Buying and selling for profit

Anyone had luck buying and selling cars for profit?

Had a discussion with a friend about this today. He's shopping for an M5, and ended up at a boutique dealer. High end cars, by appointment only. Looked like mostly online sales. Mostly luxury cars, a few old muscle cars. Very small inventory. Seemed like it could be a fun way to make a living.

I have no dreams of being a car dealer. But I have thought about buying cars, do some limited fixing up, and selling them to make profit. I love buying cars, enjoy the hunt. And I love working on them. So make some extra money, and get to enjoy some fun cars? Seems like a good hobby.

Here's my basic case study: http://cgi.ebay.com/ebaymotors/318is-/300850571081 An original looking 1991 318is, sold for $6800 today. I saw this car for sale on craigslist in Fairfax, Virginia. The seller had it listed for $3350. It was pulled after about 36 hours. And then it popped up on Ebay a couple days later. Now I don't know for sure its the same car, but same mileage, same condition, less than 10 miles apart. I'm guessing its the same car. Looks to me like someone bought it and flipped it, and made a quick $3k+. I'm guessing this guy just got lucky, but even still if it was half that profit...

So anyone done something similar?

I have been doing it now for over 35 years. I could go on and on about it. I do it as a hobby but still average 50 to 60 cars a year this way. I really try to stay un der 5k because most people can come up with that amount. Finding them is the hard part but i have developed relationships with dealers over the years and i tell everyone i know that i am looking for cars and i pay bird dog fees to those who find them. takes time to

I've been doing it since I was 16; I'm 23 and have owned more than 50 vehicles in my life...I have slowed down quite a bit in recent times, as I realized that in the long run it wasn't worth the work, and I have done some less than legal paperwork...but, long story short, there are a few significant challenges:

A) once you hit a certain number per year (usually about five), states will either make you get a dealer's license, tax the living crap out of you, or put you in jail

B) huge profit cases like the one you describe are the exception, not the rule

C) it takes a LOT of luck, and you'll find that the unlucky ones generally wipe out any profit you made from getting lucky on the last five

D) most importantly, a thing is only worth what someone is willing to pay for it, and you will be frequently forced to make tough calls between selling for less than you want or holding out until the end of eternity for the right buyer

It was a lot of fun while I was doing it, but a lot of work too. I learned how to work on a lot of different stuff, but in the end, I probably came up just shy of breaking even overall. Now I just buy cars because I like them...it's a lot less stressful. If I wanted to make a living as a mechanic full-time, I'd still be doing it, but I'm tired of letting others reap the fruits of my labor.

@cutter67 50-60 cars a year!! Wow. Way more than I was thinking about. I was thinking like 2-3 cars a year or something. Basically the only ones I knew would be a good buy.

@Slick Yeah, its the bad buys, the ones you can't offload that worry me. I bought a miata, thinking it was worth fixing up. Ended up parting it out, doubled the small amount of money i had into it, but still it took a ton of time. I'd like to avoid doing that again.

I do it also, I stick to a couple models that I know we'll so that any surprises are manageable. I go for 4 a year but I work a lot so in 2012 I did 3. No big deal but provides a little extra cheddar without taking from the "family resources".

I only do 1-3 cars a year anymore, and more because they are cars I want to play with than working on a profit. But when I was single and had time and space I did 5 or 6 a year and on average supplemented my annual income by 15-30k.

My advice to people who want to do it is the exact opposite of what I did. Buy the cars that bore you, commuter appliances that can be cleaned up and maybe have some minor repairs are a much easier sale than specialty cars.

I got lucky with specialty cars because I have always been very active in the online communities for whatever marque I was dealing with so I knew where to find the market. I also got lucky because I developed a reputation locally as "that guy that likes weird cars" so I would get calls from complete strangers offering their oddball cheap if I'd haul it. Pulled a 64 Bug and a 71 Alfa GTV out of the back lot of a small auto shop for $300, sold the bug for $1000 within 2 days without turning a wrench, sold the alfa for $750 a few months later. Not huge profits but when I dont have to wrench on them it's the best ;)

JThw8 wrote: My advice to people who want to do it is the exact opposite of what I did. Buy the cars that bore you, commuter appliances that can be cleaned up and maybe have some minor repairs are a much easier sale than specialty cars. I got lucky with specialty cars because I have always been very active in the online communities for whatever marque I was dealing with so I knew where to find the market. I also got lucky because I developed a reputation locally as "that guy that likes weird cars" so I would get calls from complete strangers offering their oddball cheap if I'd haul it. Pulled a 64 Bug and a 71 Alfa GTV out of the back lot of a small auto shop for $300, sold the bug for $1000 within 2 days without turning a wrench, sold the alfa for $750 a few months later. Not huge profits but when I dont have to wrench on them it's the best ;)

+1 million. Excellent advice. I turned the biggest profits on the crap that I had no interest in; $50 Escort sold for $500, $200 Saturn sold for $1000, $500 Civic that sold for $1300. Always had a hell of a time selling the BMWs, Saabs, RX-7s, etc, and barely made a profit, if any...as an enthusiast I knew they were worth my asking price but your average buyer isn't an enthusiast and probably doesn't care anyway.

It also helps to resist the temptation to drive whatever you buy. The more you drive them, the more crap you will find wrong that will either require $$$ to fix or weigh on your conscience during the resale. Some people will lie through their teeth to sell a car; I never could and often paid for it.

You will hear all time about limits on how many you sale but i have let to run into any trouble as long as you pay tax on them you are fine. I keep asking people who say that show me the law or tell me someone who went to jail and no one has. There is many ways to deal with paperwork and there are many grey areas when it comes to paperwork learn them. The cars you choose is very important learn to do a good detail no wash and wax but a full detail a working radio is very important even if you have to buy a cheap one. If your state has inspections that are transferable try to buy with good stamps. The big one is do not walk away from a profit if someone waves cash in front of you take it. At the end of the year i average 400.00 a car after all expenses and im happy..remember do not try to hit homeruns the game is won by getting on base

I will share this

Just if you see a RH from Kansas City bidding.. PM me or something so we don't run it up on each other.

towlot.com

ronholm wrote: I will share this Just if you see a RH from Kansas City bidding.. PM me or something so we don't run it up on each other. towlot.com

Crap, sites like that never seem to cover the midwest.

In reply to cutter67:

The easiest one I know of is not signing your name to the title when you intend on flipping it, that way you never took ownership...

Raze wrote: In reply to cutter67: The easiest one I know of is not signing your name to the title when you intend on flipping it, that way you never took ownership...

In WI, anyways, that's illegal. I found out the hard way when I received a letter from the state and a bill for $760 in back taxes based on their "assessed value" of a car with a title I skated. I think the guy I sold it to did me in somehow.

Raze wrote: In reply to cutter67: The easiest one I know of is not signing your name to the title when you intend on flipping it, that way you never took ownership...

In Pa that is considered a open title that is against the law there. But if you know a notary they are allowed to hold the paperwork for 10 days before they have to send it to penndot if you can flip it before ten they can put in the new buyers name this is a grey area but it works

Illegal here is Ohio to have an open title also, not a good idea here.

this is what i have learned over the years of buying and selling cars:

where to buy cars to flip

1.) Friends and family are your best option i come from a large extended family and i buy 90% of their cars and friends

2.) knocking on doors when i see a car sitting for a extended time i ask about it

3).little used car lots...i look at the back rows their trade-ins or it was a car they couldnt move for some reason.

4.) bulletin boards...like when you come out of supermarkets and you see ads thumbtacked up

5.) i am on list at charities for donated cars this has become big in the last 5 years

6.) CL, ebay and forums i dont buy a lot but do sometimes.

7.) THE BIGGEST THING IS TAKE CASH WITH YOU...CASH REALLY DOES TALK

i dont advise picking one model its good to know one type of car but you have limited yourself and more likely you will walk pass that one homerun you can hit every so offen. as i have stated before become very good at detailing (yes turds can be polished... mythbusters proved this).

this is what i look for and do when buying and selling

1.) interiors have to be able to be cleaned up and serviceable if the interior is trashed i walk away most of the time. finding a good shop to do interiors at a good price AND FAST is tough. i will do things like headliners i am pretty good at doing them living thru the 80's with GM. (nothing worse than thumbtacks holding up a headliner). power options should work windows are a big thing. Radio's must work buy a cheap one from walmart if you have too but factory is the way to go. i remove aftermarket and install factory a lot of times. subwoofers power amps all go. no wires hanging from under dash. any flash thats been added like gages and custom shifters remove and get rid of

2). trunk area or hatch make sure it is very clean make sure spare tire and jack and tools are there and in the proper place and secured.

3). engine bay make sure you degrease and clean spend some time there. if there were wires run for stereos or other items added later get rid of them. if it has been riced with things like cold air intakes get rid of it. i have dericed more hondas and nissans than i care to think of.

4). wheels and tires i have removed more aftermarket wheels and tires and put stock back on than i care to think of if your tires are not matched but have two of one brand and two of another brand put the same brand on one side of car not on the front and rear.

5). buy spray undercoating and use it do all the wheelwells and underneath for 25.00 you can spray the whole underneath of the car this adds great value.

when buying cars know your limitations. if you have to send it out to have things fixed this takes money out of your pocket. cars with bad motors and transmission can be bought very cheap but if you have to farm it out you will lose. if your state has inspections make sure the car will pass. if you only have $5000.00 to play with do not buy a car for $4,999.00 spend upto half no more. the people who make the most doing this are the ones who buy and sell cars under 5k because most people can come up with that amount without going to a bank for a loan and there are a lot of buyers in this range

always try to have the car end up as close to the way it rolled off the dealers lot when it was new. THE THING I CANNOT STRESS ENOUGH IS HAVE THE CAR VERY CLEAN

I could not agree more with the above: Clean, clean, clean some more. Since l like good sight examples.

Locally listed 95 Neon 5 speed. Needed "brake work" (no details) dirty inside and out. Showed up at the sellers house with a tow dolly and $200 cash and netted this:

Spent a weekend replacing a ruptured brake line, a good wash and wax, full steam clean of the interior and dropped $150 on some CL find wheels with good tires (tires on the car were shot) and ended up with this.

Traded in 24 hours for a Jeep Grand Cherokee which I had sold for $2200 before I agreed to the trade.

So about 3 days turnaround for close to $2000 profit. All just for cleaning a car and replacing a $10 brake line.

@ Slick and Cutter, can you explain the whole becoming a dealer thing once you hit that many cars?

Also don't forget to check in with the title loan places. Many of them sell the repo cars to the public very cheap.

Enyar wrote: @ Slick and Cutter, can you explain the whole becoming a dealer thing once you hit that many cars?

It varies state to state, but in essence some states have a rule that if you sell X number of cars a year you need a dealer license.

As far as how to become a dealer, also varies state to state. I looked into it in NJ and you were required to have a dedicated lot, at least 1 acre, commercially zoned, a security bond and a whole bunch of other stuff that didn't make it worth my while to pursue further.

Thw8 is right. In Wisconsin, these are the pretty harsh rules/requirements:

Wisconsin DOT said: Anyone who sells, leases, offers or negotiates sales or leases of motor vehicles in Wisconsin must have a Wisconsin dealer license. (Individuals can sell up to five of their own vehicles each year without a dealer license.) If you sell or lease vehicles to the general public, you need a retail dealer license. If you sell vehicles to other licensed dealers only, you need a Wholesale dealer license. To qualify for a retail dealer license you must meet all of the following requirements: A permanent business location—not a residence—with office space, a 12x20-foot indoor vehicle display area and an adjacent display lot. Note: If you are selling only motorcycles, display area need only be large enough to display or repair three motorcycles. Zoning and local permit approval for the location. A sales tax seller permit is required. To obtain one, contact the Department of Revenue at (608) 266-2776 or on their Web site under Sales and Use Tax. A $50,000 surety bond or irrevocable letter of credit. For a list of insurance companies accepting applications for bonds, see Insurance companies that accept applications for bonds. Note: If you are selling only motorcycles, you need a $5,000 bond or letter of credit. A service department or written agreement with a nearby service facility. At least one licensed salesperson. That could be you or someone else. A business sign and posted hours. A lease for the business real estate unless the license applicant owns it. A manufacturer’s certificate of appointment (franchise) if you will be selling new vehicles. Dealer license fee, dealer plate fee, and fee to the Department of Financial Institutions. (More information on fees follows.) You must be at least 18 years old. You must be of good character, and must not have been convicted of a serious crime directly related to the sale of motor vehicles.

Enyar wrote: @ Slick and Cutter, can you explain the whole becoming a dealer thing once you hit that many cars?

i hear this all the time but have not found anyone who has got into trouble doing this as long as taxes are paid on the cars. the reason states have laws about open titles is because of collecting taxes. in Pa it use to be possible to do a title only transfer and not pay taxes on the car. you only paid taxes when you reregistered the car but they closed that loop hole you can still do title only but you pay taxes on car.

as far as becoming a dealer evry state is about the same most have the following rules. (i was part owner in a couple over the years in different states)

1). must be able to park at least 8 cars

2). must be gravel or paved lot no dirt or grass

3). must have office with desk seating for 2 customers must have phone, electric and restroom. if a office trailer is used it must be on blocks wheels and axles will be removed and tied down

4) a sign of min size of 4' x 8' is needed with phone number on it. mounted securely

5). insurance is a state thing... most made you carry just on the other guy you do not need full coverage on the cars on the lot unless you are using a line of credit. most of the small lots that handle cheap cars dont carry full coverage. each insurance company has their own rules for test drives and what is needed . its mostly like a employee of the lot must be with them you need a copy of their drivers lic. things like that.

6). never had to put a bond up some will ask for a financial statement from the owners.

7). most used car dealers get in trouble with paperwork and taxes you have to have a sharp person taken care of that. dont play with the states tax or fee money they dont like it

So cutter you just put every car in your name and paid taxes on it everytime? I guess if we are buying cheap cars it doesn't matter all that much.

Enyar wrote: So cutter you just put every car in your name and paid taxes on it everytime? I guess if we are buying cheap cars it doesn't matter all that much.

no i dont...to be honest i play in the gray areas. i have mailing addresses in 3 states rules change when you move cars across state lines and what can be done with titles. i always stay within the law but its gray until they close the loopholes i will keep doing what i do.

Do explain? How are you paying taxes on them if you don't put them in your name? Not that I am trying to bust ya or anything I just want to know.

Enyar wrote: Do explain? How are you paying taxes on them if you don't put them in your name? Not that I am trying to bust ya or anything I just want to know.

He is basically saying that he doesn't pay taxes on all of them, he takes advantages of loopholes to avoid doing so. Having addresses in three different states definitely makes it easier to play in the grey...

So cutter you just put every car in your name and paid taxes on it everytime?

no i dont...to be honest i play in the gray areas.

A good friend of mine sold six cars in a year (one over the WI limit) and while they didn't come and throw him in jail or fine him or anything, he did get a strongly worded "we're watching you" sort of letter. Other states may be less harsh.