Talk me out of this car cashflowing strategy

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Talk me out of this car cashflowing strategy

Cameron Philgreen
Member since 2019 · 15 posts · 6 votes

Disclaimer, this post is about a CAR, not real estate.

Talk me out of this:  Used 2018 Tesla model 3.  Was bought new at $61,000, 8000 miles, selling for only $47,000 (30% off).

What if: $10,000 down. $37,000 loan at 1.99% APR (special EV loan). Payments will be $590/mo, which means I could rent it on Turo SIX DAYS PER MONTH and be cashflowing already. Any rented days after that is positive cashflow.

On top of that, we get a fun, economical car that drives itself on the highway.

Talk me out of this, why would I NOT go through with this deal?

Or if you think it's fool-proof, tell me why!

Trying to do this deal this weekend, so respond quickly!

Love y'all.

3Reply
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Alexander FelicePro Member
Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes
7y

how much effort and money are you going to sink into learning this non-scalable hobby? Even if it makes a little money it's a single point of failure operation with high downside risk and low upside potential. It's a short term venture at best, and the most likely outcome is you bought a fancy new-ish car and have a bunch of consumer debt costing you money rather than making you any. 

the car won't appreciate

you won't get any tax benefits 

It becomes less lucrative as other EV vehicles come into service 

It adds a bunch of additional liabilities on your DTI which many hinder you if you decide you want to buy an actual investment.

Sounds like someone just wants to buy a Tesla and justify the terrible financial decision. If you want to buy the car just do it, if you want it to make financial sense you're going to have to be at least drunk, and if you think it'll be a good investment you might need a lobotomy. 

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  • Jason D.
    Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes
    7y

    @Cameron Philgreen definitely not fool proof, but dont see many holes it this idea.

    A couple questions....

    1) do they really rent for $100/day?

    2) what additional insurance must/should you carry

    3) factor in wear and tear

    4) is there a better ROI car for this than a tesla?

    5) is there an age limit for you to be able to rent it out?

    2Reply
  • Shannon Vinson
    New to Real Estate · Fort Myers FL · Member since 2019 · 31 posts · 15 votes
    7y

    @Cameron Philgreen look into the insurance claim issues people have had with Turo. That might change your mind.

    3Reply
  • Cameron Philgreen
    OP
    Member since 2019 · 15 posts · 6 votes
    7y

    @Sam Teifke good question, it would be the same as any other wreck.

    0Reply
  • Cameron Philgreen
    OP
    Member since 2019 · 15 posts · 6 votes
    7y

    @jason 

    @Jason D. thanks for the reply!   Amazing questions.

    1) yes $147 per day in Dallas.  I'm in Waco, so probably closer to $90 to $100, but we have a lot of visitors (2nd most in the nation right now), so I'm sure I could swing $600 / mo in rentals and break even.

    2) Nothing extra required, but I would opt into Turo's $1M liability policy.  "The policy protects you against lawsuits for injuries and property damage that occur during a trip."

    3) For sure

    4) Not sure, but for me the fun/economy factor is the kicker here.  It's my dream car, so nothing else would be as exciting.

    5) Same as other rental car companies.  You can rent at 21, but you're charged a fee until age 25.

    0Reply
  • Mario Am
    Specialist · Nashville, TN · Member since 2019 · 187 posts · 83 votes
    7y

    @Cameron Philgreen

    Try KBB.

    They estimate the cost you should pay on a car taking in consideration miles and etc.

    0Reply
  • Alexander FelicePro Member
    Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes
    7y

    how much effort and money are you going to sink into learning this non-scalable hobby? Even if it makes a little money it's a single point of failure operation with high downside risk and low upside potential. It's a short term venture at best, and the most likely outcome is you bought a fancy new-ish car and have a bunch of consumer debt costing you money rather than making you any. 

    the car won't appreciate

    you won't get any tax benefits 

    It becomes less lucrative as other EV vehicles come into service 

    It adds a bunch of additional liabilities on your DTI which many hinder you if you decide you want to buy an actual investment.

    Sounds like someone just wants to buy a Tesla and justify the terrible financial decision. If you want to buy the car just do it, if you want it to make financial sense you're going to have to be at least drunk, and if you think it'll be a good investment you might need a lobotomy. 

    [email protected]Podcast Guest on Show #301
    24Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    7y

    @Cameron Philgreen  Even if your payments were $600 a month and you could get $600/month in rentals, after you factor in maintenance, insurance, etc; is it worth it?  The car is guaranteed to depreciate which means over time it will be less desirable.

    2Reply
  • PJ Kolnik
    Chicago, IL · Member since 2017 · 81 posts · 87 votes
    7y

    @Cameron Philgreen

    I’ve thought about this too, and then I realized how quickly Turo changing its terms of use exposes you to risk.

    Since I started doing it with a 2015 Forester that I don’t drive very often, I’ve grossed about 200 / month... less than I thought but better than nothing.

    During that time, they’ve changed their terms of use twice! First to tell me the revenue that I would receive under the standard insurance plan would go from 75% to 70% and second to tell me I had to be exclusive with Turo if I was going to list on Turo.

    I think I can probably expect to make enough money that after taxes I will be able to cover parking, registration, and the gas that I buy during the year.

    600 / month is pretty optimistic given that you’ll get the most reservations on the weekend not during the week and you’ll have to plan your life around when you can use your car. If you live in a car based city, I can’t imagine what a pain those logistics would be.

    All in all I got a lockbox on the fence and people text me when they need the code and it’s not actually all that hard to get money from it. It just difficult to plan when I can use my own car and I’m glad I didn’t make a decision to do it contingent upon a minimum income I needed to get to have it make sense.

    7Reply
  • Tanner Marsey
    Rental Property Investor · San Diego, CA · Member since 2017 · 439 posts · 578 votes
    7y

    10k tied up in a depreciating asset so you can’t really start counting cash flow until that is recouped. (Plenty will argue this). Wear and tear on vehicle will eat into that cash flow. I imagine some sort of increase insurance?

    Not saying it’s not a bad idea but do the research.

    0Reply
  • Andres Bejarano
    Contractor · Laguna Hills, CA · Member since 2019 · 5 posts · 1 vote
    7y

    @Cameron Philgreen

    You need to rent it at least 6 days for loan, asuming insurance and holding cost is $200.00 adds another 2 days.

    To recover your investment of 10k you need to rent it at least another 9 days to get it back in the first year.

    A total of 17days a month(204 days a year), after that you'll get profit. A 56% of the year needs to be rented.

    I will check rental percentage on Turo.

    0Reply
  • Matt K.
    Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
    7y

    You'd either have to value your time at low to no cost when you factor in the administrative burden of running a business. If you outsource out (can be done cheap through automation) it could be a little better but I doubt that much for one car.

    if you're going to become a car rental you'll need a fleet vs just trying to do this part time to make some money.

    There are far cheaper cars you can get and rent out that would likely make much more sense.

    If you're flexible on car types you can get cheap leases that make certain cars extremely affordable and likely with little costs outside the lease. Check out leasehackr or charge ev (forget the exact site) for deals. None will be a telsa though...

    1Reply
  • Clifford Paul
    Rental Property Investor · Member since 2018 · 483 posts · 956 votes
    7y
    Originally posted by @Cameron Philgreen:

    Disclaimer, this post is about a CAR, not real estate.

    Talk me out of this:  Used 2018 Tesla model 3.  Was bought new at $61,000, 8000 miles, selling for only $47,000 (30% off).

    What if: $10,000 down. $37,000 loan at 1.99% APR (special EV loan). Payments will be $590/mo, which means I could rent it on Turo SIX DAYS PER MONTH and be cashflowing already. Any rented days after that is positive cashflow.

    On top of that, we get a fun, economical car that drives itself on the highway.

    Talk me out of this, why would I NOT go through with this deal?

    Or if you think it's fool-proof, tell me why!

    Trying to do this deal this weekend, so respond quickly!

    Love y'all.

     You should talk to @Turo Tales he's got like 10 cars on Turo in El Paso.

    If I lived in Waco I would buy a hot dog cart, get a permit and hang out on the corner of the silos and make $2500 a day.  Last year the silos brought 1.6 million visitors to Waco but since you live there you probably already know that. 

    Picture of my $25 breakfast at Magnolia Table from a couple weeks ago.  LOL 

    2Reply
  • Aaron Bihl
    Investor · San Antonio, TX · Member since 2017 · 344 posts · 268 votes
    7y

    It could work, or it could not work. I have 6 cars on Turo and still haven’t really been able to predict what cars work well and why. 

    My best car is a 2010 Honda Insight, it does better on a month to month basis than my 2016 Lexus IS200t f sport (which I really just wanted but justified by throwing it on Turo).  But somehow I have a 2009 Prius which I think is nicer and if doesn’t do as well as the Insight. 

    Also, you are looking at either a 65% or 70% split depending on the coverage you choose.  And you have to be okay with people driving your car and treating it like crap, Turo isn’t going to pay for the little stuff (scrapes to rims, dents/dings/scratches less than 3 inches, etc).  And people will drive your car like a rental and will inevitably smoke in it too. And if you are unlucky enough they may steal it for 10-14 days and you can’t do a anything for 10 days because it’s Texas law and turo won’t pay out on those days either. 

    Not trying to sway you either way just some real life experiences from a dude a few hours down the road in San Antonio. 

    4Reply
  • Jonathan W.
    Los Angeles, CA · Member since 2019 · 512 posts · 301 votes
    7y

    @Cameron Philgreen

    Few problems

    1. How old are you? Insurance rates vary, older people who do turo have a huge advantage cause their insurance is generally so low(this does not matter whether you use turo insurance or not, you still need your own)

    2. Do you know how long a Tesla takes to repair?

    One fender bender with a Tesla and your car should be in the shop for weeks. So many sensors to replace

    3. How will you manage your delivery cost? Most people will want to be picked up at the airport? Will you uber Home?

    You do have a good idea. It seems you maintenance costs are non existent so I don’t know if six days will really cover it but I don’t know anything about maintenance on a Tesla as it’s a very different car.

    4. The fact that you haven’t considered any other cost and think 6 days is all you need and not 7 means you might be missing something.

    I do have experience with turo and you can succeed in it. I had cars that did well and other cars that were a mistake. A Tesla seems to be a good pick from what I’ve seen

    Don’t forget to capitalize on the extras and good luck!

    1Reply
  • Jim Chuong
    Rental Property Investor · Toronto, Canada · Member since 2012 · 102 posts · 95 votes
    7y

    @Cameron Philgreen your idea reminded me of this:

    A couple paid for two Teslas by sharing them on the Airbnb for cars — here’s how they did it

    http://www.businessinsider.com/turo-rental-used-to-pay-for-tesla-2017-10

    0Reply
  • Sunday Nguyen
    Real Estate Investor · OAKLAND, CA · Member since 2017 · 24 posts · 30 votes
    7y

    @Cameron Philgreen

    I’d say go for it. I experience it first hand, with the exact idea like your and I bought a 2019 Tesla Model 3, rent it out on Turo ( Bay Area, Ca ) it’s have been working out good so far for the last 4 months. I’ll share with you my number and the pro’s & con

    Here’s my number:

    $61k purchase ( got some adjustment for paint color -$2500 off)

    1.99%

    Monthly service debt: $719 + $122 ( insurance) = $841

    Rented for the last 4 months ( had 3 weeks vacations, therefor it was not listed for rent during those weeks) $4790/ 4months = $1,197.50. Which mean I’m net profit at $356/month on average.

    The downside is occasionally renter would nick the rims, scratched the paint, return the vehicle dirty. Those are things that will happen and how you choose to handle it, would make you a better host on Turo than other.

    For instance, I charge $50 for car wash and cleaning if it return dirty, you can request directly from the guest and if they are refuse to pay, Turo would step up and always pay you. Wear and tear items, like scrape wheels, or paint chip, I’ve advise to pick the premium insurance ( they will cover 3inch or smaller) Turo offer, which in return you only get 65% of earning, but it’s worth it. Damage wheel ( my favorite), my cost to fix $75-$90, Turo reimburse $225 😉. Pet hairs ( happened once ) $75- my cost to get it clean up, Turo reimburse $250.

    Someone smoke in the car ( not my Tesla, I have 6 cars, rent out 3 on Turo) $500 reimburse and my cost to get it done is $150. There are ways that you can create extra margin in addition to daily rent.

    I’m have a busy schedule, I’m a full time investor working on 3 flips at the same time. When renter want to pick up at my house it’s free, if I deliver within 25 miles from my home I charge $120.

    Car rental isn’t for everyone, it take strong communication with guest and resilient when dealing with Turo staff to get your reimbursement. I do think that it worth it, I love my Model 3, it’s a super fun car to drive and when I don’t drive it I make it available on a Turo.

    The only downside that I see about buying the Tesla is that it will reflect on my credit report, that would raise the Debt to ratio when I tried to refinance one of my rental. That’s only if you use a loan to buy, but if you lease it, Tesla Finance don’t report it to the credit Bureaus( wish I knew about this when I bought it using a loan)

    Hope it help you with your the questions you had.

    Best,

    Sunday N.

    6Reply
  • Nicholas LaGatta
    Real Estate Broker · Atlanta, GA · Member since 2017 · 229 posts · 145 votes
    7y

    @Cameron Philgreen. Definitely don't do it. I had an investor buddy make a Turo business work with 20 cars, a centrally located parking lot, a full time employee, and lots of oversight. People abuse the hell out of rented high-performance vehicles and usually end up getting at least their money's worth.

    I bought a Camry myself and operated it on Turo for a year before I sold it. I ended up roughly breaking even on the car's price plus opex, which just means I managed an asset for a year and dealt with dozens of members of "the general public" with nothing to show for it.

    There's no such thing as a free lunch. I recommend you go big or go home. There's better money to be made in appreciating asset classes.

    0Reply
  • Mike ReynoldsPro Member
    construction · Nacogdoches, TX · Member since 2011 · 2k+ posts · 1k+ votes
    7y

    I have a cash flowing vehicle but not in the same way. My work pays me 400 a month for my truck. I find a good truck at a buy here pay here lot for less than 280 a month. I break even on money most times on an annual basis. I make the money on the sale when I sell it. I keep one as a spare also. 

    that being said I think you need to figure 9 rentals a month to break even and you can make money on the sale. More than that would be profit. You have tires and other expenses you have to factor in. 

    1Reply
  • John Roesler
    Rental Property Investor · Saint Paul, MN · Member since 2019 · 44 posts · 37 votes
    7y

    I've considered doing this myself. Biggest hang-up for me (besides the financial aspects mentioned) was the location question. Where do you park the car? Does the renter just have to get to it, or do drive it to them? Turo app suggests you get more renters if you get the car to them. In the end, it didn't make sense for me and where I live. But if you have the right prime location near the airport...maybe?

    0Reply
  • Dennis M.
    Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    7y

    i got a better business model

    82’ ford fairmont -600 bucks

    Rent it out -20 bucks a day

    If they trash it or wreck it doesn’t matter because it was a piece of crap to begin with

    5Reply
  • George W.
    Investor · NJ · Member since 2018 · 869 posts · 921 votes
    7y

    id plan on spending double on maintenance if i were to do that. People beat up and abuse rental cars. 

    Id also factor in that you're gonna need car detailing more often. 

    Depreciation is super high on autos. You're not saving 30%, you're buying a car that depreciated 30%. New cars always depreciate. Used cars do too over time. 

    Insurance is going to have to probably allow it. So it would probably go up. 

    At best you'd get a car that had the loan paid every month. Thus free car for yourself and maybe make some money to but long term the car is only gonna depreciate faster and rent less often because it'll be older at that point.  

    0Reply
  • Seth TeelPro Member
    Investor · San Antonio, TX · Member since 2012 · 596 posts · 587 votes
    7y

    @Cameron Philgreen

    You shouldn't do it because you can't afford it. Unlike real estate cars are a constantly depreciating asset liability. If your only goal is cash flow, why not just lease a car and rent it on Turo? I am sure there are rules against it, but do you get my point?

    You can't apply real estate principles to automobiles, no matter what the strategy.  While I am a fan of leverage with regards to real estate, leveraging cars just means you want something shiny you can't really afford.   

    Real estate builds wealth, automobiles depreciate.  I'd say take the $10K, use it as a down payment on a duplex, house hack, cash-flow monthly (while building equity), then sell the property in a couple years and buy the newer better Tesla model. 

    1Reply
  • Frank Geiger
    Rental Property Investor · NC · Member since 2018 · 776 posts · 776 votes
    7y

    Interesting mixed results. I'm sure there is a way to win and lose at the Turo game. Like airbnb, it's not passive. You either do the checks, maintenance, etc yourself or pay someone to do it. I heard the most lucrative cars are the normal everyday vehicles though. 

    0Reply
  • Aaron Bihl
    Investor · San Antonio, TX · Member since 2017 · 344 posts · 268 votes
    7y

    I think if your goal is to use Turo to cash flow I’d use the 10 grand to buy 2-3 cars that are older and reliable.  

    3 cars at 30-40 a day with no payment looks a little better than 1 that you are hoping rents for 100/day. Also, if you buy lower end cars it makes a lot more sense to list them with 85% split option and only get liability insurances.  

    If your goal is to buy a cool car that you want and normally couldn’t afford and want to use Turo to offset the costs, go for it.  Just realize it may not cash flow but you likely will have a nice car to drive for a lot less than usual. 

    2Reply
  • Carlos Gonzalez
    Investor · Phoenix, AZ · Member since 2015 · 346 posts · 170 votes
    7y

    @Cameron Philgreen

    Do it and let me know how it goes after one year. If your strategy is successful I’d want to know for a friend.

    0Reply
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