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Help with the money side of buying new inventory


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Hi again guys, just a few more questions:

On 10/31/2020 at 11:48 AM, gmpirate said:

Set aside money that you can afford to use for investing and leave it there

What would be the best way to do this? The main problem I am having is figuring out what source the money is from when I buy new sets for resell, whether it be a quick flip or hold. Sets can be bought in store with cash, online with PayPal or Card, so it’s hard to set aside money in a specific place for sets to resell. 

On 10/31/2020 at 10:46 PM, Groovejet said:

If it is to maximise returns, I would say you should re-invest everything

Wouldn’t this be pointless? Say I make $50 on a set which is completely profit, but then I “reinvest” that $50 on another set. From this new set, I sell it make a profit of $50 - which would not achieve anything right? Additionally, if the profit was less than $50, I ended up losing, as I had $50 profit in the first place? Not complete sure, as maybe reinvesting everything should just be done in the beginning when you are starting out.

Thanks again guys

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11 hours ago, User5346 said:

Hi again guys, just a few more questions:

What would be the best way to do this? The main problem I am having is figuring out what source the money is from when I buy new sets for resell, whether it be a quick flip or hold. Sets can be bought in store with cash, online with PayPal or Card, so it’s hard to set aside money in a specific place for sets to resell. 

Wouldn’t this be pointless? Say I make $50 on a set which is completely profit, but then I “reinvest” that $50 on another set. From this new set, I sell it make a profit of $50 - which would not achieve anything right? Additionally, if the profit was less than $50, I ended up losing, as I had $50 profit in the first place? Not complete sure, as maybe reinvesting everything should just be done in the beginning when you are starting out.

Thanks again guys

Someone on this forum wrote a great post a few years back on how they turned a $25 impulse clearance buy into a $50k+ inventory of LEGO sets. Maybe they can speak up once more.

Personally, I had 2 years of investing where most of what I bought was bought with "fresh" capital. Then I hit a point where I said "enough" and used (part of) my sales profits to buy more inventory. Now I am at a point where I recovered all of that initial "fresh" capital in profits, and therefore the inventory still stored in my basement ($30k+ in current market value) is all "on the house", meaning even if a fire goes through tomorrow and destroys it all, I will have made a profit on my investing.

This is a great feeling to have. 

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11 hours ago, User5346 said:

Wouldn’t this be pointless? Say I make $50 on a set which is completely profit, but then I “reinvest” that $50 on another set. From this new set, I sell it make a profit of $50 - which would not achieve anything right? Additionally, if the profit was less than $50, I ended up losing, as I had $50 profit in the first place? Not complete sure, as maybe reinvesting everything should just be done in the beginning when you are starting out.

Thanks again guys

No, this is how you grow your money (I'm taking taxes and expenses out of the equation and assuming you reinvest all of your money).

1.  Set #1 - purchased for $50 sold for $100.  Now you have $100 (i.e., $50 in original capital + $50 profit)

2.  Set #2 - Purchased for $100 sold for $200.  Now you have $200 (the $100 you had after the last sale + the $100 profit from this sale).

3.  Set #3 - Purchased for $200 sold for $400.  Now you have $400.

Etc.

 

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9 minutes ago, Phil B said:

Someone on this forum wrote a great post a few years back on how they turned a $25 impulse clearance buy into a $50k+ inventory of LEGO sets. Maybe they can speak up once more.

 

I don't recall that post, but I started out in 2006 when my mom moved and brought all of my old Lego sets to my house.  While figuring out what to do with them, I realized (1) I could sell the sets individually for a lot more than I could sell the lot, and (2) there were a lot of other people out there trying to figure out what to do with old Lego collections.  I bought a used lot for $900 using money that I had built up doing Ebay arbitrage with used Maui Jim sunglasses.  I broke that lot down into individual sets and doubled my money in a few months.  I continued buying and selling used Lego until 2010 when I got more serious about things and started moving away from used lots towards new sets.  I haven't reinvested 100% of my profits over the years, but I have reinvested the majority of them and grown that original $900 into far more than I could have ever imagined when I bought that first lot.  

 

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Not sure if the same applies in Australia, but here most on-line banks allow a number of separate savings/checking accounts.  If you open one as a 'lego investing' account, and decide to put a fixed amount into it each month, this will be your starting capital.  Then, link this account to your paypal account.  If you then keep all proceeds from sales in the account, and draw (only) from it to cover purchases, you find it grows pretty quickly following redcell's example.  (or should, at least)

Edited by SpaceFan9
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12 hours ago, User5346 said:

Hi again guys, just a few more questions:

What would be the best way to do this? The main problem I am having is figuring out what source the money is from when I buy new sets for resell, whether it be a quick flip or hold. Sets can be bought in store with cash, online with PayPal or Card, so it’s hard to set aside money in a specific place for sets to resell. 

 

The answer to this question really depends on you and what would work best for you.  If you have a set pot of money to use in buying Lego and don't want to intermingle those funds with other money you have, it may be easiest to set up a separate bank account for that money and then just transfer out of it as needed when you buy something.  That way if you buy something with cash out of another account, you just pull money from the Lego account to replace it.

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1 minute ago, redcell said:
12 hours ago, User5346 said:

What would be the best way to do this? The main problem I am having is figuring out what source the money is from when I buy new sets for resell, whether it be a quick flip or hold. Sets can be bought in store with cash, online with PayPal or Card, so it’s hard to set aside money in a specific place for sets to resell. 

The answer to this question really depends on you and what would work best for you.  If you have a set pot of money to use in buying Lego and don't want to intermingle those funds with other money you have, it may be easiest to set up a separate bank account for that money and then just transfer out of it as needed when you buy something.  That way if you buy something with cash out of another account, you just pull money from the Lego account to replace it.

You can do this on two levels:

1. Use physically different bank accounts as suggested by @redcell and @SpaceFan9.

2. Use good old Excel and keep a detail list of all your purchases and sales.

Since doing #2 is almost mandatory anyways (if only come Tax time), I just do 2.

 

 

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1 minute ago, Phil B said:

You can do this on two levels:

1. Use physically different bank accounts as suggested by @redcell and @SpaceFan9.

2. Use good old Excel and keep a detail list of all your purchases and sales.

Since doing #2 is almost mandatory anyways (if only come Tax time), I just do 2.

 

 

#2 is also so much easier if you want to maximize rebates, credit card cashback, etc. by using different payment methods.

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  • 1 month later...
On 10/31/2020 at 11:15 AM, SpaceFan9 said:

Lots of good advice here so far.  I'll try to summarize from my point of view

  • set a goal, make a plan, and then stick to it.
    • when I started out, my goal was to subsidize the lego hobby.  I would buy 2 at discount and quick-flip one for ~50% gain to subsidize the one I built.  Or sell off minifigs and keep the bricks to make the bricks nearly free. 
    • later, realizing that better returns could be made with a bit longer hold, I dropped both of those strategies and started buying in bulk.  My goal changed, and thus so did my plan.
  • don't spend money you can't afford to lose
    • I think the strategy of keeping your lego funds in a paypal account is quite good.  This will put a natural brake on your spending, and trigger the pain center of your brain if the funds get too low. Credit cards reduce the impact on that pain center, and make it easier to over spend (on both lego, and life).
    • always keep in mind that buying is easy, selling is hard.  Don't buy more than you can afford to store, or have time to sell.
  • When you're starting out (say for the 1st year or 2), its a good idea to keep all of the funds from sales in the account and add to it from other sources when you can.
    • This is the building phase.  Once capital is built up, and your buy/sell process is working smoothly, then you can draw funds from the sales---i.e. reinvest 1/2 and pull 1/2, depending on storage/time constraints.

Hope this helps.

Enjoying this thread as I am looking to dive into this endeavor. When you say you buy in bulk, are you just doing that from general retailers or are you sourcing in a different way?  Thanks for the advice. 

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1 hour ago, P-Lynch6 said:

Enjoying this thread as I am looking to dive into this endeavor. When you say you buy in bulk, are you just doing that from general retailers or are you sourcing in a different way?  Thanks for the advice. 

 
 

In that context, I meant "buy more than 2".  I've found it's much easier to sell through 20 of one set than 2 each of 10 different sets.  The challenge is to pick the 'right' set.  Buying 2 each of ten is more likely to find a winner, but then you only have 2 of them.

Edited by SpaceFan9
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2 hours ago, SpaceFan9 said:

In that context, I meant "buy more than 2".  I've found it's much easier to sell through 20 of one set than 2 each of 10 different sets.  The challenge is to pick the 'right' set.  Buying 2 each of ten is more likely to find a winner, but then you only have 2 of them.

Limiting your variety of sets purchased is definitely easier to manage.  My strategy is to just buy the best deal available at the time.  I may not be hot on something but if I can get it fo 60% off I'm in.  But yeah, takes a little more time to organize, package, etc.

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