“Making money while you sleep,” and “having your money work for you” are phrases everyone wishes could describe their financial situation. But outside of investing in the stock market – and getting lucky doing so – or breaking into the world of high-end art and collector cars, it’s rarely a reality. The idea of buying something, or at least a piece of something, and watching it appreciate as you passively rake in the money sounds straightforward; to actually make money, however, it helps to have in-depth knowledge of the market you’re buying into, which isn’t so easy. That’s precisely why Chris Bruno co-founded Rally Rd., an SEC-registered app: to lower the bar for entry into the world of classic car ownership while at the same time adhering to familiar share-based marketplace principles.
“I never felt comfortable in the traditional equities markets,” said Bruno. “I never felt like I knew as much as everyone else, or certainly as much as the professionals focusing on that market.” Jumping into the deep end of any new industry can be daunting and intimidating, especially if your own money is involved. When it came to investing his own money, Bruno went with what he knew: classic cars. But to invest in a classic car the traditional way means purchasing an entire car and oftentimes hundreds of thousands of dollars. “When I was younger I had some money, the question was ‘how am I going to deploy it?’ The options were all-in no matter what. Real estate: all-in on one house. Collector cars: it’s all-in on one or two cars for the same price [as that house].”
Only a small portion of the population can play with money at that entry point. What Rally Rd. does is break down the ownership of the cars into shares so, say a ‘94 Lamborghini Diablo Jota valued at $600,000 capped at 3,000 shares would be worth $200 per share. “There are no set minimum share purchases or obligations to participate or trade,” says Bruno. “You can feasibly own part of a ‘94 Lamborghini Diablo Jota for $200. Through the Rally Rd app, you can track the car’s value, history and get eyes on the car’s legal documents like sale history, appraisals, valuations, service records, and inspections.
So then, all the reward and none of the risk? Just lay back and make money while you sleep, right? Well, not entirely. Just like any other investment, obviously, you still have the potential to lose money. “We don’t make any guarantees that everything goes up and to the right.” And even though the number of shares are capped for each car at the initial offering, Bruno says, “If a catastrophic event like transmission failure happens, additional shares will be sold to cover the cost.” Which means shares for that car result in dilution and a devaluation.
As a precaution, the investment cars are stored in private warehouses in Upstate New York and Pennsylvania. “The cars are kept in turnkey condition. They’re not even registered for road use.” But, Rally Rd. has a team of workers constantly maintaining the collection, occasionally running the cars, driving them on the private roads around the warehouse. And as for the actual initial value of each of the cars, Bruno says Rally Rd has “assets priced by a network of advisors and industry experts to ensure accuracy.” Additionally, the company claims that “all the information – public auctions, verified private transactions – are available all in-app, and we price and value the cars relative to others on the market.”
But what happens when you want to sell your shares? Whether to cash in or to offload your piece of a car that’s dropping in value, it’s all done peer-to-peer, within the app. Which is both the beauty of Rally Rd. and a potential setback. If a car is a going up in value, you can sell your shares to another Rally Rd. member at an agreed price, and if it’s higher than what you bought it for, that helps determine the live value of the car. The problem comes when you want to sell your shares, and there’s no one willing to buy. Unlike the NYSE, the Rally Rd community is much smaller, so finding a willing buyer becomes a little more tricky. “In some cases, we would play the buyer as a last resort to help out in that situation,” said Bruno. “It’s not a guarantee that we will do that but in some cases, we would.” But, as Bruno said, they “don’t make any guarantees,” just as in any other share-based market.
In the ideal situation, cars keep gaining value over time. Because the Rally Rd. community is small and the values don’t fluctuate as rapidly as the real stock exchange, trading windows on cars are only open for 30 days. Then, they’re closed for 30-60 days to gestate. That way, shares aren’t scalped for ridiculous prices for prospective buyers who missed the IPO or trade window.
In the end, should the car’s value reach a plateau, or should someone make an offer to buy the car outright, an offer can be made, in-app, to buy out all the securities on that car. In that case, all the “owners” are consulted to gauge overall interest in selling the car — this includes Bruno and the owners of Rally Rd, too, who buy into each car with their own money, up to 10 percent. Then, it’s left up to the board of advisors and industry experts, which Bruno says is “the most democratic way to go about it… We expect all the cars at some point to leave the platform.” Bruno went on to say “What we [don’t] want to do is indicate we’re going to hold this for ‘exactly five years’ and then sell it.” Mainly because any set indication of a sale can taint the legitimate price of the car, which is why Bruno says “everything on Rally rd. is always for sale.”
Bruno believes that “up to a certain level, it’s too difficult and it’s financially irresponsible to manage the utility component. And at that point, you don’t have enough capital to buy the best of the best, the rarest of the rare, and that’s where most of the returns are driven.” In that respect, Rally Rd. has arguably done what it set out to do: lowered the bar for entry to the world of classic car ownership, as far as making a profit is concerned.
But, just because a new world of trading, buying, and sharing ownership is now as easily accessible as opening your smartphone, the market has the chance to be just as volatile as the art world, real estate or the NYSE. But like those markets you have to keep a close eye on trends. When it comes to cars, Bruno says he has a knack for doing just that and has confidence in his new market. “People said I was crazy to put all my money into collectible cars. They said ‘buy a house. That’s what normal people do.’ So I bought a house. Ten years later it’s still worth exactly what it was when it bought it. And the exact two cars I was looking at, which would have been the same exact amount as the house, all-in… one is now eight or nine times what it cost. The other was a $250,000 car. Today it’s worth $1.8 million.”
