What is car flipping?
Car flipping is a business venture where a person buys a car at a lower price, refurbishes it a little bit then sells it to realise a profit.
An example of car flipping is when you go out on craigslist and spot a car that is being sold way below its current market like a 2011 Toyota Corolla selling for $3500. You can purchase the vehicle and make a few necessary modifications or repairs and resell the same car on another listing site for $4700 therefore recovering your investment and making a profit of $1200 on top. That is what car flipping is all about.
Is flipping cars illegal
Car flipping in itself is a legal business but failure to conform to the state’s regulations may make the business illegal. Car flipping as a dealer is legal but when you choose to do it as an individual then there are some legal technicalities in your state that may make the business illegal.
In some states a dealer is someone who sells a single car with the sole purpose of turning a profit while in some other states an individual can flip a maximum of 7 to 10 vehicles in a calendar year before they are considered a dealer, this means in some states you can flip up to 7 cars before it becomes illegal while in others you must be a dealer to flip cars.
How to start a car flipping business
Step 1: Understand the regulations
Flipping cars 101 requires you to familiarize yourself with your states regulations surrounding the matter. A car dealer must have a licence and if you are participating in the car flipping business without a licence then it is deemed to be illegal.
For an individual, different states have regulations on how many cars one person can own and flip in a year its usually ranges from 2 to 10, if you flip cars within that range you will not need a licence, therefore if your state say a maximum of 4 and you have 10 then you can circumnavigate that rule that by putting the excess 6 cars in your family members name or even a trusted friends name. You can make the used car flipping business for additional income.
The other option is to become a state licenced car dealer. A dealer must have a physical address that is different from his house address and all that you have to do to become a dealer is to head over to the states DMV’s website and apply for a dealer’s licence by filling the necessary paperwork. At this point you are qualified as car flipping cars entrepreneur, you can do it either as an individual or a dealer.
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Step 2: Have seeding money
Have some start-up money of your own to buy your first few cars as you accumulate profits and check out the viability of the venture. As a car flipper you are bound to make a few bad purchases but that shouldn’t break your spirit.
Step 3: Understand the used car market and values
There are various sites that you can use as your price guide when assessing the book value of a used car these sites will help you know whether the car is undervalue or overvalued. After identifying one to buy then
- Inspect the vehicle before buying it or hire a professional to do it
- Check the VIN number to ensure the car has no outstanding issues
The best cars to flip for profit as a beginner are the regular ones not the exotic cars since they have a low market demand.
Step 4: Repairs and polishing
Make the necessary repairs to the car, polish the paint job just to make it look brand new. This is essential since it will raise the value and also first impressions are important for the new buyer.
Step 5: Advertise
Advertise the refurbished car on any relevant platforms necessary like Craigslist and wait for a buyer to find you or your dealership.
