to an unusual gift from his father. Instead of the typical presents like cars or video games, Andrea received a thousand euros deposited into a stock trading account. This early exposure to the financial markets ignited a passion for investing that would shape his future.

“I started having fun with stocks and then startup investments,” Andrea recalls. This initial experience laid the groundwork for his understanding of financial principles and risk management, which would later prove invaluable in his real estate ventures.

A Shift to Real Estate

After completing his studies in finance in Milan and London, Andrea made the bold decision to relocate to Australia in 2017. It was here that he turned his attention to real estate, drawn by the hype surrounding residential properties and the concept of negative gearing. However, Andrea was skeptical of the residential market’s long-term viability.

“My thinking has always been, ‘Why wouldn’t you invest in something that is giving you profit every year?’” he explains. This mindset led him to explore commercial real estate, where he identified the potential for higher returns.

The Commercial Advantage

Andrea’s research revealed that commercial properties typically offer annual cash flow returns of 7-8%, compared to the 2-4% returns commonly associated with residential investments. This realization prompted him to develop a straightforward yet effective strategy: purchasing properties nearing the end of their leases, renewing those leases, and then having the properties revalued.

“I renew the lease and get the property revalued for more,” he states. This approach not only maximizes cash flow but also allows for immediate capital growth, essential for expanding his portfolio.

Strategic Property Acquisitions

Andrea’s first property purchase came in 2019 when he acquired a warehouse/office in Brisbane for $700,000, using his savings as a 20% deposit. With only nine months left on the lease, he successfully negotiated a new lease, leading to a revaluation of the property at $900,000 in 2020.

“I was buying an asset that no one wanted,” he reflects. His willingness to take calculated risks paid off, as the tenant extended the lease, resulting in immediate capital growth.

In 2020, he continued his momentum by purchasing an industrial warehouse in Brisbane for $1.4 million, leveraging equity from his first property. This property was revalued at $2.1 million in 2021 and is now worth $2.5 million.

Andrea’s third acquisition followed in 2021, another industrial property for $1.55 million, which was revalued at $1.9 million shortly after. He diversified his portfolio in 2022 with a $2 million retail complex in Perth, which has since appreciated to $2.4 million.

The Importance of Research and Risk Management

Throughout his investment journey, Andrea has emphasized the importance of thorough market research and risk management. He partnered with Rethink Investing, a buyer’s agent, to help execute his strategy effectively.

“Regardless of the type of commercial asset, I have stayed true to my strategy,” he notes. With total purchasing costs since 2019 amounting to $5,702,500, his portfolio’s current valuation of $7.7 million reflects the success of his approach.

Navigating Challenges

While Andrea has enjoyed significant success, he has also faced challenges, particularly during the COVID-19 pandemic, which saw a surge in industrial property values. However, rising interest rates have increased his portfolio’s interest costs from 3% to 6.5%.

“The costs have doubled, but the beauty of commercial investing is I get more cash flow so I can pay the interest confidently,” he explains. This cash flow has allowed him to maintain profitability despite the rising costs.

Advice for Aspiring Investors

Andrea’s journey offers valuable lessons for those looking to enter the real estate market. His advice is clear: “Don’t buy a house or a unit too soon.” He warns that rushing into residential investments can lead to significant cash outflows, making it challenging to build a portfolio.

Instead, he advocates for focusing on cash flow-generating investments. “If you switch gear and focus on cash flow generation every month, it becomes much easier,” he advises. This strategy has allowed him to prioritize commercial properties over personal homeownership, enabling him to grow his portfolio without the burden of high monthly mortgage payments.

Conclusion

Andrea Cancelli’s remarkable journey from a young investor with a modest gift to a successful property mogul serves as a testament to the power of strategic thinking, thorough research, and calculated risk-taking. His focus on commercial real estate and cash flow generation has not only built a substantial portfolio but also provided him with the financial freedom to pursue his goals. For aspiring investors, Andrea’s story is a reminder that with the right mindset and strategy, significant success is within reach.