THE most important question -- When to sell?

[azalon]

Well, I had a few paragraphs and then realized something . . . My own thread title is WHEN to sell, not what happens when you sell. I had scenarios and Ebay fee calculations and numbers etc. But I realized I just need to keep this simple and directly to the question. When is the best time to sell your Lego sets? And why? First off, they would obviously have to be retired so that the value has risen. Secondly, it matters how much you paid per set. A larger discount from the MSRP will always be better in the long run, although I'd rather pay full price for a set like Diagon Alley than wait for a discount and miss out. If that set rises to $350, I really don't care if I got it for $150 or $135. Say your margin is 20%. So when the set you paid $100 for rises to $120 you will sell. Nope, that doesn't work because the fees eat up your 20%. So a $100 set(the price you paid) would have to sell for $136 in order for you to profit by $20. That's without the cost of intangibles: packing material, shipping box if you need one, printing paper and ink, gas to drive to the post office, and so on. I'm also not including Ebay discounts such as Power Seller discounts. Would you sell? Let's say that is your margin. 20% after all fees. That means that when a set rises in value by 36%, you sell it on ebay and you net a 20% profit. Is that enough? Do you hold out for more? Should you? One one hand, here's what could happen if you rolled your inventory over once per year. If you started with $10,000 and bought Lego sets, waited for them to retire and reach that 36% increase, you would obviously wind up with $12K. Sounds great. You have an extra 2k to reinvest! Errr, what about taxes? And it would be nearly impossible for every set you have to retire AND rise by 36% each and every year. So this would have to be a long term situation where you invest per month or per year and roll your inventory--or ladder your inventory--on a 2-4 year basis(a whole other story!). But if you did reach a point where you could sell 10K per year and make your 20%, after doing that for 5 consecutive years that 10K would reach almost 25K--without taxes, which you gotta pay! Same question though, with all that in mind . . . would you sell for a 20% return? Going for a 30% return? Good for you! But that means the set would have to rise in value by 47% over its original MSRP. But the 5 year ladder is now over 37K. That's a lot of money to reinvest. And yes, let's just say you DO have the room for all those sets. You wouldn't have to use any new money too. But how common is it for a Lego set to rise in value by 47% and how long does it take? Looking at my personal Brickfolio, my Indiana Jones and Kingdoms have passed that--yours could be different based on sale prices, not sets purchased at MSRP. And right now, I'm pretty happy that the Indiana Jones sets that I still have (sold a few over last 12-18 months) at all over 100% increases from my purchase cost. The problem is being able to have a complete sell through of your entire inventory, every year, with a 20-30% return. So with the ladder principle or leapfrogging, it would be likelier to wind up either investing on a monthly basis or a lump sum initial investment. If diversified, you would be selling some sets next year, but not all. So over the course of a few years you would have sets that are 2-3 years old and ready to be sold. For an explanation of laddering or leapfrogging, think of it this way: you invest $2000 each year from 2012 through 2017. When sets hit your magical number, you sell them and reinvest. Some sets will hit your goal quicker than others. Some years it might actually be difficult to find quality sets to buy. Obviously, the main goal is to wind up with more than you started with. The sets you bought in 2012 would be planned on reselling in 2015. Sets bought in 2013 resold in 2016 and so on. After a certain point, you shouldn't have to put any new money into your inventory. So what is the best route to take? Do you aim for a lower margin of 8-10%, but try for high volume of sales, I could see that adding up rather quickly. But taxes would eat into it. And if you're selling retired sets, it could be a long time waiting for the rest of your inventory to retire. Do you have a certain percentage such as 25% for everything? I can see that working since it could be easier for a set to go from MSRP to 125% than for a set to go from 125% to 150% of original MSRP. Throw in a discounted or sale purchase price and that margin is much easier to reach. Also, it's much easier to compete on Ebay since not everyone purchased at the same cost. Some miss out on sales that you capitalized on. Buy a set at 25% off and that set doesn't need to increase much for you to hit your target. Do you just wait until your $100 set hits $150 or $200 on Ebay, then you sell and not bother worrying about what percent your profit it--you just know you did well? To me, and others I would think, it's the million dollar question . . . When is the best time to sell your Lego sets? And for those who say they don't sell, or will never sell . . . just play along and give your opinion if you were planning to sell. I'm not asking for anyone's business plan, but just to hear thoughts about a subject I've wondered about since I kept my first Lego set sealed. Although I still have my Cafe Corners . . . and my Green Grocers . . . and my last few Millennium Falcons . . . Sometimes you just don't mind hanging on to some sets for as long as possible :)

[slobey]

This is a hard one to answer as everyone has thier own stratagies. It can even come down to the set itself- ie. do you flip it not long after EOL and make a quick buck or hang onto it in the hope it will steeply appreciate in value over the next 5 years (eg Cafe Corner). I guess it all depends on the individual. Some can afford to and have to room to sit on a lot of sets for a long time while some have to turn thier inventory over to make it viable. I fall into the later catagory. I live in Australia where LEGO prices are a lot higher than the USA or Europe. This can be a real pain but also has an advantage: I can buy sets from overseas and sell them locally at less than RRP and still turn profits in some cases of up to 25% which I then in turn buy "investment sets" to stash away in the hope they will turn a tidy profit later on. I'm also a LEGO builder and was using the "buy overseas and sell locally" method to substitute my hobby but when I realised how much some sets are going up after EOL I've started buying multiples and puting one away for later. I only ever buy sets i like or would be useful in my MOCs so if a box ever arrives destroyed or my kids discover my stash and start openning them I'll still get enjoyment out of them.

[Ed Mack]

Some quality posts. There is no correct answer in my opinion, only variations of the right one as long as a profit is made. There are answers that might be more profitable than others, but as with any investing, it basically comes down to an individual and their tolerance for risk and what a good return is. If I was looking to maximize profits, then the Brickpicker site is an invaluable tool. Waiting for that first sign of a plateau could be the time to sell. Maybe you want to see a new set double in value from your original investment(I don't say MSRP because nobody should pay MSRP for a new LEGO set). Some people say they want to see prices triple. Looking for a increase of 10-20%, then flipping it, is very conservative in my opinion, especially considering commissions and taxes, but it might work for some. Storage is the main factor in holding onto LEGO sets . Speaking for myself and over 3000 LEGO sets, it is a rather daunting task to store these sets. I have a 1/3 of my basement filled, boxes in my garage, cars, my office at work and a huge storage room at work. I am running out of space. I have over 50 LEGO store displays in addition to the regular sets. There will be a point where I have to start reselling some sets to make room for new ones. This is a situation every LEGO investor has to deal with and is different to each investor/collector.

[schmidtywerben]

I'm glad I read these posts. Personally, I'm very new to LEGO investing, being only 20 years old and everything, so I haven't come across the opportunity to sell yet. I don't see any reason to be worried about selling too soon either so I've got a while, but I really like to read up on the strategies on how to go about doing it. Storage does seem to be the biggest problem though. I really don't have that many sets, but I'm already running out of room. Of course that'll be the last thing to stop me, I'll just find somewhere else to put them, the living room, bathroom, etc... (kidding). Regardless, it's nice to think ahead, whether it be a year or 5. Personally, I think I'd be one to hold on most of the sets as long as I can. To me, a 10-20% turn over doesn't seem worth it to me, even when the set was on sale. And of course, I do agree with you Ed, no one should pay MSRP for any set, as I always buy my sets off the clearance shelves, with coupons, or if they're on sale. Anyways, that's just my my 2 cents as a rookie!

[Upnya]

Great thread! I had many of the same questions floating around in my mind! :)

[cvail8]

I think that using all of the approaches is the best approach! My number one rule is the cheaper you buy em, the less you have to make on them! With some sets, I am happy to pick them up on the cheap and move them rather quickly. Like with the pricing error on the 4204 Mine where Walmart had it for $40... I held on to those for the Christmas season and moved them for $140. With that, I knew if I just waited a couple of months I would easily double my money or better. On others, like the PotC and Harry Potter themes, I have kept my eye on rising prices and unloaded a few here and there. I'm not sure whether the interest in these will stay high once there aren't movies to support them, so I am hedging my bets. With the Star Wars sets (especially with the Disney takeover), I am holding out for a while. And if the Disney-buying-Hasbro rumor comes true, I will rent a shed and fill it full of Star Wars sets. If the Star Wars license ever goes over to the dark side of Kre-o, I shudder to think how hard it will be to find SW sets...

[Ed Mack]

I think that using all of the approaches is the best approach! My number one rule is the cheaper you buy em, the less you have to make on them!

With some sets, I am happy to pick them up on the cheap and move them rather quickly. Like with the pricing error on the 4204 Mine where Walmart had it for $40... I held on to those for the Christmas season and moved them for $140. With that, I knew if I just waited a couple of months I would easily double my money or better.

On others, like the PotC and Harry Potter themes, I have kept my eye on rising prices and unloaded a few here and there. I'm not sure whether the interest in these will stay high once there aren't movies to support them, so I am hedging my bets.

With the Star Wars sets (especially with the Disney takeover), I am holding out for a while. And if the Disney-buying-Hasbro rumor comes true, I will rent a shed and fill it full of Star Wars sets. If the Star Wars license ever goes over to the dark side of Kre-o, I shudder to think how hard it will be to find SW sets...

Excellent points. Wait for the deals. Every LEGO set will go on sale at some time or another. It pays to be vigilant. The new STAR WARS movies will be huge for the theme and older sets. Mickey Mouse is good for SW LEGO set values.