The History of Real Estate I: Marcus Crassus

Sep 24, 2021

House flipping has seen a surge in popularity in the past decade or so, but the practice of buying and reselling houses as an investment has been around for quite some time.

Did you know that investing in Real Estate goes back to even Roman times?


Let’s explore the history of real estate investment, and see how this long-standing industry has come to be what it is today.

The real estate industry traces its roots all the way back to the early 1800s when the Louisiana purchase became the first major Real Estate acquisition made by the U.S. Since then, it only became popular to the average persona as a form of investment in the 1980s but we can trace our history even further into the past.

 



Real Estate In Rome. 


When we think of ancient Rome, we think of gladiators, legionaries, chariot races, temples, art, mosaics, and the war machine that dominated the West for 10 centuries. However, Rome was an extraordinarily complex society where we could recognize many of the industries of our modern age.

If we travel to the 1st century BC and enter Rome, it would be difficult for us to recognize the city. Augustus had not yet been born and therefore the architectural projects of his time that embellished Rome did not yet exist, neither did the great fire of Nero that changed the city forever for the better, the Pantheon of Agrippa (the current one dates from the 2nd century AD) or the Colosseum weren’t even a dream.

However, in the streets of that primitive Rome, we would see many of the businesses that we know today, restaurants, schools, public toilets, tailors, doctors, lawyers, insurance agents and also real estate agents.

 
The vast majority of the people living in Roman cities lived in cramped apartment buildings called insulae. Insulae were generally three to five stories high and housed from 30 to 50 people. The individual apartments usually consisted of two small rooms. 

The bottom floor of the insulae often housed shops and stores that opened out to the streets. The larger apartments were also near the bottom with the smallest at the top. Many insulae were not constructed very well. They could be dangerous places if they caught fire and sometimes even collapsed.

And it is by talking about this that we can begin to talk about what could be the greatest Real Estate agent in history, Marcus Licinio Crassus.

 

Crassus Early life. 


Marcus Licinius Crassus was a member of an old and highly respected plebeian family in Rome. His youth was marked by the exile imposed by Sulla on him and his family in Spain, which led him to see how misfortune and poverty fell on his family. Marcus Licinius Crassus’ life’s concern would from this point onward be to rebuild the fortunes of his family and, at the time of his death, his fortune will be worth US$13.3 billion at July 2021 gold prices.

 

Crassus the Businessman and the Real Estate agent. 


This is where I must ask the reader to understand the historical context in which we find ourselves. Crassus’ practices, in the eyes of someone from the 21st century, are questionable at best.

The system by which Crassus became the richest man of his time required corruption, a slave hand, cruelty and some practices more typical of a mob boss than a current businessman.

Some of Crassus’ wealth was acquired conventionally, through slave trafficking (Slavery was back then considered conventional), production from silver mines, but is the Real Estate side which made him rich. Crassus’s system was simple but effective.


Step 1, get cheap and efficient labour. 


Crassus began by buying 500 slaves with the money he still had from previous businesses. These slaves were mostly normal workers, but among them, there were some architects of various origins who had fallen into misfortunes.


Step 2, find demand.

 
Rome at that time was a city that had spread far beyond its traditional limits, the Pomerium, but this ancient area was where most of the population was concentrated. If you think that your city has a lot of people, the density of the population of ancient Rome will have driven you crazy. Without today’s technology and means of transportation, people had to concentrate in narrow areas very close to their points of interest, and housing was limited.


Step 3, generate a constant cash flow and increasing demand.

 
However, Rome had a second problem, there was no space to build. To this Crassus devised an "ingenious" solution. He established the first fire brigade in history, which in turn, is the first arson brigade in history. This business worked like this, pay us and we will protect your house, don’t pay us and your house “may” burn.

 
Here is when all the systems came around. Crassus fire brigades started fires around the city in the Insulae that were not protected, upon “arriving” at the scene, however, the firefighters did nothing while Crassus offered to buy the burning building from the distressed property owner, at a miserable price. If the owner agreed to sell the property, his men would put out the fire; if the owner refused, then they would simply let the structure burn to the ground. After buying many properties this way, he rebuilt them and often leased the properties to their original owners or new tenants. Crassus used his slave labour to erect new and larger buildings that he would sell again or lease to his former tenants at higher prices, if these people could not pay, the ever-growing population of Rome would supply the demand. 

 
These new houses had luxuries that others did not, the first floors were larger and were intended for people with money. The houses used to have slaves who guarded the street lighting and inside the buildings, the buildings were connected to the sewage and water system of the city. Without wanting to, Crassus began the project that Augustus would continue 50 years later.

This closed system of construction and destruction made Crassus not only the richest man in Rome but one of the 3 men who dominated the politics of the Roman Republic for decades, the richest man of the first triumvirate along with Caesar and Pompey. 

 

The devil is in the details.


In retrospect, the closed real estate business system that Crassus created is despicable, to say the least. But the importance for the real estate business world is immense. 

Crassus created the first firefighting and mass construction system with a view to the sale of real estate for common people, both for rent and sale. He created buildings with housing and business spaces creating, in turn, the system of buying and selling real estate that we know. Wealthy people could take advantage of this new property to buy and speculate, usually friends and allies, and these became the economic base of a fledgling middle class in Rome, the first urban middle class in history.

After the death of Crassus, and the fall of the Roman Republic, Augustus and his successors took note of this. The private initiative was replaced by a public initiative that created fire brigades that no longer had incentives to buy houses and real estate projects sponsored by the state that created crass-style homes but of better quality, safer, and with protection. This middle class would begin to buy housing in these new homes, where the first floor could even have a toilet and running water.

Unfortunately, the figure of the real estate agent will lose enormous importance due to the interference of the state in the business. But it is with Marcus Licinius Crassus that we can say that the figure of the Successful Real Estate Agent was born.

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