(Guest Post by Sam as part of our Side Hustle Series… Who knew people did this?)
When I turned 30, I had a mini mid-life crisis. After all, news anchor Peter Jennings died at 67 and pop star Michael Jackson died at 50. I’ve been frugal ever since the sixth grade when my parents encouraged me to only order water when we went out to eat. The experience was kind of rough as a kid who just wanted to drink fizzy pops and milkshakes. But maybe not, I grew up in third world countries where poverty engulfed us like smoke in a burning building.
After 20 years of being frugal and eight years of saving over 50% of my after tax income after college, gosh darnit, I wanted a nice watch! I went to the local watch dealer and spent the next two hours looking at the literally hundreds of options available: Rolex, Omega, Briguet, Panerai, Vacheron, Audemars, Patek, you name it, my head was spinning.
I was about to buy a simple Omega Seamaster for about $2,000 when the saleswoman encouraged me otherwise. She said, “Sam, that’s a nice watch, but anybody with $2,000 can buy one of those. You want to buy a watch that’s rare where even if you had the money, you couldn’t get one without a long wait.”
Great. What she said totally made sense. I asked her what she got? She went to the safe and came back with a magnificent Rolex Milgauss with a white face and an orange thunderbolt for a second hand. “Not bad!”, I said. “How much?”
“$5,900, but only if you can buy it,” she replied.
Holy crap, $5,900 is a ridiculous sum of money, I thought to myself. I told her I had to think about it as I Googled “Rolex Milgauss” on my phone. Sure enough, I found posts that highlighted how rare (at the time) the Milgauss was, and anybody who could get their hands on one should, because they were selling for ~$8,500 in the after market, and over $12,000 if you got the green sapphire crystal with black background!
“I’ll take it!” I finally told her as I handed over my card.
My First Watch Sale
Although I felt completely foolish wearing a $6,400 watch after tax, I rationalized my purchase with my age, savings habit, and the fact that women wear more expensive engagement rings all the time around here in San Francisco! Justifying our purchases is an American tradition. How else do we plan to keep consumerism and the bull market alive?
Of course I told a watch enthusiast colleague about my purchase and he was pumped for me. He rocked a Hublot Big Banger himself. He ended up telling another colleague in Asia of my purchase who e-mailed me saying he’d be by San Fran later in the month and he’d love to buy the watch from me!
What? Already? I told him I’d think about it. When he finally came over, he offered me a check for $8,300. I called Ann, my jeweler to ask whether she had another Milgauss in store, and she said no. The waiting list for one had grown to 10 people, but she’d reserve one for me no problem.
I ended up selling my colleague the watch for a $1,900 profit after just three weeks of ownership. Three weeks after that Ann gave me a ring to say she got another Milgauss for me, and it was then that a watch dealer was born!
My Watch Sales Since
Besides a nice suit, tie, cuff links, shoes, and leather bag, there’s not much in terms of accessories a man can get. To some men, a watch is that engagement ring equivalent. Totally gratuitous, but at least a watch tells time! I was never one to care since I found watches to be uncomfortable on my wrist. But, once you start making a little bit of money, you start caring much more!
Here are some of the watches that I’ve owned and traded out of within a 3 week period due to the high demand in the market.
- Panerai Black Seal Ceramic – Purchased for $6,200, sold for $8,900.
- Two Rolex Stainless Steel Daytonas – Purchased for $9,600, sold for $11,600 and $12,200
- Rolex Milgauss Black Face – Purchased for $5,900, sold for $8,200
- Rolex Milgauss GV Green Crystal – Purchased for $6,200, sold for $9,900.
- IWC Big Pilot – Purchased for $7,300, sold for $8,700.
- Patek Philippe 5396 White Gold Annual Calendar – Purchased for $32,000 during the 2008 crisis, sold for $39,000 in 2010.
At the time of purchase, every single one of these watches could not be found by the general public. You needed a connection to help procure such a time piece, hence the after market sale price.
One of my favorite watches now is the Patek Philippe 5726A Nautilus Stainless Steel that costs around $42,000 retail, but I can get one for $36,500. The problem is, it’s not THAT rare given the price is so high and I might be super tempted to just take it out of the package and wear it!
Tips To Becoming a Watch Trader
1.) Build capital. Once you have money, it’s easier to make more money. This is true for just about every asset class there is! It’s not necessarily the more expensive watches that return the biggest dollars. What’s more relevant is the perceived rarity of the watch. There are tens of thousands of Rolex Stainless Steel Daytonas for example, but because of clever marketing by Rolex and the cooperation of watch stores, they create demand by artificially holding back supply. It’s kind of like the diamond industry.
2.) Build connections. Now that you have capital, you now need to build connections with a jeweler. The strategy I had when I first started was to approach the hungriest and newest jeweler in the store. I told Ann to call me as soon as she could get a hold of a Rolex Milgauss White. I told her I’d promise to buy from her, and that’s exactly what I did once she rang. I demonstrated myself as a reliable buyer, which she loved since she has a tremendous amount of flakers. Once you’ve built rapport with the jeweler, it becomes a beautiful relationship.
3.) Focus your buying with one person. For the large majority of timepieces, you had to have at least $50,000 in past purchases with the store before even getting on the waiting list. But, you don’t want to spend $50,000 on stuff anybody can buy. Hence, you go back to step one and build rapport with the hungriest dealer at the store. After you prove your reliability, you’ll be offered more and more timepieces until you’re deemed reliable to jump to the top of the list. You’ll be surprised how quick you can get to $50,000 in purchases when you’re buying and selling $6,000-$8,000 watches!
4.) Save on taxes. To save on state taxes, I had all time pieces shipped to my vacation home in another state where the jeweler does not have a presence. This is why it’s best to target a boutique jeweler, and not a behemoth like Tourneau, who is everywhere. Having the store ship my watches to my second home is totally legit since I go at least four times a year. A 10% savings on $6,000 is a significant amount of money.
5.) Make sure you don’t go overboard. Based on my capital and risk tolerance, I focused on watches priced between $5,000-$10,000. Such timepieces were almost always stainless steal. They are in the sweet spot for demand because not many people can afford more than $10,000 for a watch. There was one time where I overestimated the demand for a particular watch because the company began to produce more. As a result, prices dropped and I had to go back to my dealer and ask for store credit because I couldn’t make a profit. Luckily, I had my friend use my credit and buy a watch through my dealer while I used the rest to buy some gifts for someone. Things turned out well. Just don’t become a regular returning of merchandise because you’ll then get downgraded on the list!
Where To Sell Watches
* Craigslist. Although there are a lot of scammers on Craigslist, you can basically do enough due diligence to tell whether they are legit or not. There are a lot of watch buyers who proceed to then resell in their countries of origin. There are other individual watch buyers who don’t have the connections or buying history to procure your time pieces. Craigslist is a huge marketplace that has something for everyone.
* eBay. I have never sold a watch on eBay because Craigslist and my network of friends were enough to fulfill the demand. However, I constantly checked on eBay to make sure my pricing was competitive. I’m sure you can sell just as easily on eBay, however, I like to meet my buyers and get the watch verified.
* Friend’s of friends. If you don’t have an immediate network of friends who can afford whatever price you are buying, I’m sure if you ask around enough, you’ll find someone who knows somebody. We’re all connected in some way. A lot of my buyers are guys in their 30’s who might also be going through a mid-life crisis. Many more are engaged and want something nice too.
A Patek Phillippe Is Cheaper Than a Seiko
A $42,000 Patek Philippe is cheaper than a $500 Seiko. While a Seiko depreciates in value, a Patek Philippe almost always increases in value.
It’s like buying a F12 Berlinetta Ferrari for $350,000 vs. a $43,000 Ford Explorer. If you get your hands on the F12 early enough, you can probably drive it for six months and still make tens of thousands of dollars in profit. If you are the first to buy a Ford Explorer, you are guaranteed to lose money if you try to sell it!
If you want to make money with watches, build your capital and your buying reputation. It may sound ridiculous to spend $42,000 on a watch, but not so when you can sell it for $60,000 several years later. It’s actually more crazy not to take advantage of your connections and capital when basic material prices have been skyrocketing for years, and will likely continue to rise in our entire lifetimes. Good luck!
Regards,
– Sam
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Sam is the founder of Financial Samurai, a personal finance site that believes in reaching financial independence sooner rather than later. If you’re interested in building multiple income streams through real estate, the stock market, and alternative investments such as P2P lending and structured notes, hop on over! Most recently, Sam authored a book entitled, “How To Engineer Your Layoff: Make A Small Fortune By Saying Goodbye” where he shows readers how to profitably quit their jobs by negotiating a severance package.
**Have a side hustle of your own you’d like to share? Let us know.***
(Top photo by alexkerhead)
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Who would have known. Way to go Sam on being a watch dealer. You’ve done quite well.
I learn something new about Sam every day. It is crazy the amount of stuff Sam is involved in but it doesn’t surprise me.
In regards to the sales tax, you still owe use tax is you bring it back to your home state technically so while it isn’t illegal to ship it out of state you probably do owe a use tax which is normally based on the honor system…
Do the dealers have to sell the watches at a certain retail price? That is the only reason why I see that they would sell them so cheap if the market price is higher than what they are selling for.
Yes AD’s have to sell the watches @ MSRP some times the value could be double MSRP on the right watch.
Wow – I think this was one of the most interesting side hustle series articles to date. I had no idea this existed.
Ha! The rolex forums are one of the areas that Mr. PoP surfs over to on a regular basis. A rolex for himself is on the list of “wants” – but below the tube amp that’s coming soon.
I wonder if he’s seen you on those forums… =)
Really neat side hustle, getting to use something amazing and selling for a profit. It wouldn’t work for me as I don’t take very good care of things, and have a track record of losing them…My BF does something similar with his coin collection, except he resells only smaller pieces, trying to get his costs down to zero and still keep major pieces.
@CallMe – Thx. Want to buy a watch? :)
@Lance – You sure about the tax thing? Are you saying my watch is never allowed to leave the state where I have my vacation property? I’ve never head of such thing, but perhaps where you are Big brother is always watching! Retailer cannot sell below or above their manufacturer suggested price, otherwise, all hell would break loose, and brand could be hurt.
@SMB – Good to hear!
@Mrs Pop – Yep, I see Mr. PoP asking all the time on that forum. Just get him a watch that matches the price of your engagement ring, and call it square! Remember though, don’t get a watch you see in the display shelf. Ask for the good stuff.
@Pauline – It always is fun to have some utility out of the item isn’t it? If you’re too afraid to scratch though, definitely keep the watch in the wrap it came in.
That is pretty cool about the MSRP thing and as far as use tax it is rarely paid by anyone other than companies.
Thanks for this post, I wrote one also on my site about watches and values. Sam if you buy these for resale purposes, then which watches do you get to enjoy? I like the fact that you can make a profit from them, but I would like to wear them as well. It would look kind of weird to wear a time piece with the wrap still on it.
Very cool read. I concur on checking tax rates though. As per online purchases, most sellers do not charge tax, although the Fed/state expects you to declare every year.
That’s why they ask now ‘Have you made any out-of-state purchases online where you were not charged tax”
I had no idea that someone could build a small business in trading watches, I guess I never thought of it.I was sorta awed as I read the article and really awed when I saw the Patek Phillipe blurb.
Most interesting.!
Thanks
This is cool, as I had no idea guys still wanted watches or ones that expensive for that matter. Most of the guys I see with a watch are ones they have had for a while. I guess it is more of a status symbol now that even fewer people have and want them? Or am I just looking at it from a different point of view? I only know of a few people that actually own and wear a watch any more, because most would rather have that iPhone 5 instead. I guess if you can afford an iPhone 5 like it is a coffee at Starbucks, a watch would be a nice way to show off your money. Btw: my engagement ring was more than my wedding, but still nothing like the watches you sell. I guess I just don’t understand the show off your wealth mentality.
Money side hustle! Great point on the Ferrari vs. Ford analogy. Those fast cars sell for huge premiums, simply due to demand outstripping supply. Now I just gotta figure out how to get more capital!
@RichUncle – I’ve kept a couple watches that I really enjoy. One is a GMT for international travel, with a black leather strap to match a dark suit or a sportier getup, while another is a stainless steel all around. If you want to sell a watch for max profit, do not wear it or remove the casings!
@Financial Black Sheep – Yeah, we’ve got different points of view. For example, I use my smartphone for functionality, and don’t think it’s a status symbol at all. After tax, it’s only $250 bucks! It’s not so much about showing off your wealth. It’s about making money. At least a watch tells time vs. an engagement ring!
@Jeremiah – Right on man. Buy high, sell higher. Focus on quality and rare goods to sell at a profit, not something that everyone can buy.
@Jay – Different strokes for different folks. What excites engineers nowadays?
Fascinating. I might have to give up trading exotic cars and do this. LOL
@Sam – I agree completely, these days I’m working on some trading algo’s dealing with dividends and options. Also some asset allocation automation, a little hedge fund mized with a little day trading optimized for mid-net worth investors.
Glad you all found this as interesting as I did! As soon as Sam brought it up to me I was sold :) So thanks again bud! And for responding to everyone’s comments/questions too – really appreciate it.
To hustlin’!
No wonder you can retire, with that kind of resourcefulness :)
Cool post, and it goes to show that there is money to be made – especially from those with deeper pockets.
You would think with the internet the market wouldn’t exist. For example if your jeweler put on his or her website that they had that fist piece people would run to buy it?
Great article, Sam.
I think I need to start smaller buying and selling before making that super big purchase..
-Mike
That’s what I like to do too before jumping in all the way… you can probably start by hitting up yard sales and thrift stores/etc to try and pick some winners and go from there. I actually have 3 watches myself that I picked up from a flea market and have noooooo idea how much they’re worth, haha… prob best to make them WORK first though, eh?
This was crazy good. I never thought about flipping watches, but I guess there’s tons of opportunity when you keep your eyes open.
I would’ve thought that eBay would’ve been the most reliable platform to sell, due to the “wild wild west-ness” of craigslist.
Good stuff. I love to read about different hustles folks have.
This is amazing. I have not worn a watch in more than a decade, but my son’s do. And they don’t mind spending ALOT of money on themselves. Much better to spend it like this then on meth, eh? I have forwarded this article to them.
hahhaha YES. most definitely better ;)
I’ve been sitting on some savings drawing 0% and have been shopping for a luxury watch instead of PM’s. Finding and buying a quality Rolex for my wife was a eye opening experience. Rolex seems to be a commodity in it’s own class. Luxury watches in general do seem to find a floor of value in normal times. For the patient a diversified it could be an option.There are absolutely no VC’s, PP’S, or AP’s in my area. Quality Rolex examples are hard to find with Pawn Shops being the only option for most. I visit my MIL out of state a lot and have and pass thru a major city along the way. I plan to see a few watch dealers next trip and maybe have shipped back home a Holy Trinity watch for enjoyment/resale. I echo the points made in the article. Make sure you understand what you own. Know the movement. Be able to identify fakes. Know the online price (including ebay auctions). Offer something not readily obtainable if you live in BFE. Buy mint quality pieces with no issues from reputable dealers. Buy something you might like owning for a few years. I have met with a few local CL watch dealers and they offer junk and problem Rolex Datejust’s that I can buy anywhere. The Pawn Shops have redialed aftermarket crap bezels for their Rolex and a few Tags. The last CL dealer showed up in shorts and tee shirts and bragged about being friends with the low ball gold buyer. He had never heard of Vacheron. After our meet he texted me continuously over two hours and got upset because of my slow response ( I was Xmas shopping and driving home). Then criticized the gold and diamond ring I was thinking of trading as part of the purchase. If you plan to buy/sell a luxury watch one should dress the part. Set yourself apart from the crowd. Reputation is a two way street and means everything.
Sam,
I was reading this article thinking, “I love this idea!” As I scroll down to the bottom I see why.
I am a huge fan of your blog and read every article.
Keep up the great work!
Caonex
Great article! How can we get in contact with you? I’m looking for a watch.
Hi Sam, could you let me know why a a dealer/jeweler would sell you a watch (for e.g. the Milgauss) for so much cheaper? Are their margins that high? I’m interested in trading watches and I”m trying to find out where i can source watches from besides buying from individual owners.
Hi Jag,
The margins are huge for luxury watches. I would estimate at least 50%, if not closer to 80%. How do they do this? By building a brand.
Hence, you can’t just buy any watch, you need to do research and buy the watch that is also most in high demand.
Build a relationship, do more business, build your own brand and things get easier over time.
Sam
The stainless steel nautilus wasn’t that popular in 2012, but today it is selling for $95,000 in the grey market and is impossible to get at an AD.
Wow – that’s appreciated!