Successful young entrepreneurs advised to diversity into property

In South Africa today young qualified people with management aspirations are finding it increasingly hard to land the secure pension-paying (but possibly unexciting) jobs in the big corporations that often gave their fathers and grandfathers a steady income.

This, said Bill Rawson, Chairman of Rawson Properties, has not been an altogether bad trend: it has stimulated young people to become entrepreneurial initiators to the benefit of both themselves and the country.

“Young middle class peope,” he said, “have been forced to look for entrepreneurial opportunities and in my experience many have responded exceptionally well to the challenge, often building up strong, viable businesses in under five years.”

The time then always comes, said Rawson, when these successful go-it-alone operators have to consider where they will place the cash they have accrued and/or expect to earn in the years ahead.

“Two factors have now to be taken into account,” said Rawson. “The first is that it is always wise to diversify and to ensure that at least some of your eggs are in another basket. Very few businesses can guarantee successes in perpetuity and many, if not most, will at some stage have to work through a down period in which an alternative income stream for the CEO will be welcome.

“The second factor to be taken into consideration,” said Rawson, “is that if the entrepreneur is to remain successful he will have to keep his eye on the ball and to maintain a 24/7 interest in his business operation. This, in turn, will mean that his other investments should be of the passive type - they should not require too much attention.

“Property is, therefore, one of the few options that fully fits the bill for this type of investor,” said Rawson. “It not only has the great advantage that it can be geared to limit the initial outlay but is also is one of the few investments where, with the right rental agent working on behalf of the investor, his input can be limited to an annual visit and a monthly checking of his accounts.”

Rawson revealed that he himself had owned 12 properties by the time was 32 years old and the income from these was, by and large, reinvested in upgrading existing properties or buying new properties. Very seldom, he said, has he sold a property in which he has invested.

Those buying now, said Rawson, can take comfort from the fact that the market is still very much slanted in favour of the buyer and there are good bargains to be had. They can also rest assured, he said, that despite fluctuations rents will usually be above the inflation rate - and in good periods could even reach the 15% annual growth experienced previously. Capital growth, too, in residential property has traditionally been between 5% and 12% and is likely to continue to operate in this range from 2011 onwards.

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