With the high property prices in Singapore, many investors are looking overseas to find attractive investment opportunities. In this article we interview Matthew Snedden, one of the United Kingdom’s most recognized real estate experts and a speaker at the National Achievers Congress 2013, on both his failures and successes in building his property portfolio, and how investors can build a high return UK property portfolio with little capital.
Could you share your stories of how you began your property investing journey and achieved the success that you have today?
My journey began when I became desperately unhappy with the job that I was doing. I had spent 12 years as a property manager and felt that although the wages were not bad I was no longer enjoying it.
I attended all the Tigrent courses and met and became good friends with a lot of the speakers and mentors that the company had. This was the major breaking point for me – these people helped me gain the tools required and the education to help me overcome the fears I had built up.
Once I had purchased my first property, I saw this as a massive sign that I was going to do this as big as I could. Over the years as I’ve changed my strategy to suit my style, I gained the confidence to do larger scale developments and refurbishments. I now love what I do – this is a huge driver for me!
What does your property portfolio look like today? What steps did you take to build up that portfolio?
The property portfolio I have built over time is far greater than I ever expected having. I have bought and sold well over 100 properties in the past 10 years. Throughout this process, I bought a number of buy to let properties which range from two bedroom houses to six bedroom houses, and one to three bedroom flats as well. The majority of my property portfolio held to today are from the developments that I have taken on in recent years (converting large buildings into one, two or three bedroom flats/apartments). I have found this method better for my ROI (Return On Investment) and also for the ease of property management.
People looking to generate wealth from the markets are faced with a wide range of options that include trading and investing in property, stocks, options, futures and foreign exchange. Which of them do you think would be more suitable for a beginner looking to build his or her wealth?
The beauty of property for me is that you can add value to it and it can be seen. I can drive past it and know that I have turned something that was completely run down and neglected, into a place that somebody would love to live in. This gives me massive satisfaction and will continue to drive me. For this reason, a beginner, with the right leadership, can make a good return on their investment much more simply in property in my opinion.
What property types (e.g. residential, commercial etc) do you recommend investing in and why?
For a beginner, residential property is where most investors will start and perhaps even finish. There are a few factors I would take into consideration with this. Firstly, most people understand residential property because they grew up in one. We understand what people want to live in. Secondly, price is a consideration. While not always the case, commercial property is typically seen as a more expensive and more for the experienced investors. Thirdly, lenders look at investors in the commercial world as more experienced. The lending criteria are defined differently to residential and this may persuade the investor to stick with residential rather than commercial. I believe purchasing residential property is a much easier and simpler strategy than commercial. However, commercial property has scope for higher returns.
Which global property markets do you think have the greatest profit potential for an investor and why? Which markets do you think investors should avoid?
I personally have purchased property in both the UK and Australia. I have gone back and forth to both countries because I believe in both markets. Australia still has strong capital growth, whilst UK has very strong rental demand and high rents, thus strong cash flow. I believe in the UK market for people who are looking to build a sizeable portfolio which can generate a large cash flow base. I look into other countries that have good cash flow and feel that the advantage the UK has over the others is that its population size is large relative to its geographic size. This allows for the market to be strong even when the economic outlook seems bleak.
What pitfalls should a global property investor be wary of?
As an investor, no matter what market, country or entity they are looking to invest in, they need to understand the pitfalls!
An investor needs to be aware of the areas they purchase in, types of finance available to them for their strategy, and understanding the demand level for either sale or rent. Understanding the employment status of an area will determine types of tenants or buyers as well as the potential sale prices that can be achieved. Looking at the average income in the area will determine people’s ability to get mortgages.
How much capital do you need to have to build a property portfolio and what sort of rental yield and capital gains can you get? Could you share with us some of your best and worst property investments?
This is a really difficult question to answer however London typically achieves a yield of say 4% to 8%, whereas the North of the country typically achieves 10% plus. Understanding the strategy is the key. My main aim is to purchase property, then add value to it and either sell or refinance at a higher level to pull out a large part of the capital I originally put in. To build a sizable portfolio very fast, cash is required however this can be borrowed for the short term. There are many lenders out there who offer this and so the main point here is to find a property that fits well with the lenders. Once this has been identified, lenders are more than happy to lend to you.
My worst property investments were the ones I did based on what everybody else does, when I ignored the rules and skills I learnt and bought property based on a sales pitch delivered by a new build company. I put my money in the deal, the market dropped, and the rents did not achieve what was sold to me.
The best ones are the rest… buy below market value, change the use and add value to achieve high ROI and yields.
What are the most important lessons you’ve learnt about living a happy, successful and meaningful life?
For me, living a happy, successful, and meaningful life means understanding who you are, what gifts you have and how that fits in with rest of the world.
Success is to me is measured by my overall happiness. This can be measured through wealth, ability to spend time with love ones, and how much you are living life on your own terms. I often think how I would do things differently if given a second chance. This allows me to make better decisions the first time round.
Matthew Snedden will be going in depth on the strategies he has used to build his UK property portfolio with little capital and add value to achieve high returns at the National Achievers Congress 2013.