I have witnessed something like this at some recent auctions. In a wet, gloomy semi-basement room of a 120 year old building, there is a lot of "CONTENTS OF THE ROOM, INCLUDES NON FUNCTIONAL BOILER, 150 HP MOTOR (DAMAGED), NUMBER OF MOTORS ON THE SW CORNER, PIPING, PAPER ROLLS WITH BRONZE BUSHINGS, ELECTRICAL CABINETS, ALL WIRING, VALVES".
That stuff is basically an enormous quantity of utter junk, forgotten there 50 years ago, or just piled up in hopes that business gets better. Business never got better and the stuff is hopelessly rusted and otherwise unusable. There is, however, a lot of it, say two semitrailers worth.
The bidding goes to 500, then 2000, 10000, then stops at 12,000.
Somehow, I am positive that almost nothing in the lot can actually be sold to end users.
Somehow, also, I am positive that the guy who bid $12,000, made a boatload of money on this deal. They send some $11/hr Mexicans with oxypropane torches to take that stuff down and to take it to scrap buyers.
My question is how do they do it, how do they know to stop bidding at
12,000, how can they figure out the value of that stuff? It seems to be very complicated.
Is that like military surplus in the old days, when I could bid on almost anything and make money? How does it work?
Simple. You take all the metal you have to the scrap recycler. Trade it for at least enough money to get your next hit of doxy. In some parts of town, bypass the currency stage and trade direct for the dope.
You played on "The Love Boat"? Yes. White tux, huge sideburns.
You estimate the wieght and bid accordingly. I used to know some guys that were realy good at it. Might be a lot more wieght than you think. Of course he has to get rid of the asbestos in that boiler. The mexicans won't call the EPA.
Just get the price of what you could sell it for to a scrap metal buyer. Probably goes by weight for a certain kind of metal. Then estimate the weights and add it up minus any labor factor. My old neighbor across the street made money doing it for years. We have any scrap metal thingies to get rid of, he will take it off our hands. Find a guy like that and pick his brain for finer details.
In some (many) cases they don't. Watch them pick it up, junk trucks because they can't afford anything better, and all signs of being a totally broke person without much future.
I watched the same think last year at an auction. The scrap was bid up over what I estimated the scrap value was. I was there when they picked some of it up. Old, totally beat, Ford F-150, they loaded it until the springs bottomed out, and there was no more room in, on, or around it. Drove off with a "We'll be back in an hour."
I picked up half of my load and left, told them I'd be back the next day (I know them, great people.) Came back the next day, and the rest of the scrap was still sitting there... Yep, we both figured those guys didn't make it very far!
The best way would probably be to avoid it, and at least save the investment it would've cost to find out you didn't have the experience dealing with those sorts of deals. Demolition/salvage specialists know what they're doing. Piss 'em off and the EPA might show up at one of those "opportunities".
Like antique specialists, it isn't easy to compete with them. Even if you could, it just means the cost of deals will be higher.
In a deal like the salvage job (realistically, you'd be buying work), you probably end up with unskilled, unmotivated laborers/strangers damaging, and/or possibly stealing your equipment, causing collateral damage (huge risk of injuring each other) and other liability risks.
There are a lot easier/safer ways to make legal money, and your limitations are that you're trying to do it by yourself. When one person needs to be out checking on deals, loading, transporting, testing, cleaning, making minor repairs, researching, photographing and listing online auctions and/or other administrative duties.. days are too few and too short. Start appreciating the time left, above the dirt.
It appears that you're picturing an early retirement, and are becoming erratic in thinking about how to get there. You made the big leap, it seems now you're wondering what to do next. For what yor actions suggest, you should probably have about 2 others involved, who are talented and reliable. They could have full time jobs, but willing to devote some time/effort, but they'll need to be rewarded.. not just with broken equipment.
When you look at overhead expenses of profitable small businesses, it's fairly easy to see that profit margins are often very lean. Some of the ones that do very well are crooks, and you wouldn't want to do business with them. Advertising, utilities and some other major expenses need to be met every month, whether there was a profit or not (after repairs, maintenance, new business acquisitions etc).
For example, you might be, by far, further ahead using that building space for a car detailing/cleaning business (for car dealers only) instead of dealing in used industrial machinery.
You may just end up running an enjoyable pastime into the ground. With just a little bigger garage at home and a part-time helper, you could make fairly easy money with eBay and small items that can easily be carried to a car. No huge overhead expenses, little risk of injury and a moderate but continuous stream of income. More time with your family and a schedule where you're free to do what you want. Consistent small profits can achieve more than infrequent large profits. USPS provides free, clean, attractive looking boxes.. and newspaper is generally free, so one expense (in addition to the greedy scumbag eBay/paypal fees), is packing tape. USPS also picks up packages.
So what if there is an opportunity to make $2000 on a 3 ton machine.. carrying boxes to the car is easy. Not likely to lose a finger or an eye.
I've mentioned a few deals I found on eBay (delivered to my door) and found at flea markets (a couple of weekend hours outdoors in nice weather, meeting friendly people), which I ended up making huge profits with when the items were sold on eBay. Light-duty efforts, huge profits.. and generally as frequently as one would desire.
I often hear retail store wage earners whining about their jobs, and I can't sympathize with them when I know they could at least triple their part-time earnings with the same hours (or less) applied to finding and selling stuff online. They're probably too busy working on their Face or Space webpresence to have any spare time. Reporting who passed out at a party is much too important. Knowing that they didn't actually need that retail job would make it much easier to cope with.
The US is the land of surplus and this isn't a new development. Most 2x-10x profit opportunities don't require a tow vehicle. A rental truck and helpers might be handy once in a while.
Peter, I am not talking about a little broke guy in a truck with wooden stakes who collects unwanted bicycles. The people who bid $12,000 (payable next day) on those big lots are intellectuals. They might not even touch any of that stuff -- their guys do all the work.
What I wonder about is how do they estimate how much to bid.
Bill, thanks for a lengthy post touching several interesting topics, I will give a long winded reply.
The above is a good point (actualy several). What you are basically saying is that
a) they know a great deal of difficult to learn stuff b) if I piss them off by competing with them, they might hurt me in some sneaky way and c) these jobs are inherently risky due to dangers of injury and property damage
I heartily agree with the first point, I also always believed that knowing some difficult to learn, complicated stuff is a great way to make money. I consider my dealing with industrial surplus to be one of such applications of arcane knowledge. Someone looks at a crate and sees a crate full of junk. I look at the same crate and see servo drives, servo motors, steppers, electronic pressure gauges, and other things that are easy to test and sell.
Somehow, I feel, that someone experienced who is looking at a scrap pile, would not just see it as a sad pile of junk, but could see how much copper, bronze etc is in there almost instantly. That is hard to learn, no less than other things, and my gut feeling is that it is a very valuable knowledge.
Second point is something I heard about, but so far I have never encountered in the US.
When I think about bidding on large scrap lots, I do NOT want to be removing those items by myself, I would hire people to do it. I already hire people by day, it works great, although what they do is a great deal safer than torching down old boilers.
Yes. A couple of things. One is that I like what I am doing so much, that I am no longer contemplating early retirement. In fact, I am thikning the opposite, how long will I be able to do this stuff. It is great fun and fits my personality 100%.
Second is that I find this stuff so interesting, that I already lost 8 lbs of weight, by simply not being bored and not eating as much due to boredom.
So, for me, retirement is out of the picture for now.
What I want is to have a smoothly running operation, so that I can oversee it, buy stuff, and sell stuff, without being involved in moving stuff, cleaning it, packing, loading out etc.
I hope that I can then spend about half of my time on this, and half the time on my websites, all the while being around the work that is being done.
This sort of setup, requires a certain amount of volume being transacted monthly, of course with enough profit.
At this point, I have a very nice person working for me on a "paid daily" basis, and this helps me a lot.
Yes. I agree. This is why I decided that I do NOT want to be in manufacturing or services, where competition is at its worst. Dealing with surplus is generally high margin and intellectual, and fits my personality much better.
I own this place and owe nothing to landlords, banks, investors or partners.
I have the following fixed expenses.
Cook county real estate taxes.
Heating in winter.
Repairs, such as likely upcoming roof replacement.
Pretty much everything else is variable expenses. So, I would think, the bar is relatively low.
In addition, I have a huge front parking lot, which I want to stripe and use as a semi truck parking lot. That might pay for my real estate taxes. I have a lawyer writing a parking agreement for me right now.
I never do any business (not even buy surplus) with car dealers, other than repairing my vehicle.
WB, I do not yet have enough experience running a business out of this
10,000 square foot factory building. Early indications from the last
31 days, suggest that selling used stuff seems to be working out okay.
I have a forklift since last week (actually two, but one is being fixed), so things should be a little easier from now on. Once I settle down a bit, acquire pallet racking, etc, and straighten out the selling process, I hope that
I know exactly what you mean!
They would have to actually know something, and take some minor risks, which many people are not capable of doing.
Actually, being a successful buyer/reseller requires several skills. One is being organized enough to keep track of what is going on and to ship on time. Sounds minor, except many people cannot do it. Another is interest in the stuff that one is dealing with, knowing what to buy and to sell. Another is some character restraint, not paying too much. Yet one more is to be at least relatively honest, to stay in business. Plus some appetite for risk taking. Most people lack at least one of those.
I have a pickup truck and two trailers. One is a military trailer that I can convert from enclosed to not enclosed in 5 minutes. Another is a lowboy. This is a good start for most purposes.
Conversely, a quick and dirty way could be to add horsepowers of motors (usually you can guess by just looking) and figure out scrap price per horsepower. I think that nowadays you can roughly get $3-4 per HP in scrap value.
I do not want to be torching stuff by myself, I want someone who can do it to do it for me, I just want to buy and scrap that stuff.
You missed one big tax. That is a personal property tax. I presume IL counties have such a thing? On Dec. 31, you inventory all the stuff you have for sale and estimate the market value and send the document to Cook County. Next November, they will send you a tax bill. Same goes for the equipment in your building that is not permanently attached to the building.
My bill is pretty big each year, because the county depreciates the equipment at a rate most favorable to the county!