133. How to Flip Cars as a Side Hustle (Without Debt!)

0:00When people think of a car dealership, they often imagine a business that requires hundreds of thousands of thousands of dollars. But is it possible to get started with less? In this episode, you'll learn about flipping cards as an affordable side hustle, how to scale and open your own car lot, and how to do all this without debt. This is Ryan Atkinson, and you're listening to the UpFlip podcast where we uncover the secrets of building and running successful businesses. Today, we have with us Brandon, who flipped his first car 13 years ago and now has a successful car dealership and a popular YouTube channel, Car Questions Answered with over 200 ,000 subscribers.

0:33Brandon, so excited to welcome you on today. so excited to pick your brain on flipping cars. So thank you for being here. Yeah, no problem. I love doing stuff like this. Anytime I can interact with someone else, talk about the journey that I've been on, just really to enlighten people on how the car industry works from behind the scenes. That's what I love to do. Yeah. And I'm going to love this episode. I know already, because we alluded to it. You flipped your first car 13 years ago. That's 2011 is 2012. And now you have a successful car dealership. You have a YouTube channel, but let's go back to 13 years ago, So Brandon, 13 years ago, flipping your first car, how did you first identify like, hey, this might be a side income for me?

1:07Yeah. So really how I started out. So my grandfather, he was a car dealer and I was in school for engineering. I was a horrible, horrible student. I did not want to go to class. So instead of going to class one night, I would find any excuse. I ended up going to a car auction with him one night, just a small little country auction. They would run like 60, 70 cars every week. And I went with him and just fell in love with it instantly. Love the smells, love the environment, the nasty hot dogs before the auction, just all the sweaty old men. It was just fantastic. All the nastiness, but just fell in love with the environment.

1:41So I started going with my grandfather every Wednesday night to these car auctions where he would go buy cars. And then we would drive them back to his lot and then he would put them on his car lot and try to sell it. Well, it was so old school how he was doing things because he would market in, it was called Auto Trader. and it's still around, but it's just a magazine that shows pictures of these cars. That's the only way he would do it. And the internet, it was a real thing at that point, but none of these car dealers were using it. I was like, okay, well, I've used Craigslist to sell like some guitars and some computers and stuff like that.

2:09Let's put some of his cars on Craigslist. And I sold like five of his cars, which he only had 10, like within three days. And I was like, you know what? I can do this. So I sold my little sports car that I had as like for$9 ,000 or something like that. And just started buying cars from there. The very first car I bought, I ended up losing 500 bucks, but it was a more expensive car. And that taught me a big lesson. That was the biggest lesson that I could ever learn is that, okay, I bought something more expensive that I thought people would want to buy. And it turns out I couldn't sell it. Had it for a couple months and ended up selling it, losing 500 bucks.

2:41The next car I bought was like 800 bucks and then flipped it the next day and made like a grand on it. And that started my journey right there. Yeah. So let's talk about that$9 ,000 flip with your sports car. So this was like your first one where you're actually selling something to get money to flip more cars? Yeah, I did sell that one off of Craigslist. So that was the first car that I sold. It wasn't necessarily one that I bought to flip. It was one I was driving currently and sold it and got the$9 ,000 and ended up buying a$800 car from my grandfather that the transmission was ripped out of it, but it would still drive from A to B.

3:15So I used the rest of the money that I got from that sports car and started buying and selling cars with that. Okay, very interesting. So I'm curious, you're just doing this on the side, right? For like the first few cars or like how many cars did you start to flip before it like actually turned into like a, oh, I could do this full time. Oh my goodness. I think I want to say that I did it probably part time for about six months and then was like, I was in school for engineering at the time and I was waiting tables. I was a server and then it ended up being like, I would buy a car during the week.

3:46It would be sold on the weekend and I would make off that one car the same amount of money that I would make almost all month waiting tables. So I was like, I need to stop serving and I need to focus on buying and selling cars. So is that primarily early on all Craigslist on how you're flipping these cars or what were some other ways you were flipping the cars early on? Main thing it was Craigslist because there were not a lot of dealers that were doing really anything online. It seems so stupid that I go back in and think about that. The way that the industry was, it's so old school, but the mentality, even me now as a 35 year old car dealer, I'm still the young gun at a lot of these auctions, even though I've been doing it a lot longer than some of these other dealers have been in the business.

4:26But the average age of a dealer, I would guess, is somewhere in the 50s. So I'm still relatively young compared to what the car market range of who's in the industry. And that just leads itself to being more old school mentality, more OK, adverse to online, adverse to computers. And that's where my business has been able to grow over the years is because I can move with technology, whereas a lot of these older guys can't. Yeah. So I do want to ask a technical question of someone wants to get started with flipping cars. Where would you advise them to go now to do their first few car flips? Would it still be maybe not Craigslist, but where would you advise someone early on?

5:00Right now, a Facebook marketplace is kind of the new Craigslist. That's kind of where you go if you want to sell by an individual. Now, it's difficult. It's more difficult now because the online realm of things is so saturated, and all the dealers now post. It used to be that no dealers were posting, even on Craigslist, hardly, and it was mainly individuals. But now, dealers have saturated every little corner of the internet, so it's very difficult. But if you can get in there, and you can buy something cheap, and you can fix it up yourself, if you could clean it up yourself, you'll be cheaper than dealers.

5:33Dealers are very expensive. So if you can sell something to yourself, you're probably going to be able to sell it cheaper than a dealership, meaning that you're going to have more eyes on your product if you're just getting started. My first question here is, so you would advise people to get cars that are kind of like fixer uppers before buying a perfectly polished car to resell? Is that kind of what I'm hearing? Or can you take us through that? If you're mechanically inclined, if you're not, you can really buy it off a lot more than you can chew. So yeah, if you know how to fix things, then go that route.

5:58But if not, buy something that's ugly, dirty, because everyone can clean something up. So that would be someone who's not taking care of the car. Another thing that you can notice a lot of individuals, if you want to go that route to try to flip and make a quick$500 ,000, is that a lot of people don't know how to market cars. They don't know how to even take pictures of the car. So you can go on Facebook Marketplace and see a listing of a car, and the only picture is a picture of that quarter panel, and it's not even showing the full car. So you can go in and buy that car if it's a good car and then literally just take some good pictures of it and get$500 more for it because you get more exposure because of the marketing you're doing on the car.

6:34Yeah, Brandon, I'm laughing at that right now because I'm moving into a new apartment. I'm looking for like a new couch. And I was just thinking that some people, their Facebook marketplace skills of marketing these couches are so bad. And it's just like it's a horrible picture. And some people have like these beautiful pictures. I'm curious. So is that like a marketing strategy you would use? Advise someone early on. It's like make sure these pictures are really like great, essentially. Yeah. Yeah, in any business, marketing is everything. I mean, at the end of the day, when I'm going in and selling cars, there's nothing else that matters.

7:02But when I'm pricing my car, I'm marketing my car. When I'm taking pictures of the car, the cleanliness of the car, all of this goes into just one little bag of marketing because I've got to get eyeballs on that car. And then I've got to get that consumer from the other side of that computer screen to my lot to buy the car. And all that matters is marketing. And so I'm hearing marketing as well, but what are some other ways you win early on when you're not an established player? Is it just undercutting pricing or like what are some ways to win early on against established players? Pricing is a big thing, but the way that you can fight the bigger players when you're getting started, saying there's someone young trying to get into starting a dealership is not taking on leverage.

7:43So the most common thing, the most common way for car dealers to buy cars is by using debt. They use something called a floor plan, which is basically like a credit card that they swipe on each individual car. But what that does is that adds interest that they're going to have to pay on the car as the car sits, and it's going to add extra fees to the car. You can go ahead and not have this overhead if you can literally buy the car with cash. That's one thing that I've always done. I've never taken on any debt for my business. And that's very rare for this industry because I would say probably 80 to 90 percent of car dealers out there take on debt to actually fund their business.

8:18Are you funding this a lot with just straight cash then? All cash. All cash, baby. I like this. So how are you doing that? Because obviously that's so different than the complete norm in the car industry. But can you kind of peel back the onion there on like how you're doing this with cash? It's just organic growth. Literally, I mean, we will go through this year probably 700, 800 cars that we'll buy and sell. And it all started from that$9 ,000 minus the 800 bucks for my little 2001 Mazda 626. is just organic growth and putting all the money right back into the business and being cheap. Yeah, and being cheap.

8:53I like that. I'm curious industry trends right now, because when I think of car dealerships, maybe like one or two years ago, there were not a lot of cars on the lots. So can you kind of take me through the trends you're seeing right now and the opportunities in the marketplace for someone that is wanting to get started? So right now, it's still very tough. We went through this time, production was cut, so new car dealers could not get vehicles. And what that meant for the used car market is that trade-ins couldn't happen. So the only way that cars get to auction where I can buy them as a used car dealer is from new car dealer trade-ins.

9:24That's the majority of our cars. So if new cars aren't getting bought, trade-ins aren't happening, meaning auction cars aren't coming. So this is why you've had this massive spike on the used car market over the last three years. At the peak, used car prices went up 43%. Absolutely insane. But that's what happened. There weren't any used cars out there. New cars were overinflated also. So you have all this demand and no supply. We are getting better. Now what's happening on the new car level is productions back to where it was. We're getting incentives coming back into the market. We're having all these market adjustments that were on top of MSRPs.

9:59Dealers can't charge them anymore because we have cars in the market right now. So slowly but surely, the used car inventory is starting to build back up. And we're seeing that at auctions, meaning that prices are coming down. So for that individual that wants to get back in the market or get into the market for the first time. It's not a terrible time right now. It's not the best. If you wait a year, it's going to be better than now. If you wait two years, it's going to be better than a year from now. So the longer that you can wait to get in it, I know waiting is not a popular thing to do, but it's a very hard market to operate in right now because the quality of used cars is down and the prices are still elevated.

10:35Can I get a drum roll, please, because we are giving away a free lifetime access to the Academy for one lucky listener. And it's super simple to participate. All you need to do is leave us a review on Apple and then send us a screenshot as proof. It takes five minutes for lifetime access to the Apple Academy for free. So two steps, leave us a review on Apple Podcasts, send us a screenshot, and the link to participate is in the show notes below. If you are a wannabe entrepreneur, newer. The courses in there are so invaluable for you to actually get that first business idea off the ground. And then for the current business owners that are looking to sharpen their skills, there are a ton of courses in there for you.

11:15And the best part, you're going to be able to connect with other top-notch entrepreneurs in your field to network with them and learn from them. The winner will be announced on July 26th. All you need to do, leave us a review on Apple, send us a screenshot of proof, and you guys can find more details in the show notes below. If someone is going to have to wait then. What are some ways that they can prep to enter the market? What are some strategies that you have? Money, money. It's all about money. Save money. You don't want to take on debt to get into this industry. It's a double-edged sword.

11:44So you can grow faster with debt, but you can also bankrupt yourself very quickly in this industry because if you go through a couple months where you don't sell cars, then you're going to have lots of interest and you can find yourself upside down on cars you bought at a wholesale level very quickly. Also, the market's very volatile right now. So it's trending down on the used car side. So a lot of these dealers that are leveraged up, the values of their vehicles sitting on their lot are going down. And at the same time, their expenses are going up because their interest costs are going up every single day that these cars sit on their lot.

12:17So I talk about this debt a lot, but it's one of the most important things to being successful in the car industry, especially as a used car dealer, is that you don't want to take on any extra expense that you don't have to take on. I'm curious how you guys keep expenses low. So if someone is like wanting to start out just kind of scrappy whatnot, but they want to grow, like what are some ways that you guys keep expenses low and kind of fight against that volatile market? I probably even extend my team too much, but like other than my wife and I, we only have five team members that we've been through a segment where we opened up an extra lot.

12:49We had at our top, we had 12 team members, not including myself and my wife. And that was a lot of expenses. I think our burn rate was like 60 to 65 grand a month at that point. And it's tough to do. So I would say as far as expenses go, we do a good job at being very efficient with the manpower we have. We can, during tax time, we can pump out 120 cars out of here with five people. And we're at capacity at that point. We probably can't do many more than that. And I don't push them more than that. But I think in February or March, we did 120 cars. I mean, we're going like crazy when that is. But that's one way I keep my expenses down is just by not hiring and hiring and hiring.

13:28You also want to get the right people in the right places on the bus. That's so important to do that because you can have one person that's not in the right position that drags the whole team down and it costs you time. And we're very fortunate to have a team in place. I mean, you mentioned earlier, I have a YouTube channel. The reason why I'm able to have a YouTube channel and crank out content is because my business runs itself. And it's because I have a team. And we've spent a lot of time finding the right team members and a lot of time letting go of the wrong team members. So it's a tough thing to do, but you got to have the right people in the right places.

13:58Yeah, that's honestly like the biggest thing that I've noticed from running my agency is like sometimes we've had people in like the wrong seats. They're the right people. They have the same core values, like they're good people and like they're good, but they just weren't in the right role. And once we actually got them into the right role, like it was better for me, it was better for them. It was better for everyone because now they're actually operating within like their zone of capabilities? I don't know if that's a term in business, but like their zone of capabilities I know is so much more beneficial as you now hear.

14:22Yeah, hiring, I wanna still say I'm young. I mean, I'm 35, but it's been a very difficult path for us. I mean, I've always been younger than everybody I've hired. And that's been one of the struggles too. And you don't know what you don't know when you're going through business and hiring and letting people go has been one of my biggest struggles. But I have figured out one thing and that's I can train anything, but two things. There's two things I can't train. I can't train work ethic and I can't train attitude. So those are the two things that I hire on. And those are the first two things I'm going to let somebody go real quick.

14:54If they don't have the right attitude, they're not staying here. That's one thing that's really helped me out when I've assessed a problem. And if it's a problem of attitude, they can't be here. If it's a problem of work ethic, being lazy, they can't be here. But everything else, everything else I can fix. Yeah, Brandon, I love that because when we went to hire and there's like 11 of us on our team, the average age of our team is 24, like 0.2. So we're very young and like you're not going to come in with all the skills needed to succeed. But like I'm confident we can train you. But all you need is a good attitude and a good work ethic and like everything else that we can take care of.

15:24I follow that as well. I want to really think about the person listening right now. They're jazzed up for this. They're ready to go. How would you recommend someone once they wait, they get the cash, identify like good cars to go after? Yeah, it depends on the market you want to be in. So my niche that I'm in and another reason why we've been so successful is because I cater to a clientele that doesn't want to go into debt. They don't want car payments and they also don't want to be able to lose their car. They've probably been in a rough situation. So I only sell cars that are$5 ,000 and under.

15:54And that's very, very difficult to do. So we have a mechanic on staff. But I would not recommend getting into the market that I'm in just because of how difficult it is. and I literally have to have a mechanic on staff. I have to know what's wrong with cars when I'm going in to buy them and it's really tough to do. So more of the mid tier is probably going to be your easy range to get into cars that you're buying for$3 ,000 to probably$7 ,000 and then flipping for$5 ,000 to$10 ,000 is probably the range that I would recommend getting to and I would buy what's the most reliable and you're going to have to work on the least and that's going to be your Toyota Camrys, your Honda Accords, your Honda Civics, your Toyota Corollas, especially when you're first starting out because you want to have as few variables as possible.

16:39And working on cars is a very costly expense, especially when you're not doing it in-house yourself and you're going to have to rely on a mechanic that you probably don't have yet. And that's an easy way to bankrupt yourself really quickly. Yeah. So I want to echo that because that is phenomenal advice. It's like one, like go in that middle tier where like you might not need a mechanic, but like how early do you guys bring a mechanic on? Because that can definitely cut your costs in like half, I imagine, if not more. Yeah, it was very difficult to bring one on. And I hired one that was a mechanic before he worked with me, but the attitude didn't line up.

17:14So he found himself not working with us anymore. And I figured out that most mechanics, their attitudes probably not to stereotype mechanics, but mechanics are not the most pleasant of people. I don't know why, but anyway, they fall into that basket. So what I did is I trained, I trained a mechanic. So I had a member of my team that worked and was starting out detailing cars. Turns out he was terrible at detailing cars, but he had a pretty good attitude. So I was like, you know what? I knew he was smart because I knew him well before we hired him. And I said, okay, I've got this blower actuator on a Ford Explorer, which is just a piece behind the dash.

17:48So it's about a three hour job. Go home, watch some videos, see if you can come do it. And he went home. He watched some videos on YouTube. He came in the next day and I think he did it in like an hour and 45 minutes. So fantastic. Fantastic. And then from there on, we just kept giving them a little bit more jobs, a little more jobs. And now not only is he my mechanic, self-learned mechanic, but he is also my primary car buyer. So he goes to auction. So I have a mechanic on staff that can literally go to the auction and know what he's going to have to fix on that car before he buys that car. That one speaks to the power of having a good attitude and a good work ethic and the opportunities it will give you.

18:22So everyone listening, have a good work ethic, have a good attitude. But two, I think it's super beneficial because then it's someone that can do the quick math in their head of like, oh, well, it's going to cost this much to do, like this much to do, like let's buy or like let's not buy. I feel like that has to be the most beneficial thing with that. Absolutely. Absolutely. And we're a close team. So often me, him, my sales manager, we'll get together, say, okay, what's the market look like? What are we able to sell? How much do we need to pay for cars? We just went through a meeting about two weeks ago or like, okay, the economy, at least in our range feels a lot tighter right now.

18:50And anything that's$4 ,000 to$5 ,000, we're not selling. So we can no longer buy for the foreseeable future. Anything that's over$2 ,500 because we're not going to be able to make any money on it. So now we have to bring down our range of what we're buying. But because we're a close and small team, we're able to have these conversations where, okay, my mechanic, my car buyer knows what's happened on the front end of the office, knows what we can sell, what we can't sell, the amounts that we're at. So he knows when he's at the auction, how much he can spend at the auction and not flying blind. That's really good.

19:22It sounds like you guys have a really good system in place there. I also want to ask another question because a little bit earlier you said that you guys, your primary market's like under 5 ,000 and you'd advise someone to go like a little bit higher than that. I'm curious, like the profit margins, are they like linear where it's like the same as like under 5 ,000 to like a 15 ,000 car or like are the profit margins better at 15 ,000? That's just like a question that comes to mind. The profit margin is way better for the cars that we're in, but it's just an element of, okay, we're going to make about 1 ,200 bucks a car.

19:50And if we took the same kind of profit margin as a new car dealer, like they don't make a ton of money on their cars. If you're looking at actual margins, they might make 5%, 6%, somewhere around there. Whereas we can buy a car that's$1 ,500 and we'll sell it for$2 ,500. So our average is around$1 ,200 that we make. Now, I mean, obviously we make less per car than other car dealers. So we make it up in volume. Like I said, we sell a lot of cars. Good month for us is 120 cars, but we sit around probably that 70, 75 car range is what we'll average. Yeah. And that's what I was just going to say. Probably they might have less volume, but you have way more volume where it makes up for it.

20:30And probably it doesn't stay on the lot too long. How long does it stay on your lot? What's that average time on the lot? We try to get cars out within two weeks. Our average is right around that time frame. If a car sits on our lot for two weeks, we're marking down the price. Markets telling us that they don't want that car at that price. So we're moving on. I mean, we try to push cars out here, out of here as quickly as possible. We'll cut prices just about every two weeks, about a$500 increment just to move it. Perfect. And you guys are marketing this on like Facebook Marketplace. That's like the main form or like what are the other places you guys are marketing this?

21:00Everywhere. I think we spend like three to$3 ,500 a month on marketing. We'll do Facebook Marketplace. We'll do a CarGurus, CarFax. We just plug it in and it gets sent to everywhere. But we pay dearly for all that too, though. This has been super tactical and it's been super awesome. So thank you very much. I have learned a ton. A few more questions before we get to our fan blitz questions. One that I'm really curious about. If someone came to you today and they said they wanted to start flipping cars this weekend, what advice would you give to that person? The biggest thing is don't use leverage.

21:30Buy what you know and don't buy what you like. Buy what you know will sell. That's one thing that I learned very early. I couldn't buy cars that I liked. So these Mustangs, these Camaros, Corvettes and stuff I would see go through auction. That's not stuff that would sell through my lot. But what would sell is the ugliest Ford Taurus you've ever seen in your life. And that's what I would buy. So now when I go to auction, I see sports cars. I don't even care. It's like I don't even see them. But I see a 2001 Ford Taurus with 175 ,000 miles. That's what gets me excited. I like that. And if you can reflect just on like 13 years here, however long we're at now, 12 years, 13 years, what to you is like not the biggest takeaway, but like one of the biggest things that has made the difference for you and like flipping cars?