I started collecting my thoughts on reselling over the weekend, almost pulling the trigger on my first transaction. It was to be $499 iPads that were selling on Amazon for $580. They also came with 20% cashback via discover, so a healthy profit. Initially I was going to buy $5K of these on Sunday, but decided to not due to CyberMonday bringing a risk of lowered prices that might flood the market. Here’s some of my thought process that I wanted to share.
Taking my time
I find myself thinking more, and acting slower. While I know that this costs opportunities, I’m OK with that. This stems from several strong factors that are emerging in my life:
Upside with little downside
Side gigs (reselling, churning, ms etc) must offer me upside with minimal downside. Downside includes effort to close the loop on a transaction, and stress. In general, I’m hitting the point of asset preservation over accumulation, so I find myself very hesitant to part with my money. While the $1K in profit from the iPads was attractive, I’m sitting on $5K of cash by not buying them and stressing over getting it right. It’s easier to pry cash from my cold dead hands.
This calmness and desire to not chase after every squirrel allows me to think more about the long term value in reselling. IE if it is something I want to learn, it will work with margins beyond the Black Friday prices, or not at all.
Finding the time
I’ve mentioned that I won’t allocate more than 1hr a week to MS (in the wild), so if I add in reselling, what do I cut out? Logically, if it is ‘better’ than what I’m doing now, then the MS should suffer, and I drop that from my routine. It is all too easy to allow other parts of your life drop instead, but I’m trying to value all aspects better.
Valuations skew
If I only have an hour, and can buy $10K of crap from a store in that timeframe, would it be better to go to a store next to a Walmart, where I can buy $10K at a lower margin AND sneak in 30% of MS, vs $10K at full margin? I considered this recently with points acquisition, where the exit loop from MS (paying the credit card off without a trip somewhere else) is important. For example, if I value Ultimate Rewards at 2.5 cents now, and Alaska at 1.7 cents, should I actually focus on Alaska if that means one less trip to Walmart, and therefore increases my net earn rate?
Funny Money
One phenomenon I’ve noticed from the players in this game is that they consider certain money as ‘funny money’ eg if they got a $500 bonus from a Crap1 Spark, that can be used for paying for a cruise deposit. But why is that $500 really anything other than real money?
If I swapped out my 1hr a week and now make $1000 a week in profit from reselling, is that all funny money? Therefore, should I be buying cash J tickets to europe with it, or is that real money, and I should be keeping it in the sensible money pot?
I struggle with this constantly. For example. I recently bought some stuff from Amazon, and used ‘sensible money’ for it. I think there was a $15 off $60 rebate from Amex Sync, but that still means $45 of my non funny money left my bank account 🙁 Meanwhile I have 30K of Thankyou points that are sitting there doing nothing, earning nothing, and may well for many years to come.
Is it total wealth?
This is increasingly the way I see it, points have value and can be swapped for spending real money, but what happens when your ‘points’ income becomes cash income, is it still points? Isn’t cash just a points system anyway?
If I were able to earn $1000 per week from reselling for 1hr, I’d not bother trying to scrape out a few hundred in MS for an hour, maybe it would mean that I hit the stage where I only do signup bonuses again, and just buy a $20K of Kiva loans every few months to meet the min spends.
It’s a funny business this reselling….
Matt, one of the key considerations is the tax treatment of the proceeds. MS is completely tax free. Reselling is a business, and thus, taxable. I usually take the cash value of an MS activity and obtain its value by doubling the amount. So a sync deal returning $15 is like earning $30. If you consider fed tax, state tax and social security, that figures is roughly correct (the multiplier varies by an individual’s tax rate.)
That’s not how I do taxes though 🙂
Matt, my first use of the funds from reselling is, of course, paying back the card I used to buy the items. Then, because, as above, there are tax considerations, I hold out a percentage of the profit. As I use reselling as a way to make “real” money, the bulk of it stays in the real money pot: mortgage payments, etc.
My biggest goal these days is to assure that Husband will be able to retire early, at 59 1/2, in about four years. So, the “extra” income, over and above the real money, goes to IRAs, and buying real assets that can earn income while they increase in value.
Obviously, that doesn’t get me in F on Cathay Pacific. That, duh, is what the spend on the cards is for.
Oh, and yesterday was a dud, so far as buying anything for reselling, so far as I am concerned.
NP: I just sent 9 boxes to FBA, with various items within. I upped my account to professional, as I hit the break even point (8 sales/month) a few months ago, and hadn’t gotten to that chore. Instant happiness occurred. At the professional level, instead of them holding funds for 3 weeks or more, they are released very quickly. My checking account will be very happy tomorrow, when the funds sent yesterday hit.
Glad to hear you are doing well from it.
Why is 8 sales a month the break even point?
Actually, I misspoke; the hard break even point is 40 items, because the $.99 per item sales fee is waived.
But the fact that I got two selling issues taken care of in under a half hour, and they called me right away, just saved me about $100 in aggravation and allowed the listing of 6 items that will net me a total of over $600, makes it well worth it to me. I’m about 1/2 way to the hard breakeven, at this point.