Passion for
business &

My story

People have always asked me: why business and why property? Well, I have explained how my parents instilled self-belief and an insatiable drive for success but what I haven’t told you is how I came to be so determined to master business and property. My dad’s story is where it all begins…

My Story

My father always wanted to be a farmer and to work for himself but political turmoil in Zimbabwe denied him his dream. So, at the age of 27, he came to South Africa and studied to be an accountant (CA) so that he could get a corporate job, which would allow him to provide very well for his family. His hard work saw him steadily rise through the ranks until he was eventually promoted to Financial Director of Rainbow Chickens. However, the fire in his belly never died down; he still dreamed of running his own business and so he spent much of his free time tirelessly trying out new ideas, often unsuccessfully.

I was aged 17 and in my matric year when my dad decided to cash in his chips and take a bold risk to realize his dreams. He took early retirement and got paid a pension of R500,000, which he had worked hard for over 22 years. As most people did, he invested in the stock market with some “clever” pension broker.

Within three months of leaving Rainbow Chicken and having just started a new business, our family received devastating news: my father was diagnosed with cancer. The business fell apart, we fell into bankruptcy, and my father became consumed by bipolar depression. The last 10 years of his life were a constant battle for him. Not only was he desperately fighting cancer and a deteriorated general health, but he was also trying to conquer the depression.

The question is: why am I telling you all of this?

My father’s struggles taught me many lessons but the following two were the most important:

Lesson 1: Becoming a dedicated, life-long entrepreneur

When my father and his Rainbow Chicken colleagues started their independent business at the age of 49, they had no idea how to be successful entrepreneurs. Their business was small, but they were fresh out of the large corporate environment and so they behaved as such. They splashed out money on a fleet of cars and had them branded. They even purchased branded coffee mugs! This is how things worked in the corporate world, where big budgets accommodate big spending. But when you’re an entrepreneur trying to get your business off the ground, you have to be so much more frugal and nimble (or “foxy” as Clem Sunter calls it).

This is the part of my dad’s story that convinced me to not give the best years of my life to a corporate job, only to risk everything later on. As I say in Chapter 3 of my book, Property Going Global, I truly believe that being an entrepreneur is a learned skill and the only way to learn is to roll up your sleeves and get started. Age is irrelevant – it doesn’t matter if you’re fresh out of high school or nearing retirement age – and it doesn’t matter what your corporate experience or level of education is.

I decided I was going to start as soon as possible, long before I had any real commitments, and if I failed, I could always sleep on a friend’s couch, wake up the next morning, and try again. I was going to master business from as young an age as possible and take control of my own destiny, just as my dad had dreamed of doing.

Lesson 2: Falling in love with property and business

On the 1st August 2005, while I was London, I got a call from my mother to say that my father had passed away. He was only 59. After struggling to get a flight, I finally arrived home in South Africa and, as the oldest son, it fell to me to take care of my dad’s affairs. I had no idea what I was doing, but with my uncle’s help we managed to straighten everything out. During this process, we discovered that my mother would be receiving a pension payout of R480,000. Remember, in 1995, my dad’s retirement fund paid him R500,000 and so, over a period of 10 years, the wonderful “experts” on the stock market had not only FAILED to grow his wealth, but also had shockingly managed to reduce the capital amount by a staggering R20,000.

I wrote an article a month after my dad died to try and explain to people why I believed so much in real estate. I had already fallen in love with property – it just made so much more sense to me than blindly trusting a bunch of brokers with my money, to be invested in an inherently unpredictable system over which I have no control. And, I had enjoyed a good measure of success in property because, when others wouldn’t, I thought outside the box and used my unique skills to create value, which is something I don’t believe is possible on the stock market, unless you learn to master it like my uncle has done.

I showed people in my article what would have happened if my parents had bought property instead of putting the R500,000 into the stock market. This was based on long-term trends over the last 30 years, where property in South Africa has grown by 12% a year and earned a net yield of 8% each year. If they had bought five houses and put down a deposit of R100,000 on each one (in 1994, the average price in South Africa was R166,889, according to the ABSA Housing Index on the 31st of December 1994), their loan-to-value ratio would have been 40% – very low in risk – which would have created a scenario in which the monthly rent would have covered the mortgage payments and then some.
Let’s for argument’s sake say that 1995 was a cash flow neutral year (it would actually have been R2,935 positive, but let’s be conservative). After 10 years, after all expenses and interest, each property would be earning R107,115 per year. Now, if you have five properties, this translates to R535,573 passive income per year, more than the initial capital invested in early 1995. Add to this that, according to the ABSA Housing Index, on the 31st of July 2005 (the day before my dad died), the average house price was R708,542.

What this means is that each house would have equity over and above the initial R500,000 of R541,653 per house… a total amount of R2,708,265 in total. Rather than the PALTRY R480,000 that was returned with no passive income, my mother could earn over R500,000 a year by doing nothing (management fees are included before the net return) and have R2,7 million in equity and the original R500,000 invested. A NO BRAINER!

It has been more than 12 years since my father passed away and my mother is really concerned about money and about whether she has enough for her future. If she still owned those properties, rather than investing it in a pension and the stock market, she would be earning a passive R2,091,408,765 a year after all expenses and in two years, the loans would be fully repaid. She would also have R5,346,055 in equity in the five properties.

Now you understand why I have fallen in love with real estate and why I am so passionate about business. It yields real wealth. This is why I have dedicated my life to mastering both skills for myself, my family, and anyone who is important to me.

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Megan de Beer: + 27 (0)72 606 5642

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Scott Picken: +27 (0)86 033 7773

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