Fast N' Loud

by Richard Rawlings

  One way to familiarize yourself with the marketplace, and with particular models of cars in general, is to go out and look for clubs and groups that are dedicated to those vehicles. All it takes is a Google search for “Model A enthusiasts” or “Gremlin fanatics” or whatever it is you’re into and you’re sure to come up with something. Just like everything else on the Interwebs, though, beware the phonies. If you’re looking for particular information about values, or about parts, or about fixing something, don’t just go to one message board and take somebody’s word for it. A lot of people who post on message boards are full of s—t. So if you find an answer to a question you have, dig deeper. Check your sources. Go to two or three other message boards for answers, too. It’s kind of like good reporters used to do in the olden days of newspapers: if you can corroborate your information from at least three different, unrelated sources, you can walk away knowing that the information you’ve got is probably true and accurate.

  I’ve said this before, but just remember that there aren’t any real shortcuts in this business. You’ve got to be diligent, and even then you’re gonna make some mistakes. That’s okay. Be prepared for it and it won’t bother you. The way you pay for your education is through mistakes.

  Learning to assess values is a process. And no matter how good you get at it, you can’t make money on every car out there. That’s rule number one. Not every car out there will make money.

  Go ahead, repeat yourself.

  If you find a certain car that works for you, a certain niche that makes you a tidy profit, write it down. Repeat it. See if you can get lightning to strike twice, and then three times, then four. Some sales are flukes—you simply find a buyer who’s willing to pay too much for whatever car it is you’re selling. That’s fun when it happens, but the real profits come from finding a particular type of car you can get to know inside and out, and then making a profit off of every one of them that you flip. If you find something you can consistently and repeatedly make money on, stick with it and ride that ride for as long as you can, whether it’s Mustangs or Model As or Ford pickups. What it is doesn’t matter. If you find something and it works, ride it.

  Make your losses work for you.

  You can’t win all the time. The difference between success and failure is learning how to make your losses work in your favor. I’ve already talked about not hanging on to a loser of a car and sinking tons of money into it thinking you’re gonna turn a profit. You’ve got to drive that lesson into your head as much as possible if you want to make it in this game. Like I said, it all comes down to that famous Kenny Rogers lyric: You’ve got to know when to hold ’em, know when to fold ’em.

  At one point before the show launched, I had about fifteen cars that I’d been holding on to and trying to sell. They were of all different makes and models. I had a few hundred thousand dollars tied up in them. I didn’t have any cash freed up to go buy other cars. There was an auction coming and I finally said, “You know what? F—k it. Win or lose. I don’t care. I’ve got to free up as much cash as I can, because cash is what allows me to make more money!”

  Cash is my inventory, at the end of the day. So I took all those cars to one auction and proceeded to have quite a few beers as one after another lost money.

  I lost about $120,000 that day. That’s more than most people in this country make in a year.

  Remember, though, I’ve always kept a low overhead, and I’ve always been smart with my money (just like my shop teacher taught me). So this wasn’t a devastating “loss.” Was it disappointing? Yes! But in the long run, it wasn’t a loss at all.

  By selling all of those cars at once, I freed up about two hundred grand. Having that cash allowed me pay the rent and other expenses, and then to go buy and sell a bunch of cars and start making some money again.

  The trick is, I was able to put a lot of cash together all at once as opposed to just selling one car and losing some money (and then all that money is gone), and then selling another car and losing that money (and then all of that money is gone, too). I just covered all of them, took my loss, and then I had a giant lump sum of cash with which I could go buy ten or fifteen cars that would make money. So what to some people looked like a great big loss was actually a great big win!

  Obviously you’re not going to be flipping hundreds of thousands of dollars’ worth of cars anytime soon if you’re just getting started. But the principle is the same. If your cash is all tied up in vehicles that aren’t moving, sell those vehicles and reinvest whatever cash you can into something that will actually make some money.

  Stay on the up-and-up.

  I’ve already mentioned treating your customers right. Don’t cheat ’em. Don’t trick ’em. Honesty is the best policy. Karma is a bitch. All of that is important.

  Here’s another bit of advice: don’t f—k with the IRS.

  It’s easy for people to get into flipping cars for cash without keeping track of it all and reporting those sales to the government. Fair warning: you do that at your own peril. If you have any kind of success flipping cars, the IRS will find you. The fact is there are title transactions and registrations and all sorts of things that make cars and car sales trackable by all sorts of state and government entities. Don’t f—k with any of them.

  If your town or county or state requires you to get a permit to buy and sell cars, go get the damned permit! It’s much less of a headache and much lower of a cost than dealing with fines and all sorts of problems after the fact. Believe me. Pay your taxes. Pay your fees. Read up on the local laws that pertain to vehicle sales. If you’re going to do a lot of this, take the time to set up an actual business, like an LLC (a limited liability company) or something. There are companies all over the Interwebs that’ll help you do that. Or spend a few bucks and hire a local business attorney to walk you through it. Yes, there’s some paperwork. Yes, it’s a pain in the ass. But again, it’s far less paperwork and far less of a pain in the ass to do it up front than it is to get in trouble, get sued, pay a fine, or—God forbid—go to jail for doing things the wrong way.

  Education is expensive!

  Here’s a little something to chew on, courtesy of Aaron Kaufman:

  Education is expensive. You go, “Sure. Yeah, I remember my college was expensive.” I didn’t say “college.” I said education is expensive. Whether you’re going to soak it up off somebody else or you’re going to take the hard-nosed route and learn it yourself, education comes at a price—and the education brought to you through hard luck tends to be some of the best lessons learned.

  Certainly trying to buy and sell cars is not going to be an easy thing for somebody to get some education. It’s a very expensive education, and I’d warn anybody who’s thinking about it to make sure they add up all the costs of doing business before they get too deep into it.

  On every single car you’re considering, you have to ask yourself: by the time you put a battery in it, fuel in it, move it, transport it, make the phone calls, and not do your other job that you’re going to potentially get fired from for trying to moonlight with this flipping-cars business, are you really going to make any money?

  Aaron! Dude! Why you gotta be so negative? Yes, it’s important to consider all of those factors. You have to look at the cost of everything in life to know if it’s worth it. And, yes, you need to realize that it’s going to take time and money to get educated in the field of flipping cars. I think I’ve made that point pretty clearly. Just be smart about it. Don’t risk more money than you’re able to comfortably risk. Start slow. Take it one step at a time. Educate yourself. And then really think about why you’re doing this. If it ain’t fun, if you don’t love it, if it’s not making money, don’t do it. That’s pretty much the Gas Monkey golden rule right there!

  Beware of runaway trends.

  One way to make some really quick money in the car business is to jump on a trend. All of a sudden a certain make or model will start going up in price like crazy. For some reason e
verybody wants a certain old car that nobody else wanted for years and years. You buy one cheap, and a month later you sell it for 300 percent more than you paid for it. It’s awesome!

  The problem comes when you’re trying to chase those trends all the time. It’s easy to get caught up, and go broke.

  A few years ago, every guy out there wanted to get his hand on an old muscle car with a Hemi engine. Everything was Hemis! Cars that were worth $50K were suddenly selling for $100K, then $200K, then $400K at major car auctions. It was insane! Then, all of a sudden, the market was saturated. Everybody who wanted and could actually afford a Hemi had one. Crash! All of a sudden, you couldn’t sell a Hemi for $100K no matter how hard you tried, which means a whole bunch of people out there got stuck with cars they’re gonna lose $300,000 on.

  Don’t be one of those guys.

  The fact is, sometimes the marketplace gets rigged. There are groups of guys who buy up certain types of cars, and who’ll bid them up at auctions just to make it look like the cars are trending upward as a whole. Then all of a sudden people start buying them, thinking that they’re noticing a real trend. They’ll get caught up spending too much and eventually lose their shirts trying to unload those cars when they realize there really wasn’t any type of a broad-based buying frenzy going on at all.

  Auctions can be tricky. It’s a big world full of big money, and unless you know what you’re doing, you can get burned. You can occasionally find a real bargain at an auction, so I’m not saying to skip them. Just be very well educated and know your limits before you go into one.

  That said, it is important to try to watch for certain trends and cycles that come around. Cars go in and out of favor all the time. For years, nobody wanted Ferrari 308s—you know, the Magnum P.I.–style Ferraris. They’d gone out of favor. You could pick one up for like twenty-five grand! A Ferrari! But then you wouldn’t be able to unload it. Now? All of a sudden they’re coming back into favor. People like the look of ’em again. At one point it looked like we were entering into a nice upward trend. So I started buying them. It cost me more than fifty grand to pick one up that was in decent condition and didn’t need any work. But I know these markets, and I’m pretty sure I’ll be able to off-load that 308 at a $20K or $30K profit in just a matter of months. The reason I can say “I’m pretty sure” is because dealing with cars is all I do now. I live it and breathe it. I know the guys who buy these things and who are looking for these cars. I see the trends because I’m right in the thick of it. Fifty grand is a lot of money to risk, and I’m fortunate enough to have that sort of money to risk nowadays. That is not the case with most people.

  So instead, stick to cars you know, in a price range you can feel comfortable with. At Gas Monkey we focus on fun cars, two-door sports cars and hot rods that people buy because they think they’re cool. We never sell four-doors at Gas Monkey. No matter how great of a bargain some four-door might look like on paper, we always lose money on ’em. So we just don’t touch ’em anymore. Of course, people associate Gas Monkey with cool cars, so maybe we’ve created our own monster in that realm. Maybe four-door cars would sell just fine wherever you are. Maybe you could even develop a niche selling four-door family sedans! I don’t know. Anything’s possible. You’re much better off sticking to the cars you’re passionate about and that consistently make money if you’re gonna make this work in the long run.

  For instance, trucks are pretty much what people look for in the hot-rod world right now, but we’ll only buy short-wheelbase trucks here at Gas Monkey. We won’t buy a long wheelbase, and primarily we buy what they call fleet sides. There are a lot of cool step sides out there, but there was a trend probably fifteen, twenty years ago where everybody was building step-side trucks. So there’s plenty of them out there. But nobody was doing fleet sides because that wasn’t cool then, so that’s what we look for now.

  When it comes to tastes in vehicles, it’s sort of like tastes in fashion: almost everything is cyclical. If you wait long enough, certain trends will come back around. Buying a car isn’t like buying a leather jacket, though. You don’t want to get caught having to wait twenty years before a vehicle you purchased comes back into style!

  To give you some more insight, here’s Tony’s two cents on the matter:

  The thing about a crystal ball is if you had one, it would be priceless. It’s hard to guess what’s gonna happen in the next three to six months based on what has happened in the last three to six months. That’s not always accurate. There are a lot of times that can be deceptive. If you do want to jump on trends, you have to know what you’re doing, and you’ve got to be quick. If you start to see old Ferraris go up, old Porsches, old Mercedes, you move on those and you have to move quickly to get them. But then you have to get rid of them at the right time, too.

  Keep an eye on the broader economy as well. Back in 2007 and 2008, there was an actual fault line in the market with the economy doing what it did, because these cars, at the end of the day, they are wants. They are not needs. These are things people play with and enjoy, hopefully. A lot of people don’t, but hopefully you can enjoy an old car and owning it and working on it and appreciating it, and then on the day it sells, hopefully you enjoy that day, too.

  If you’re flipping on a larger scale, it becomes a numbers game. If you buy ten cars, hopefully you make money on eight of them, and you expect to lose money on two of them. Now, if that number switches to only making money on six and losing on four, then you are not doing real good. It would be great to get to a point where you are not losing money on any of the cars you buy, but as long as you are buying enough there’s a number where it makes sense. Say if you only buy five cars and make money on all five, you might make a certain percentage of profit. But if you’re buying ten and only losing money on two of them—and making money on the other eight—you’re actually making more money than you would’ve if you’d just stuck to the five moneymaking cars. That’s how the big dealerships think, too, except they’re selling hundreds of cars, knowing they might lose money on twenty or thirty of them. They’re still making far more money that way than if they were selling fewer cars.

  There’s also a saying that holds true in the car-flipping business: You make your money when you buy the car, not when you sell it. If you buy a car for seven and you know it’s worth nine or ten, then you know you’ve made money the moment you bought it. If you know it’s worth ten and you’re paying eight or nine, you might be in trouble. Be smart, do your research, know your market, and don’t overpay at the outset. Then you’re good! And remember, it doesn’t always have to make sense to make money. That’s something I’ve definitely learned here at Gas Monkey. Just because you don’t like a certain car doesn’t mean somebody else won’t. Just because a certain type of car isn’t a good car doesn’t mean there aren’t buyers who love to buy ’em because of the way they look or whatever the trend may be. All you need to know is that people are buying them, and that in the end, you made money.

  Find a mentor.

  I’ve said it before, but I owe Dennis Collins a huge amount of gratitude for teaching me the ins and outs of flipping cars back when I first launched Gas Monkey Garage. He’d been doing it full-time since high school, and he’d already learned so many of the lessons I’m sharing here with you now—only he had to learn ’em the hard way, just like I did. So not only was he a great friend, but he was a mentor to me. He truly helped me refine my skills in a very short period of time: he was right there helping me make decisions on a lot of purchases, and plenty of the sales, too.

  The thing about having a mentor like Dennis is I knew I could trust him. There were a lot of other guys I knew in the car business who I was friendly with, but I’d call ’em up to get their help, like, “Hey, man, what do you think a ’63 Corvette split-window in such-and-such a condition is worth?” and they would be like, “Well, I don’t know, man.” They’d come around and throw out a price and say, “Hey, if you get it for that, bring it to me and I’
ll give you a thousand dollars’ profit just to take it off your hands.” Come to find out that car was worth fifteen grand more than they offered to pay me! It was all part of the game.

  With Dennis, there was no game between us. He’d steer me right. Always.

  Beware of friendly car guys who’ll take advantage of a newbie. I ran into a lot of them. And while it’s tempting to go and make a quick thousand or two thousand bucks flipping something to an eager buyer who’s going to flip it again, you have to be smarter about it and realize that making $1,000 is pretty stupid if what you’re really doing is giving up $10K.

  Having a mentor and friend in Dennis was huge for me then, and it’s huge for me now. He’s the kind of friend that if I were in a tough spot, I could call him up and say, “Dude, I need one hundred grand right now,” and he wouldn’t even ask me what it was for. All he would say is, “Come get it.” All in all, Dennis made all of his money the same way that I made my money: by hustling. I mean, he’s in the Jeep business primarily, and he’s the largest reseller of used Jeeps in America. It’s been a very lucrative business for him. But that doesn’t mean he rolls over and goes to sleep and sips margaritas all day on the beach. He’s still hustling like me because it’s fun! Flipping cars, building hot rods, racing in rallies . . . for Gas Monkeys like us, that s—t never, ever gets old.