With more people taking out loans to finance their purchases of vehicles, cars, and furniture, some borrowers may default on their loans.
In such cases, the lienholder must hire a repo firm to repossess their item. A repo business allows you to take control of your finances and career.
If you are determined, resourceful, and determined, you can make this a financially rewarding career. Your income will be linked to the number of successful repossessions that you make.
Towards the end of this article, you’ll find answers to some of the most frequently asked questions on how to start a successful repo business…
After the borrower falls behind on a loan, repossession businesses locate and retrieve assets and items for lienholders.
These businesses are contracted with lien holders and are responsible for repossessing the items that will be sold at auction. Lien holders can recover at most some of their investment. Some repo businesses receive a fixed fee per repossession. These fees will vary depending on how valuable the item is. These items can be hard to locate, especially if the borrower moved or has left the area. Therefore, a repo company may have to conduct additional research.
Many repo businesses specialize in a particular type of work. There is a lot of demand for repo agencies that can retrieve furniture, vehicles, boats, and motorcycles.
According to IBIS World data, repossession services saw a 4.2% increase in growth between 2015-2020. The improving economy resulted in a higher industry profit and a greater demand. This growth is expected to continue through 2025, despite continued improvements in the economy. With continued economic progress, consumers will likely continue to buy and finance more. Creditors may offer higher-risk loans. This can lead to loan delinquencies rising, which could result in the need for repossession.
In 2020, the market for repossession was worth $1Billion. 15,577 employees are employed by 9,268 businesses.
Many trends continue to influence the repossession industry. Partners in Asset Recovery’s Repo Report indicates that the customer base who are financing purchases is changing. The United States currently has 15.5 million workers who have other employment options. A growing number of workers are also part of the gig economy which creates financial uncertainty.
Business owners must be aware of the risks involved in repossessions. They are more complex and come with additional risk factors. Repo agents must not break the peace during repossessions. This is a significant problem in the repossession sector. Current scenarios include:
It is best for repo agents not to interact with customers because of the increased attention on breaching the peace.
The number of days that repossession companies can store their vehicles for free has increased in recent contracts with repossession agencies. Vehicles are currently kept on the lot for up to four days. This increases storage costs for companies or creates additional space that is needed for vehicle storage. Extra storage delays the vehicle’s transportation from home to auction. The vehicle’s value also declines, which means that auction sales are lower.
Repo companies typically market to leasing companies and creditors. A repo business might specialize in a particular type of repossession, such as automobile or boat repossession. The target market for a repo business will depend on its specialization
While a business degree does not necessarily require you to be a businessperson, you must have the right skills and experience for your business to succeed.
Knowledge of state repossession rules. The rules of repossession vary between states. Business owners need to be aware of these rules to avoid potential violations or give the lessee an advantage in court.
Knowledge of the type of product to be repossessed. If a business is responsible for repossessing boats, a repossession agent will need to have experience driving and working around boats.
Attention to detail. Attention to detail can make identifying the correct items to repossess and remove them without causing any damage.
Confident nature. This industry requires confidence, so repossession agents must be confident and self-assured.
Conflict resolution skills. These interactions can get heated. Strong conflict resolution skills are essential for business owners to avoid these conflicts and resolve them quickly and safely.
Clear head under pressure. Repo work may lead to high-pressure situations so workers must think clearly under pressure.
Management experience. A business owner with previous experience will be better equipped for these challenges when expanding a repo company.
It can be costly to start a repo business, especially starting a multi-truck enterprise. You should expect to spend at least $80,000 on a new truck. That will bring startup costs up to $90,000. You can start small by purchasing one truck or work with freelancers who have their own tow trucks.
Typical startup expenses for a repossession business:
Next, you need to create a business strategy. A business plan will be required by banks. Numerous studies also suggest that having business planning can increase your chances of starting a successful company.
The legal structure of a business to be legally operated is called a business entity. There are four main business entities that you can choose from: a sole proprietorship, partnership, or corporation, as well as a Limited Liability Company (LLC). Each entity type has its pros and cons. These include liability exposure, costs, and administrative requirements.
It can be hard finding the perfect name for your business. Names must not only be appealing to your customers but also have to be easy to remember.
Many repo businesses will require a secure garage and parking lot. It is a great way to reduce travel time and save money. Renting costs can vary depending on the property’s size and location.
A repossession license is required in some states to operate a repo business. There are several types of permits, licenses, and registrations needed to open a repo business. These include a commercial driver’s license (CDL), Employer ID Number, Occupancy Permit, and a Commercial Driver’s License (CDL). Note that there are repossession laws that you would need to keep in mind.
It’s one thing to come up with a business idea and manage it. But getting funding to start a business repo is quite another. It can be challenging to get funding to start a repo business due to the cost of the vehicles. The borrowers applying for a loan must have good credit and the ability to invest 15-25% towards the total startup costs.
Tracking income and expenses is more manageable by having separate accounts for your business and personal finances.
Marketing can help a repo firm build its client base and help it grow later. Marketing is essential for any business. A brochure, website, and business cards are crucial marketing steps. The repo industry is a great place to start a business. But, it’s important to contact potential clients directly. Business owners should be prepared to pick up a phone and make those calls. The marketing costs will depend on what they do and how much work they have done.
To have full coverage for a repo business, you will need multiple insurance policies. As insurance can be expensive, it is essential to obtain quotes before you begin.
The cost of these policies will depend on many factors. Ask for quotes from multiple insurance providers to get an accurate estimate of your budget. Compare the quotes and consider premium costs as well factors like coverage limits, exclusions, deductibles.
Although a business owner or manager can do all or part of the initial repossession jobs, hiring staff will become more difficult as the company grows. PayScale reports that repossession agents are paid an hourly rate of $13.71 on average, but it can vary between $10.66 and $18.36.
The business budget should include all expenses related to hiring employees. All standard costs like worker’s comp insurance, contributions to health insurance, and paid time off may need to be included in the budget.
For your long-term success, an accounting system is essential.
It is not only essential to keep the business in good standing with the tax authorities, but it also allows you to monitor and track trends and cash flows and maximize your profits.
The profit margins of a repo company will vary depending on their specialization, the number of clients, and the number of successful repossessions.
Shmoop estimates that the average price for the repo is $150 to $400 per car. The average income for a business that repossesses between four to five cars per week is between $4,000 and $6500 per month. That’s $50,000 to $80,000 before expenses.
A business owner may keep costs down and still earn a good income by buying a used tow truck. It is possible to reduce costs by working with freelance drivers who have their own tow trucks. This will allow the business to make more money from the extra work.
Research your competitors to see if they specialize in the type of repossessions you are looking for before starting a repo company. It will be easier for you to establish a client base if your business is not competing with existing clients.
Also, it is essential to have firsthand experience in the repo industry. You can gain valuable insight and experience by working for reputable repo businesses for several years. This will make you more prepared to set up your business and allows you to gauge whether this is something you’d like to pursue.
Our review team has come across a program in the real estate industry that is next level!
Although it’s not real estate in the traditional sense, it’s all digital.
With this digital real estate program, you can have the ability to completely walk away from manual labor!
Sound too good to be true?
Of course it does!
But it isn’t…in fact, business owners wish they had this skill!
All you have to do is build and rank a website and forward the jobs off to a business owner in town, you could even email it to them!
This works for literally any service based business, tree service, plumbing, towing, etc.
Simple, after you forward the jobs off to a business owner and he makes some money off of them, you simply ask to make the deal beneficial for each other.
A fair price to charge per lead, depending on the industry is 10-20%…let’s just use the tree service industry for example and go by worst case scenario.
Let’s say you build and rank the site and only 20 jobs a month come in. The average tree service job is anywhere from $500-$2000!
That means at bare minimum you have an asset worth $1000 a month!
See why they call it digital real estate now?
That’s a rent payment.
The great thing is how easy it is to scale. You don’t have to answer the phone…all you have to do is get the phone to ring.
Unlike the passive income ideas I mentioned earlier…
This one actually allows you to collect that without working in a brick and mortar business all day.
Truly passive income!
The training program takes making money online to a whole other level. The owner of the program walks you through how to build and rank a site hand in hand, with the occasional voice over when he is sharing his screen.
You will learn the importance of keywords, website name, how to send call notifications via email, backlinking, etc.
Once the training program is completed you will also have access to a Facebook group where you can ask questions and be in a community with others on the same journey as you.
Digital real estate allows you to have passive income with most of your day being spent OUT of the brick and mortar landscape.
Now, I know you probably have tons of questions… So, check this out to learn more.