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Researching the Perfect Cars for Flipping
Certain cars sell faster than others, this is an obvious fact. However, in the business of buying and selling cars for profit the faster you can sell your investment, the more money you can make. You want to find cars that sell quickly and are in high demand. How do you do this? Easy, look at listings like classified ads in your newspaper, craigslist, and consumer reviews. Reviews help you when you go to buy so you know what problems to look for when you buy. I know this sounds like a lot of homework but it will pay off big dividends the more you research.
Finding the Right Car to Buy and Sell is Crucial to Making a Profit
In my area trucks sell incredibly fast. There is a huge demand with a low supply. I look for trucks first when I’m looking to buy an investment vehicle. In Los Angeles, CA my friend looks for Toyota cars and Range Rover’s. He sells them as fast if not faster than I sell trucks… It’s just what the market indicates.
I look at selling prices on eBay.com first when I look. I want to find a vehicle much cheaper (i.e. $1k or cheaper) than what they are selling for on eBay. I know this sounds crazy but I will tell you how to find these in the next section. I also do homework on vehicles at www.edmunds.com and more price research on www.craigslist.com. These are big sources of information. You can also scan ads from dealers but keep in mind they advertise fairly higher prices than they sell for and need to make enough money to cover high overhead costs. If you can’t make more than $500 and your vehicle and price is identical to that of a dealer you shouldn’t even try it. Customers/ buyers feel safer buying from the dealer than you the individual even though the dealer won’t do any more to ease buyer remorse than an individual.
Perception of the car you buy is everything. People buy cars for the following reasons:
- perceived quality
- resale value
- condition the vehicle is in and how they think it was taken care of
You need to have most if not all of these qualities in your vehicle if you want to make money in flipping cars.
Inspecting & Buying a Car to Flip
You have done your research and now it’s time to buy. Don’t forget inspecting the vehicle before you negotiate and purchase. You don’t want to get caught with a vehicle that’s going to need an expensive fix and won’t sell. For information on the best places to buy your investment and details on how to buy it is in How to Flip Cars available on the Home Page. I do most of my buying on craigslist.com and classified ads in newspapers. I always talk to the person and listen to how they describe the condition of the vehicle. I also ask what their bottom dollar price is before I see it. This gives you a lot of information on how the seller feels about it. A motivated seller means room for profit for you. Doing this also begins to save you money on the purchase price, but don’t consider that price set in stone.
How to Inspect and Buy a Car to Sell for a Profit
When inspecting the car, you want to look for major costs. I’m assuming the car you are looking at is already priced within your budget to make money. If it has some dents or scratches, those should be fairly easy/ cheap to fix. If there is rust or possible collision damage, be very careful. These problems could be expensive to fix unless your purchase price reflects the cost to repair and allows for an excellent potential profit. Be sure to TEST DRIVE! This is the most important part of the inspection process. Start the car and listen for engine knocks or misses. You want to be cautious of these problems as they have potential for extremely expensive repairs. When you drive it, make sure to check that every gear of the car is shifting smoothly. A new transmission is not cheap. I also check every electrical button (windows, lights, mirrors, seats, etc.) and make sure they all work. While these may not be expensive fixes, it may lower the value to the seller and create room for negotiating the purchase price. For all of the things to check for and do in this process check out How to Flip Cars.
When you have decided the vehicle is good to buy be careful when negotiating price. No one wants to give a good deal to a jerk. Be courteous, but don’t be afraid to walk away from a deal if the price is not feasible for a profit. I outline all of the problems and fixes before I shoot the seller my price. I give them a very low price and wait to see what they say. Knowing when to be quiet is very important.
When the seller and I agree to a price, I make sure to check the title. Look for leins and discrepancies in the title that would make titling in your name difficult or impossible. This is very high on importance when buying and selling cars for profit.
Advertising & Marketing Your Vehicle for Sale
Advertising your flip is an integral part of selling and making more of a profit. There are several avenues for advertising your investment ranging from online, to publications, to in-person marketing. I sell cars mostly on www.craigslist.com, www.eBay.com, and my local newspaper. I have sold cars using tons of other methods like social networks, talking to car salesmen, and even my mechanic.
When I advertise, I have an idea of how much the car should sell for. I advertise a price that is a few hundred dollars above that sales price. That will allow for negotiating a better price for the customer, but still allow a considerable profit for you. Be careful to not advertise too high of a price because it may deter a potential buyer that would be in your profit range. The key is to be lower than most of your competition, but still be well into profitability. Your time spend researching used cars for sale will help you set a good price.
Make an eye-catching advertisement in the newspaper or online auction/sales websites. Look at ads that you want to imitate and do so. Put your twist on it and be sure to build value in your flip. There are good examples of value building ads in How to Flip Cars along with more info on advertising and how to place ads in craigslist and eBay.
How to advertise a car you’re selling yourself
Handling leads is very important when it comes to advertising. Be sure to keep an organized record of everyone you come in contact with. By doing this, you can also create a contact list in the future if you know what a person is looking for. You can sell cars before you even buy them this way.
Selling Your Car Yourself to Maximize Profits
After successfully advertising your car for sale, set appointments with prospects to show the car in a public place. Bring a pen and paper along with your title. Don’t forget to bring a screwdriver to remove the license plates if you live in a state that doesn’t keep the tags on the car. Make sure your investment is squeaky clean and presentable. Be prepared to sell your vehicle at that moment.
When you meet your lead, be polite. Show them around the car and ask them questions. Ask what they’re looking for in a car, about them, about their kids. It doesn’t matter; just ask them questions. I ask questions that I know will elicit a ‘yes’ response. Selling cars is a series of positive responses. When it comes time to ask them if they want to buy the car, it makes it a lot harder for them to say no after they have said yes tons of times previously.
Be sure to show the highlights of the car. If it has clean, well-maintained leather, be sure to key in on it. If a big concern of the buyer is 4-wheel drive, be sure to tell them all about it. These are sure-fire ways to build value in the car, along with the price.
The buyer is obviously attracted to the price, so be careful when negotiating. If they lowball you an offer, do the same thing back. Just come down on your price $100 or so. That way you don’t lose out on lots of profit. I think the best way to keepa large profit is to come down off of your price in small increments. Keep in mind that if they drove to meet you and look at the car, then the price you listed should be close enough to what they are willing to pay.
I always have a friend come with me to show the car I’m selling. This is because I want to be safe and if I sell the car right then, I have a ride home. I don’t ever show my car at my house because I don’t feel comfortable with strangers knowing where I live. Also, I don’t want the customer coming back to my house in case something unforeseeable goes wrong with the vehicle I sold them and they want me to fix it or give them money back. Selling your car is half of the battle when buying and selling cars for profit. You’ll make money when you know how to successfully sell a car yourself / by owner.
Tips for Tax and Title Issues – How to Save Money
Your lead has turned into a customer; be sure to completely fill out the title and give them a bill of sale. A bill of sale can be a handwritten note with the date, the make and model of the vehicle, along with the selling price and a signature. These are the must-haves for selling your vehicle…
When you buy or sell, it is against the law to give an open title. However, this doesn’t mean it never happens. Some methods of avoiding taxes when buying and selling cars are:
- floating a title (not filling out a title and bill of sale when car is purchased. When you sell it later, that buyer’s info is inserted)
- gifting (the seller gifts the car to the buyer and the buyer is exempt from taxes)
- false sales amount (the seller writes a significantly lower price on the title/ bill of sale than what was actually purchased for)
In most states, a person can sell up to five vehicles a year without a dealer’s license. However, a way around this is to buy 5 in your name, 5 in your brother’s name, 5 in your wife’s name, etc. This tactic may not be needed if you are making a large enough profit on your cars and can invest in a dealer’s license. This license costs no more than $635 and an all-day course. You could quickly and easily make that money back with all the advantages a dealer’s license comes with. For example, dealers don’t have to pay sales tax and can buy and sell as many cars per year as they want. The benefit of dealer-only auctions is also very handy. Auctions are a great place to find deals, but keep in mind there could be more dealers with bigger budgets looking to buy the same cars you are. So, be prepared.
Owner Financing a Car
There are a lot of people that can’t afford to pay for your car or truck up front, but they can afford to make payments to you. It is as risky as it sounds, but it is even more lucrative than you think. I have extensive experience in financing deals by owner and it has proven to be rewarding. But certainly not without the stress…
When financing a car buy owner, be as precise as a bank, and then some. You should get every detail of information from them including:
- references (family is the best)
- income and expenses
- social security numbers (for credit checks)
- address information
- phone numbers
- work location and phone number
Obviously, the more info you have, the better off you will be. You want to make sure the buyer is trustworthy and can afford to make payments.
When financing your deals, you want to be sure to tell the buyer that the price will be more because of the risk involved. More often than not, the buyer will understand and agree to your terms. You want to price your vehicle about 33% more than the sales price and include a 10% apr. These numbers will offset the risk of financing it out.
Be sure to have this agreement in writing and notarized. You don’t want to be left high and dry with no recourse and no way of collecting your money. Having the agreement in writing also allows you to take the contract to a lender and sell the note at any time. This is harder to do, but is possible. You will receive a little less than your total profit, but it will be upfront.
If financing any other way, put a lien on the title to make sure you still have ownership of the vehicle until the note is satisfied in full.