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!
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.
(Top photo by alexkerhead)
Jay loves talking about money, collecting coins, blasting hip-hop, and hanging out with his three beautiful boys. You can check out all of his online projects at jmoney.biz. Thanks for reading the blog!