How to leverage the law of scarcity to build a multi-billion real estate portfolio. A practical step by step blueprint.
In June of 2018, David MacNeil, WeatherTech founder and CEO acquired a Tour de France-winning 1963 Ferrari 250 GTO with chassis number 4153 GT for a whopping $70 million.
Adjusted for inflation this $70 million is approximately $87.6 million today being 28th of July, 2024.
You are Nigerian and I am Nigerian so let’s talk in Naira, when converted to Naira at today’s rate this $87.6 million is approximately ₦141.3 billion.
Now when we talk about buying cars we usually budget ₦30 million to ₦50 million, depending on the car and model you want. If you are flush with cash you can go up ₦120 million to ₦300 million range.
If you want to make a statement and draw instant attention whenever you pull up you can go as high as ₦500 million to ₦1 billion max for ultra-luxury sedans like Rolls Royce, fast cars like Lamborghini, hypercars like Bugatti and all the rest.
So the question is, what the hell kind of car sells for ₦141.3 billion?
The Ferrari 250 GTO is a grand tourer produced by Ferrari from 1962 to 1964. Just 36 of the 250 GTOs were manufactured between 1962 and 1964 and after production, the 250 GTO retailed for $18,000 in the United States, with buyers personally approved by Enzo Ferrari and his dealer for North America, Luigi Chinetti.
Interesting history, but if you are like me your next question should be, how is a car that was produced in the early 1960s which is 62 years from now sold for ₦141.3 billion?
One of the economic factors we are often told is that once you buy a new car and drive it out of the dealership it has automatically lost 50% of its value, so how was a car that was produced in 1963 and has been driven in various races and by various drivers sold for ₦141.3 billion which is more than 80 times the cost of the most expensive brand new car today?
The answer is quite simple, the Law of Scarcity. What is the Law of Scarcity?
The Law of Scarcity states that If what we desire “appears” to be in limited supply, the perception of its value increases significantly.
So the Ferrari 250 GTO which was produced in 1963 sold for ₦141.3 billion not because it has an ability no other car in existence has, not because it could reach a speed no other car in existence could reach, and certainly not because its performance and endurance is better than that of any other car in existence.
No!
As a matter of fact it can’t even hold a torch to the performance, endurance, speed and technology of modern sportscar. It only sold at that price because it is extremely scarce and hardly ever comes up for sale.
It sold at ₦141.3 billion because it has the Law of Scarcity working for it.
Now permit me to ask, if the Law of Scarcity can turn a well known liability like a car, a sportscar into a ₦141.3 billion asset what do you think it can to a well known asset like real estate?
If the Law of Scarcity is the long searched for ‘philosopher’s stone’ that can transmute a liability to a high value asset, what do you think it will do to an item that from the get go is an asset?
Most importantly how can you as a real estate investor leverage this Law of Scarcity to build a multi-billion real estate portfolio?
A real estate portfolio which to be honest with you has the potential to grow into hundreds of billions if you assemble it with tens of billions.
To answer this question, permit me to refer to my earlier article where I shared step by step how to invest and compound ₦1 Billion in real estate.
One of the categories of real estate I advised you to invest a portion of the ₦1 billion in is scarce real estate properties.
To be exact, in that article I advised you to invest ₦420 million of that ₦1 billion into buying scarce real estate properties.
However when your purpose is to leverage the power of the law of scarcity to build a multi-billion real estate portfolio. You go all in in buying scarce real estate properties. 100% all in.
Before I proceed, what is a scarce real estate property?
Scarce real estate properties are pieces of real estate which by their nature, location or positioning is very limited in supply and availability. You can’t just get them anyhow.
In a real estate market like Nigeria’s that is still developing and still have a lot of things to build up, when buying scarce real estate properties prioritize land properties.
I say this because land by their nature is scarce and when they are positioned in a location that somehow still increases this scarcity, it is a double whammy.
So what are examples of scarce land properties? Beachfront lands, lands that are directly facing the expressway, lands in locations that no longer have much lands available. These are the popular examples I can give you but it can go beyond this.
What’s the strategy? You buy as many of these lands as you can and you hoard them, it is that simple. You hoard them to enhance their scarcity.
The longer you hoard them, the more valuable they become because the more those who want them will desire them. The more they desire them, the higher the figures in the offers you are getting increase.
Whenever you are ready and willing to sell, you can name your price and get it. That’s the law of scarcity.
What do you think gave the seller the confidence to call $70 million for a car that was made in 1963 and retailed at just $18,000 when it was produced?
Let’s talk about the finances of leveraging the law of scarcity and investing in scarce real estate properties.
When you want to invest in scarce real estate properties, don’t expect the properties to be cheap. Like I have been saying, these are properties which by their nature, position or location is scarce so they don’t come cheap. At all.
The Ferrari 250 GTO when it was made in 1963 sold for $18,000. That amount of money in 1963 is a lot of money. A lot of money. Rare items don’t come cheap, but do they appreciate?
Well, a $70 million cheque 62 years later confirms that they do.
To invest in scarce land properties can cost you a lot of money, a lot but cost is irrelevant, the main question should be will you make your money back?
Oh my bad, that too is the wrong question.
The right question is not whether you will make your money back or not but how many times over will you make your investment back when you liquidate?
So when you are investing in scarce real estate properties don’t look at the cost, because trust me it is going to be very pricey but that is irrelevant. The only thing you should be worried about is how scarce, how exclusive, how unavailable is that piece of property? How desired will it be say 3 or 5 years from now?
Are you aware that you can never go wrong when you are leveraging the law of scarcity?
These are the only questions that matter. I say this because I told you that David MacNeil, WeatherTech founder and CEO acquired a Tour de France-winning 1963 Ferrari 250 GTO with chassis number 4153 GT for a whopping $70 million but do you know that at $70 million, this is still a good investment?
He acquired this in 2018 but do you know that if he put it up in the market today he can get nothing less than $100 million for it?
How do I know this? Well I can’t really go into the nitty gritty details of how the vintage car market works but in 2022 a 1955 Mercedes-Benz 300 SLR Uhlenhaut Coupe sold for an astonishing $142m at an auction in Stuttgart.
How is a car made in 1955 worth $142 million? Oh please spare me the surprise, that’s the Law of Scarcity at work.
There are various laws in existence, both economic and physics. In physics the law of gravity states that anything that goes up must come down. We could have wasted time and effort complaining about it but we didn’t. Instead we leveraged it and built planes and rockets.
In life, don’t complain about things, instead learn how to use and leverage them to your advantage.
In economics we have the Law of Scarcity and to be honest with you, you should leverage it to build a multi-billion real estate portfolio because if it can turn a well known liability like an $18,000 sportscar into a extremely valuable $70 million asset, what do you think it will do to your real estate portfolio?
If you are ready to get started investing in scarce real estate properties, check below to get in touch with me.
I Am. Ugochukwu.
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