King Richard Lionheart Conquers Cyprus - Medieval Real Estate Flip
King Richard Lionheart (1157-1199) ran into some bumps in the road on his way to the Holy Land to fight the Third Crusade. But he turned those lemons into lemonade and executed the most epic real estate flip of the Middle Ages.
His ships were meant to meet in Sicily, where his sister lived. Conveniently, she was married to the king of Sicily. Inconveniently, the king had just died, so the island was engulfed in the usual medieval civil war caused by disputed succession. Richard scooped up his sister, demanded her dowry be returned to him, and took both her and the loot with him on the crusade.
In 1191, they sailed for Acre, but storms blew them off course. The ships crash landed on Cyprus, which was ruled by Isaac, a rebellious Byzantine prince who claimed the island as his own. He had been the local warlord for ten years and the Byzantine empire had not been able to regain control of the island.
King Richard was in a hurry to get to Jerusalem, but Rebel Isaac insulted Richard’s fiancée, and Lionheart wasn’t the kind of guy to let an insult to his lady slide. So he conquered Cyprus. When he captured Isaac, the defeated usurper begged not to be put in iron chains. Richard obliged this request and had silver handcuffs specially made for this royal prisoner. What an epic troll!
Now Richard, King of England, and duke of most of western France, also ruled Cyprus. So he did the most logical thing: raided the island for all its goods and imposed a 50% tax on its nobles. All this new loot really came in handy to finance the Third Crusade. But he was kinda stuck with ruling Cyprus and its unhappy barons.
What was he going to do with an island he didn’t want to own? If you owned a private island in the Mediterranean, would you get rid of it? Of course not! But you’re not Richard. He wasn’t nicknamed Lionheart for lounging on the beach, and he was eager to get to the Levant, liberate Jerusalem, and get on with some more serious chivalrous adventuring.
So he did the most logical thing and sold Cyprus to the Knights Templar for 100,000 gold coins. It was an epic medieval real estate flip. Given that Richard had scooped up all the island’s loot and imposed a huge tax, the nobles were not at all happy, and thus, constantly in rebellion. A few months down the road, the Knights Templar still didn’t really control the island, so they GAVE IT BACK to Richard.
Richard still didn’t want Cyprus, so on his way home from the Third Crusade he re-sold it to Guy de Lusignan (the king of Jerusalem who did not rule in Jerusalem) as something of a consolation prize for not winning the holy city from Saladin. King Guy was broke, so it’s unlikely that he ever paid up, but the Lusignan family would still rule Cyprus for the next couple hundred years. It was a win-win-win.
Among his many accomplishments, King Richard Lionheart might have invented a popular private equity business model: Get your hands on a distressed asset, squeeze all the value out of it, then sell it to some sucker. You have to admit, it’s a business plan with a bright future.
From big time institutions to individual investors, flipping real estate usually flows a pretty simple model:
1) Find an undervalued property and buy it
2) Fix it up so somebody else wants to buy it
3) Sell it for a tidy profit (cha-ching, cha-ching!)
Like so many things in life, that’s easier said than done.
First, you have to find an undervalued asset. Its current owner probably knows things about the property that you, the potential flipper, do not, and set the price accordingly. Then you might find that fixing it up was harder than you imagined. That’s called “development risk.” Finally, once you’re ready to put your asset on the market, the market will decide if the price you want is acceptable.
Unless you’re a king with an army behind you, it’s probably best to do your homework and test your assumptions before you go all-in on a big flip. Do it right, and you might retire to an island. Do it wrong, and you might go down with the ship.
