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Underground Arbitrage

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I have a couple of friends that figured out how to combine their love for Flea Markets, Garage Sales, Goodwill, and Second Chance stores on the weekends. They started this journey years ago while in college to find things as cheap as they could since like many students, they were living on a very tight budget. And they found that they had a pretty good knack for finding those hidden gems. So other students saw what they were able to find and asked if they could find them the same kind of stuff or show them how. Being the good people they are and the fact that they really enjoyed the hunt, they readily agreed.

Ok, what does arbitrage actually mean? Well, here’s a good definition from Investopedia:

“Arbitrage is basically buying a security in one market and simultaneously selling it in another market at a higher price, profiting from the temporary difference in prices. This is considered risk-free profit for the investor/trader. ..”

Now we aren’t talking securities, stocks, or any financial products, we’re talking about finding a designer shirt, or $100 pair of shoes, and anything else of good value for very little cost. Then re-selling the item at a higher amount. It’s the old buy low and sell high but doing it Garage Sale Style. This was before the Internet and eBay but eBay’ers have used this method to make some pretty good money since it started. The tricky part is knowing the value of items you buy are much greater than your

purchase price. And you don’t need eBay necessarily, which is a good thing since eBay auction fees have risen dramatically over the early years. More on that below.

So I was one of their early customers when my Espresso Machine went belly up. I am a verified coffee junkie and really loved my hard core coffee jolt multiple times a day, especially in college. I had gone into the service right after high school and was a little older than most students and had picked up my coffee habit in the Army. So I didn’t have very much money and couldn’t afford even a cheap replacement (in those days the cheap ones still went for over $100). So my friends put an Espresso Machine on the list of items to look out for on the next shopping trip. Son of gun if they didn’t find me a great little Espresso Machine for $15. It wasn’t very fancy and was a little dinged up but worked great. And I gave them another $10 for finding it, so they were overjoyed too.

Now jump ahead about 20 years and I ran into them at our college reunion. And catching up on our life stories they mentioned that after they graduated they both had a hard time finding a job. So they just keep on doing the garage sale stuff since it was pretty good money and was their only source of income. And now they were dealing in really specialized stuff so instead making $10-$20 a deal they were making up to $150-$200. In fact they were killing it, doing enough to make more money than they would of with a Liberal Arts Degree. And now with eBay, CraigsList, retail clearance stores, and venues on the Internet or smart phone apps it was even easier.

So in a nutshell, they have found a lot of ways to find the items that are at a bargain rate, and then find buyers who are eager to find the item. As an example they now can look up anything on their smart phones to see what any possible purchase is going for on eBay and/or even retail. So if some item is in good shape, a good or even high end brand, and it sold for $200 new and the one they are looking at they can get for $20, that’s a winner. Now not every item has that 10-1 spread but they

said they don’t buy anything unless they can make at least $50. They tried the lower priced items but found they require too much time and effort for the money. So they stick to what they know and even still have buyer lists. And I think that’s the special sauce.

Now remember that the key is knowing the value, and finding the right sources to find the best deals. And they have a lot of stories about how things can go sideways (like counterfeit merchandise that can even fool experts) for one reason or another. But they also have technology on their side now so they can call a buyer and ask them if they want this XXX if they can get it for them for this amount, so they sell it before they even buy it. And they have some favorite merchandise (like silverware and dishes are huge, who knew) So like any other business, you have to pay attention.

But it can be a great way to make extra money if you stick to the basics and know your products. And with the help of all the retail store clearance sales, many retail outlets are great sources for low cost items that can be resold for more. They work from Thursdays through Mondays and take Tuesday and Wednesdays off. So the work schedule is a little different (most weekends they work). But they do take at least two months a year off (January and February normally). And if you just want to make some extra money part time it’s a great way to do it. And it helps if you have a little working capital too but you can start off really small.

And Garage Sales are just the tip of the iceberg. They go to Estate Auctions (actually any kind of auction that they may have knowledge of the stuff), Flea markets of all kinds, watch CraigsList on a national level, Government Auctions, you name it and they probably cover it. And they go on working vacations too where they still keep their eyes open for bargains. So they do put a lot of time and effort into their efforts.

Ah, almost forgot to talk about eBay. They mentioned that in the early days eBay was great, tons of buyers, collectors who paid top dollar, etc. But they are no longer eBay fans unless it is truly a collector item or high end brand name. The time, trouble, and listing/advertising fees are too high for small dollar items. It still can be a good platform for the right things but listing 200 auctions a week (like many eBay grinders do to make acceptable money) is no fun for the return on investment.

So next time you drive by a Garage Sale sign you might want to stop take a quick look, just in case you can find that hidden treasure. And you can keep it to enjoy or sell it to make a few bucks.

Update 2019 – Great Article on Retail Arbitrage

There was a great article on February 17th by Julia Glum (MSN Money Author) on a couple who buy spices at Trader Joe’s and then resell them on Amazon. This is exactly what our original article was discussing about finding products at clearance or whatever and reselling it through various ways (Amazon and eBay being the most popular). Here’s a link to the article and they have a YouTube Video series on it too in the article. Click here to read the article and watch the video. Oops, they took down the Trader Joes video but the story is still there and worth the time to read if interested. The couple now has a YouTube Channel here you can go check out: Always remember there is a risk involved in any scenario where you need to re-sell an item and do your research.

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