If you are looking to supplement your income then you have probably started looking for a side hustle. While many people might not have considered flipping cars as a side hustle, there are a lot of opportunities available. Let’s take a look at how to start flipping cars and what important information you need to know, including whether it is legal in your state.
Is Flipping Cars Illegal?
Believe it or not, there are laws that restrict the numbers of cars a person can sell for profit. These laws vary by state given the different motor vehicle laws across the fifty states.
Depending on where you live, the number of cars you can flip is restricted by your state’s DMV office. This is because anyone in business to make a profit on the sale of multiple cars requires a license.
Most commonly, this license is referred to as a dealer license. This what gives car dealerships the right to buy cars at wholesale auctions and partake in the sale of motor vehicles on a large scale.
If you were to ask a car dealer what the laws are, they will tell you that any kind of car flipping is illegal. Fortunately, we all know car dealers aren’t the sharpest tools in the shed. These laws exist to protect the monopoly the that dealerships have over car sales.
Plus car dealers are terrible at keeping up with technology and the latest market trends. Ever visit your local dealer’s website? The entire auto industry is changing due to companies like Carmax, Carvana and Vroom.
Car Flipping Laws By State
Before looking any further, we break down the laws that car flippers must be aware of as to not be classified as a dealer. As an independent car seller, there is a maximum number of cars you can flip. These laws exist to protect car dealerships from excess competition and to protect consumers from buying cars from non-trustworthy parties.
So before you get into the car flipping business, keep in mind how many cars you are allowed to legally flip. Always check with your state authorities to make sure you are in the clear to buy and sell a car. Even if the numbers seem low, there is still plenty of money to be made flipping cars.
How Much Money Can You Make Flipping Cars?
Even though you can only sell a handful of cars depending on your state, there is still a lot of profit available to car flippers. Depending on a number of factors, the potential profit for flipping cars will vary.
The secret sauce to getting the best profit for flipping a car is not what many might think. You might be thinking you have to fix up a car and add new features to get the best price.
But the secret to the best profit is in the acquisition. Instead of trying to sell for an absurd price, buying your cars for cheap is the best way to guarantee profits.
Think about it. If you buy a car for $500 and it is only worth $600 then you will have your work cut out for you trying to get a decent profit. But if you bought that same car for only $200, then you have room to make a larger profit.
Of course buying cars for cheap is easier said than done, and deals are getting harder to come by. Even if your buying opportunities are small, the changing auto industry will have new selling opportunities popping up for decades to come.
How to Start Flipping Cars
The first step to start flipping cars is to understand your situation. Does your state allow you to flip cars? If so then you are off to a good start. But it will take some planning before you buy your first car.
In order to successfully flip cars, you will need a few things. First is somewhere to store your cars. Since most states do not allow you to keep an inventory over one car, you should only need a single parking spot.
What Equipment Do I Need?
In terms of equipment and tools you will need, it will depend on the type of flipping you plan to do. Do you plan on doing repairs to the cars you buy? If so then you will need the tools necessary to make small fixes. As for equipment, a car jack or car lift may be beneficial for larger fixes.
If you do not plan on doing repairs, then do not worry. You do not need to be a mechanic or have extensive knowledge of cars to be a successful car flipper.
While you may be deferring some fixes to mechanics and cutting into your profit margin, you do not need any specific equipment to flip cars outside of a phone, a computer, and the will to succeed.
What Skills Do I Need to Flip Cars?
As we mentioned, you do not need to be an expert in fixing cars to be a car flipper. But it is extremely valuable to be able to diagnose car issues and understand the cost to fix, then you will be in a better position to make better decisions than your competitors.
If you do not have experience in the auto industry, that is fine too. You will need skills that make you stand out among car flippers who also fix cars. Negotiation skills are among the most important skills in car flipping.
As mentioned, your profit will be secured when you buy a car to flip, so buying cars for less than they are worth will put you in position to make profit regardless of necessary repairs. You could wind up needing to fix anything from the exhaust pipe to the thermostat housing.
Research skills are also important to prospective car flippers. It will help you immensely to be able to research how much certain cars are selling for online or to study why a certain car isn’t selling despite a low price. Being able to dig deep into scrap prices or market trends will help you improve your car flipping venture.
Where to Buy Cars
A crucial step in buying cars to flip is knowing where to get the best deals. Anyone can find cars for sale online, but the best flippers know where the deals are.
Craigslist is one of the most popular ways for car flippers to buy a car. Even though Craigslist is very popular, there are plenty of diamonds in the rough.
As you develop online research skills you will be able to find good value in certain cars for sale on Craigslist. As you reach out to sellers, your negotiation skills will help you get as much information out of the seller. Plus, it will help you get your acquisition price as low as possible.
The other best place to buy cars to flip will be in your local neighborhood. Scanning local forums or newspapers will help you find people who aren’t great at marketing their car. If you can show up and negotiate in person, you will also get a chance to inspect the prospective car.
From there you will be in control of the negotiation and on your way to profiting handsomely while flipping cars.
Best Cars to Flip
As you start searching for cars to flip, you will find that certain cars do better than others. We aren’t talking about new cars vs used cars either – certain models and makes will fetch a higher profit than others.
As you might imagine, used cars are much better to flip than newer cars. In some states it is illegal for anyone other than a dealership to sell a new car. Plus dealers have private access to dealer auctions where inventory is bought at a low cost.
Finding pre-owned cars for sale will allow you to buy cars for value. Sellers might not know that the mileage on their car is below-average for similar years, so you can slide in for a great price.
As for specific makes and models, the best cars to flip will be specialty or discontinued cars. If you manage to find a cheap classic car, then there is a good chance you can profit easily. Collectors give older cars and hot rods a strong resale market, so if you can buy one before them, there is a chance to profit.
To stay up to date on the best cars to flip, you can learn a lot about the topic from Flipping Cars Reddit. People who are already in the business can give you advice on where they are seeing success. So if you want to get into flipping cars Reddit is a great place to start.
Where to Sell Cars for Profit
When it comes to the best ways to sell your car for profit, car flippers should take advantage of the many marketplaces.
While it is important where to buy cars to flip, a sale is a sale, so it is worth listing your car for sale all over the place.
First start out by listing your car on the various online car marketplaces to ensure you are getting the established shoppers.
After that part is covered, take the time to list your car on Craigslist and other local forums so your buyers can find you if they don’t use one of the big websites.
Tips for Car Flippers
- Always check your local and state car flipping laws. Do not engage in illegal activities.
- Utilize the Internet when researching cars. There is always an answer to your question.
- Be smart. Do not spend more money than you can afford to lose.
- Be patient. Sales will take some time, so don’t sell yourself short with your flips.
- Take advantage of our car valuation tool to stay on top of current resale prices.