Scott Picken, senior managing partner of Wealth Migrate and author and founder of the International Property Foundation (IPF), believes that asking how to make a million is the wrong question, and he might just be right.
“What wealthy people understand is that it’s not about how much money you have in the bank, but about how many passive income streams you have. Is it better to have a million in the bank, or a passive income of R10,000 per month from five different sources? I can guarantee you that anyone who is wealthy will understand that it is the latter,” he states.
While R1 million can help you unlock opportunities, Picken believes that not knowing how to create passive income will always stand in the way of your financial freedom. Picken, who earned R2 million on his first property deal, believes that creating value is the easiest way to make a million. This is a concept he grasped at age 22, and he now offers his own success story as an example.
“A friend and I found a house in Cape Town with high density zoning when I was 22. We wanted to build 34 student apartments, but as we were close to a river, we could not build a basement for parking. We bought the property together and occupied it with students while we went through all the planning and zoning. Once we had everything in place, we proposed a joint venture with an established developer, which was accepted. We developed the house into six town houses and sold them into the market. We made over R4 million in profit, or just over R2 million each.”
Picken understood right away that his first millions were an opportunity to create more wealth, and he and his business partner started looking at offshore property. They invested in a property in London, close to Wimbledon station and home to nearly 60,000 South Africans in need of lodging. They invested £20,000 of their own money into building two more bedrooms.
“In London you rent properties by the bedroom and suddenly we had five income streams. We lived in the house while we did this, which was inconvenient, but if you live in a property for one year in the UK you aren’t susceptible for capital gains tax. With the value we added to the house, we re-mortgaged it and bought another property, which we moved into and did the same thing again. We earned over £1,000 of passive income per property.”
The same principles that earned Pickens his first million later ended in his turning a $4 million company into a $40 million company that listed on the Australian stock exchange in less than five years.
“To create money or income streams, you have to have knowledge and skills,” he says. But he adds that nobody ever learnt to swim by reading a book. “You have to get started, manage your risks and learn along the way. The more you can partner with experienced people, the more successful you will be. If you understand this, achieving both objectives is easy!”
**Copy courtesy of ‘Finweek’. Call 0860 103 911 to subscribe.**
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