Savvy investors have been flipping houses for decades. RealtyTrac says nearly 27,000 homes were purchased, fixed up and re-sold in Q3 2014, with an average gross profit of $75,990 per house. But enthusiasts with smaller budgets and an affinity for fixing cars can do the exact same thing.
Auto dealerships and those trying to sell books on establishing dealerships will tell you car flipping is illegal. Curbstoners – criminals who buy salvaged and other undesirable vehicles for cheap and resell them at higher prices – should not be confused with flippers. Every state has its own laws regulating the business of flipping. But typically as long you buy and sell fewer than five vehicles per year, you’ll be operating within the law. For instance, Georgia law states that anyone selling five or more vehicles in a given year must have a license.
A large percentage of vehicle repair cost is labour. Those who can eliminate this aspect by fixing up the vehicles themselves will profit the most. There is some science to successful and profitable car flipping however.
Opportunistic Clean Titles
Let’s face it: hard economic times force people to sell possessions for fast cash. But as the saying goes, one man’s misery is another man’s fortune. The idea is to buy exotic vehicles at a discount to resell for a profit.
Craigslist is by far the best source for finding cars to flip. The area which you can search is larger now as well, with gas prices lower than they’ve been since late 2008. Take your time and look for the right deals. Remember you’re only going to be fixing and selling five or less cars per year. Words like “must sell,” “divorce” and “OBO” (or best offer) are what you’re looking for. Cars with slight body damage or that are in disrepair should also be high on the priorities list.
Use websites like Kelley Blue Book to find the resale value of that particular vehicle. There’s a great debate as to whether Carfax or Autocheck is the better service to investigate the VIN history of a car. The general consensus is that Autocheck is more accurate and offers unlimited VIN reports (versus unlimited license plate reports via Carfax) for a one-time fee. Avoid buying any vehicles with suspicious VIN reports.
AuctionZip is a service to help locate auctions in your area. Auctions are a great way to buy cars below market value. Just make certain to do a VIN check, Blue Book check, and be honest with yourself – do you have the ability to address any mechanical issues necessary to resell the vehicle?
What to Fix
The first obvious requirement, of course, is to get the car mechanically sound. Pull the spark plugs and smell for that burnt odour that indicates they need changing. Make certain the brakes aren’t grinding or squeaking and address any noise coming from underneath.
The vehicle must pass the eye-test as well for potential buyers. Invest in a buffer to shine up all your vehicles. Mismatched and low-end tires can be a deal breaker in the eyes of buyers. Invest in a set of new tires from TireBuyer.com and gets some new rims. This gives the vehicle more aesthetic appeal. You can increase your asking price by a great deal more than you paid for the tires and rims. Steam clean the engine and use baking soda and water to clean any surface corrosion. Shampoo the carpet and polish the dashboard. A sparking new paint job can be the finishing touch.
Be realistic about reselling the car. Greed will delay a sale, while at the same time you want to turn a reasonable profit. Use websites like Cars.com and Auto Trader to compare what others in your area are charging for similar vehicles.
Set your price higher than what you actually want, to give yourself room to negotiate. Stick a “for sale” sign in the back window and use online classified services to gain exposure.
Lastly, keep everything legal. Do not try to float titles (fixing the car up quickly and reselling it while still in the original seller’s name). Car flipping is not a get-rich-quick scheme. It is not the same as a “buy-and-hold” long-term strategy. But car enthusiasts looking to make quick money with the right deals could leverage their exotic interest into a moneymaking opportunity.