Investing in Lego

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cbaker1974
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Investing in Lego

Post by cbaker1974 » Thu Aug 25, 2011 8:41 pm

Condor suggested I make a new topic on this subject...Lego investment is definately something that people are divided on, usually with pretty strong feelings on either side. This topic however isn't to judge whether it is right or wrong, but to give advice if this is something you would like to pursue. As with any investing, "past performance does not guarantee future results". However, the more you know about your subject, the better chance you are likely to succeed. This isn't even really aimed to be optimal, but it is the approach I take and is a lot of fun to me. With that, here are the criteria/tenants I use when selecting sets for investment. A lot of it is common sense to me and won't be earth shattering revelations but maybe it will be a good read.

1) Pick sets that have a "wow" factor
Items like the modulars and world monuments are no-brainers here...these sets are "wow" moments that make people say "I can't believe that is made of Lego". The Taj Mahal or Statue of Liberty are iconic and something everyone can relate to. Tower Bridge is easily the set here that is in this category.

2) The bigger, the better
Huge sets are expensive, which reduces the initial pool of buyers. These sets are also produced in way fewer numbers than smaller sets, so there is more scarcity to begin with. Someone who can't afford a set today, may be able to afford many times its price in 3-4 years as they climb in the ranks at their job, get out of college, finish law school, etc. There's also a "work" factor here when you go to sell...if I can sell 1$400 MSRP item for $700, I'd much rather do that, than sell 10 $40 items for $70 each. The profit is the same, but I only have to store, list, and pack 1 item in the larger case.

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Re: Investing in Lego

Post by cbaker1974 » Thu Aug 25, 2011 8:42 pm

3) Find something that appeals to adults
Adults are the ones who are bidding over MSRP on sets when they are retired, not kids. There can be lots of reasons...for example, Star Wars and Indiana Jones are iconic movie series from the past that are nostalgic to today's Generation X/Y adults...they grew up with these movies and having these sets gives them a way to rediscover their childhood. Complex, realistic "display quality" builds work well here too...for instance, Shuttle Adventure/Expedition/whatever is one of the most realistic looking shuttles Lego has ever produced and looks like something people might display in their home for a conversation piece. Likewise, some of the Creator houses have been very realistic...Model Town House 4954 looks like a house a real person would live in, and I believe that's the reason it is so successful in the aftermarket.

I believe this also comes into play within themes...SW Films > SW Clone Wars. Way more adults have seen the films than watch Clone Wars, and this reflects in the set prices. I have passed on Toy Story (and will on Cars as well), because they appeal to children, and in 3-4 years today's kids will have probably outgrown these themes, so they don't become "must haves" for anybody.

4) Look for unique items
There have been a zillion police and fire stations...even though these sets can sometimes get large and expensive, there is a new version produced every few years. Same for duplicated sets in other areas..the Slave I has now gone through a ton of iterations. While the new version is very nice, it may also suffer in the 2nd hand market in comparison to other large SW sets just because it's been done so many times. This doesn't mean that it won't gain in value, but I think it does limit the profit potential. In Lego Trains...even though the Passenger/Cargo trains are expensive, they are pretty generic and you can expect to see similar sets 5+ years down the road. But things like Maersk Train and Emerald Night are very unique and stylish...those are sets that have very unique design elements that probably won't be repeated.

5) Be careful with TLG-only themes geared at kids
Atlantis, Space Police, Agents, Alien Conquest, etc. There are some cool sets in here for sure, and some of them can do very well, but to me there is too much unpredictability in what will be desirable long term in these sets unless they have blatant "wow-factors". For example, some Agents sets do great, others are still near MSRP. Some castle sets do great, others not so much. To me, there are more "sure things" out there to pursue.

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Re: Investing in Lego

Post by cbaker1974 » Thu Aug 25, 2011 8:42 pm

6) Avoid sets under $50, unless in bulk
These sets are affordable, so more of them are made...that means there will be more selling competition later. If you can score them at big discounts of 50% or more then they may be worthwhile, but you need to have lots of copies to make up for the work you'll need to do in selling them. This becomes more important as the sets get smaller...I typically won't buy battlepacks for investment unless I can get 20+ of them and at a discount. eBay and Paypal fees eat into the profit, the shipping is a pain for such little return. But if you can mass produce listings, then economy of scale will start to take over and make these sets worthwhile. Same goes for collectible minifigures...even if I can sell them for $8 each, I have to sell a crapload of them with a lot of work to make the same amount of cash as selling 1 big $200 set.

7) Know when sets are getting close to retirement
Almost every Lego set gets retired at some point or another. When buying for investment, buy as close to the predicted retirement date as you feel you safely can. This one can be really hard, as Lego can be unpredictable at times (who is still waiting for Death Star to be retired so they can cash in? They could produce this set for many more years like the X-Wing 6212 and screw investors over, or they could stop tomorrow and make us all happy). However, there's no value in buying up the Super Star Destroyer next month..it will probably be in production well into 2013/2014 so I will wait until then to buy it. Brickset is a great resource to find out the history of production runs of past sets and to get the production start dates of sets being made today. Big bonuses are when Lego.com has retired a set, but you can still find it at retailers like Amazon, TRU. Winter Toy shop is one that falls into this category...it is probably discontinued but somewhat available.

8) Look for sales to help improve your profit
This site is probably the best source for those sales, but be careful and don't buy just because something is on sale, especially if it doesn't have one of the characteristics above. The best time to pursue sales is when a retirement coincides with retailer clearance...Lego does this a lot at their stores and online. Target, Walmart, etc will clearance instead to turn inventory on regular schedules. This can result in some crazy things, like Pirates of the Caribbean sets already being clearanced (it just came out??).

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Re: Investing in Lego

Post by cbaker1974 » Thu Aug 25, 2011 8:42 pm

9) Don't wait to take profits
Per the previous topic, if you can get some items on 50% clearance due to inventory resets that will still be in production for awhile, and is a good seller, then I'd go ahead and sell them rather than letting them sit, especially if they are "regular" items that are not good candidates to skyrocket in value after retirement. There's no need to sit on a set for 5-10 years...if you hold a set too long, there is a risk that it will be remade or even worse, "forgotten about" and no longer as popular. Likewise, sets will eventually flatline or reach a price plateau. If a $100 set goes to $200 in the first year, but only $250 by the 2nd year after retirement, then its time to sell...better to go buy another round of $100 sets than keep waiting for the original set to slowly trickle upwards. 1 1/2-2 years seem to be good peak times to hold sets (with exceptions of course!).

10) Optimize your selling operations
Know when to sell...cold weather months are the best for online auction sites. Save your Winter Toy Shops for next October/November. Think about the upcoming re-releases of the Star Wars movies...this attention will probably add some extra to some of those sets. Look for things that may shortcut your time in terms of printing shipping labels, listing auctions. I used to try to save boxes, get them free from retailers, etc. But these boxes are always different sizes and you spend a lot more time packing to offset the "free" box. If you are selling an item for $100 profit, go buy a "right-sized" $1 box that it fits in so that you don't have to wrestle with it for 15 minutes when packing it and risk it arriving damage. Mention how well you pack it in your ad to give people confidence. Spend a little extra time putting details in your ads...this will reduce uncertainty by your buyers and make them feel more comfortable. Use html templates when listing so yours looks more professional than your competitors.

11) If the set sucked in production, then it will suck in the aftermarket
Town Jr, Jack Stone. Star Wars 'The Twilight'. Space Skulls. Time doesn't make crappy sets any better.

Anyway...these are not hard and fast rules, but things to think on. I'd be interested to hear what other people have to say!

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Re: Investing in Lego

Post by SpaceViking » Fri Aug 26, 2011 4:01 am

cbaker, this is a nice summary. Thanks for posting.

My counter points to consider refer to the theme that only "big" sets are worth the time/energy to turn a profit.

a) risk: with big sets, I see a greater risk of fraud. Specifically, if one encounters fraudulent buyers, then selling only big sets increases the risk of a big loss. If (hypothetically) 1 in 20 ebayers are fraudulent, (say taking the minifigs out of the box, returning the rest, and hitting the seller with a charge-back for 'not as described'), and that particular 1 hits you, then the loss is significant. On the other hand, if the loss is only on a $20 set, its much easier to cope.

b) ratings: new sellers need to build a positive on-line reputation. My experience [on bricklink and amazon. I dont like ebay] is that feedback is only left on 20%-50% of the transactions, so it takes time to build it up. This can be easier with smaller sets where the value appreciation is still worth the work. Selling minifigs separately is another way to generate a lot of sales quickly to boost ratings, without much work. And again, one fraudulent buyer can drop a high-quality-feedback rating percentage very quickly unless there are lots of sales to show honest buyers you're a straight-shooter.

One very wise friend of mine recommends never investing in anything "physical" unless one is willing to personally keep it if the market crashes. I think this applies to LEGO just as much as it did to condos in Vegas or Florida during the real estate boom. :-) So, consider the thought of having multiple copies of a set hanging around a long time when choosing how many to buy. For example, Star Wars film sets sell great now, but tastes and/or the economy can change quickly.

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Re: Investing in Lego

Post by sadowsk1 » Fri Aug 26, 2011 5:26 am

This is all really good stuff. I wanted to add in that I think the Lego made stuff like classic city theme items appreciate in value, but it takes much linter. In my own experience I got lots of city sets in my youth and as I got older with more disposable income I had an interest in rebuying them. They are so rare to find since no one thought to save them for the reason that they were everywhere. It took a while but they got up there in value and these were small sets that don't take up much space.

I also think that there is some value in buying the sets that people don't like and are deeply discounted. Especially if you still like them. I bought up Star Wars tie defenders because I love Star Wars and the set so cheap I will still have use for it if it doesn't sell. Kind of like what was mentioned in the previous post. I think the same effect happen with the rogue shadow or the midi falcon. Not very popular at the time,but once it wasn't available anymore the interest grew. It's a gamble, but as long as a person still has a use for the set even if they never find it profitable to sell it, no one loses.

I would say I do a fair amount of investing and buying for my own collection. I do not have huge profit margins but it's a hobby that I enjoy and the times I do sell something it keeps me active with Lego and what's now to love about that? Lol

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Re: Investing in Lego

Post by lukeskywalker » Fri Aug 26, 2011 6:43 am

Thanks for the info. This should help improve my bad track record with investing.

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Re: Investing in Lego

Post by condor » Fri Aug 26, 2011 10:13 am

Thanks for starting the thread! I'll be adding my thoughts at some point this weekend since I'm supposed to be working :D

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Re: Investing in Lego

Post by Nick » Fri Aug 26, 2011 6:23 pm

I think you may have only implied very important point: space considerations.

The bigger the set, the more space you'll need to store something. Most sets do not soar immediately after their discontinuation. Sometimes, you will have to wait months, years, or many years to see a reasonable rate of return. For example, when the Jungle Cutter from Indiana Jones went on clearance ($9), I bought as many as I could (about 10~). Unfortunately, over 2 years passed before the set sold for more than retail. Now, 10x Jungle Cutters do not require much space, but if you are holding onto more than just Jungle Cutters (like Death Stars or any other set that big), the available storage space begins to diminish quickly. Imagine having at least sets the size of a Temple of the Crystal Skulls, multiply that by 5-10x different lines, factor in multiples, and you begin to find yourself questioning clearance-sales purchases due to space constraints--which is sad.

Regarding the idea of a rate of return, most sets climb back up to retail after being discontinued. Some sets require an unusual amount of time, whereas other sets soar exponentially after being discontinued (Green Grocer). Safe bets are usually licensed lines, though there are always exceptions/buyer-beware to the rules (e.g., Prince of Persia, Speed Racer, and even many of the unpopular Star Wars sets--the Twilight); likewise, some LEGO themes do usually we and break the trend of being able to expect only slightly more than retail (e.g., Castle, Pirates, City modular sets).

I'm always interested in the "wow" factor that cbaker mentions. If you've studied aesthetics, then the "wow" factor is something like that. A set should look good outside *and* inside the box. LEGO usually does a good job with the visual aesthetics of its box art, but some sets can come off looking less than stellar and some sets can look like it was photographed by Anton Corbijn. Something can be iconic and NOT command iconic-type money. The set shouldn't look too busy, but it should be sparse or plain either.

Something to also consider/remember: nothing goes up forever. If a set's aftermarket price quadruples/soars to the heavens, that doesn't guarantee anything except what you can get for it at the time. Sets do cool off, and sets do flare up unexpectedly. Any number of factors can contribute to an unexpected fluctuation in prices. More recent examples include the Slave 1 w/ Dengar as well as most Batman sets. Yes, we all want to maximize our returns, but rarely do we achieve this every single time. If you are investing in LEGO to resell, then you need to be firm about what kind of return you want and you need to be able to walk away from a transaction with no regrets. Don't sell something Monday for $100, then see it selling for $200 on Friday, and regret your bad luck/timing. This happens. As long as you made your skim, and you are in the green, you are doing fine. Yeah, it sucks that you sold your Star Wars sets too early, but also be glad that you sold your Slave I's (6209) for $200 when you did, because at this point they are only going for about retail.

Two last tidbits. First, think outside the box. If you want to invest/resell LEGO, consider other lines/ themes/ licenses. I'm sure that most people here already do this, so this is more for those who currently do not. Second, and more importantly, it takes money to make money. Some LEGO sets do not go on sale. That's just a sad fact of life. Do not put off buying something in the hopes that it will hit some kind of magical sale. Suck it up and buy the set at full price. If my memory is right, Cloud City never went on sale. (As an addendum to the second point, buying for Target.com or toysrus.com is dice-roll: the shipping packaging may *or may not* be adequate to protect a LEGO set during transit. Just buy from a LEGO store or order from LEGO.com.)

Also, I'm all for monetizing your hobby/hobbies.

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Re: Investing in Lego

Post by pterribilis » Fri Aug 26, 2011 8:35 pm

Wow, reading this demonstrates the ferocity of lego investors. I would consider myself a casual investor. I do not have multiples of any set as I like lego as a collector/builder/hobby more than anything else. I did buy a few sets that I don't plan on opening 4195, 4841, 4842, 4866, 6212, 10210, 10215, 10188 for investment purposes only. I'm not really big into star wars or harry potter, but bought them due to 20+ percent off sales and figure i have nothing to lose as i will be traveling back to Australia in a few years time and lego is around 2x to 3x more expensive there MSRP. So i can always make my initial investment back.

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Re: Investing in Lego

Post by SpaceViking » Fri Aug 26, 2011 9:25 pm

Good points, Nick. Thanks for the input.

A while back, The Brothers Brick posted an interview with folks that run large Bricklink operations to get their perspective (http://www.brothers-brick.com/2011/01/3 ... k-sellers/" onclick="window.open(this.href);return false;) It's well worth a read as well.

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Re: Investing in Lego

Post by Nick » Sat Aug 27, 2011 1:02 am

On counterpoint to cbaker's "avoid sets under $50 unless in bulk" claim. For the most part, sets under $40 will (at best) double in price over a period of time. However, no need only look to Indiana Jones and Harry Potter and the Goblet of Fire sets to see how far $50 (even at retail) will get you. Race for the Stolen Treasure was a $30 dollar set--which now sells for $90-$100; Graveyard Duel was a $40 set--which now sells for $250-$300. There are more examples like this (mainly from licensed lines) to warrant buying as much as you can if the price is right (re: clearance).

Remember, money is money, so even if you only have 1x $40 set that appreciates to $100+, it's still $100+ that you can use to reinvest into more stock. Yes, ideally, you would have boxes full of sets like Graveyard Duel or any of the other older HP sets (that retailed for less than $50), but you have to take what you can get--and if the getting is only a few, that's still more than none.

Also, please ignore the typos in my original response. They weren't glaring to me while I was typing and eating, but now that I'm done eating...

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Re: Investing in Lego

Post by cbaker1974 » Sat Aug 27, 2011 7:43 am

Good points/observations Nick. I think the things I posted are just general tenets that I follow, not necessarily hard and fast rules. For example, I did purchase several Ambush in Cairo sets when they got reintroduced at TRU this past spring (after already being discontinued). Even though they were $10, they will probably fetch upwards of $35+ in the next 6 months or longer due to it being an iconic scene + some really cool parts.

I have to admin, I am way more addicted to the buying end of this than the selling end. I have filled up a room with sets after buying some shelving units from Home Depot, but I haven't done a great deal of selling yet. I just came out of my Dark Ages around Christmas time last year, so my stockpile started with the after Christmas sales and has been building since then (I've been anguishing quite a bit over missing out on Green Grocer, Taj Mahal, Grand Carousel by only a couple of months...I did buy them for myself in the aftermarket at a reasonable markup before they really started taking off luckily).

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Re: Investing in Lego

Post by condor » Sat Aug 27, 2011 11:19 pm

I agree with Nick, but it's tough to guess which sets will go up in value. I picked up a couple of the limo sets when they were $15 at Walmart because there hadn't been a limo set before and figured it might increase in value. I was right because now they are up to $50 or so. However the Space Police and Atlantis sets that I got at a discount are still below MSRP. However, that goes along with cbaker's comment on themes for kids.

I think the Clone Wars sets are ok if they are a remake of an older set. The CW AT-TE and the Republic Attack Gunship fetch pretty good prices. I'm still debating whether to sell my gunship or not :)

As for current sets that are about to be discontinued that I think will appreciate:
HP Burrow - it's a set that they haven't made before and it has some unique minifigs
Fire Brigade - I don't think this one will command the same prices as Green Grocer and Cafe Corner, but you will probably be able to make at least $100 on it.
Western Train Chase - Even though it's Toy Story, it has enough unique train parts for the train fans
Clone Turbo Tank - It's a remake of the old Turbo Tank that appeared in the movies
AT AT Walker - OT SW, check; iconic scene, check
Imperial Flagship - if you can still find it, buy it!
Winter Toy Shop - I doubt it will get re-released and people willwant it to complete their Christmas Village

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Re: Investing in Lego

Post by legitimatealex » Mon Aug 29, 2011 6:43 am

So these are all the people I compete with to score LEGO on clearance. Harumph. Good posts nonetheless.

My only addition to this is to mention that you should also look for sets that are basically 'piece' sets, eg one that comes with a lot of one piece. Whether this piece is a minifigure, a weapon or just a tiny part that is rare, people will appreciate buying multiples of a piece from one seller instead of running around 20 different Bricklink shops trying to track down as many of this piece as they can.
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Re: Investing in Lego

Post by condor » Mon Aug 29, 2011 7:01 am

legitimatealex wrote:So these are all the people I compete with to score LEGO on clearance. Harumph. Good posts nonetheless.
:lol: I don't really buy up the store unless it's a super clearance, and even then I won't buy more than 4 of the same sets at a time. I have enough sets at home as it is taking up space, so until I sell those, I won't be getting more.

One other point I wanted to make is to sell new sets on Amazon. While they dictate how much shipping money you will get, buyers there seem to pay way more than what people sell for on ebay. I've sold almost all my new/sealed sets there and have always gotten at least 20% more than the highest ebay and bricklink prices. It's also easy to list because you can list it and forget about it until somebody buys it. There's no up front costs since everything gets charged after the fact. I get around the shipping costs by listing that I will be shipping the parts and manuals only in their sealed bags and that no box is included. That way I can use the one price Priority Mail boxes. It sometimes sucks when shipping to the west coast from here though because shipping could get up to $18 for a large set.

Make sure to put delivery and signature confirmation on anything expensive though because I've heard horror stories where the seller gets scammed and DC isn't enough to prove it was delivered. Also, don't sell used items because buyers always assume used means as new and complete. I almost got burned twice by selling used sets, but I offered them a discount and they accepted.

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Re: Investing in Lego

Post by NIGELTTF » Tue Aug 30, 2011 6:00 am

I'm feeling sad on this as the hurriane flooded my basement and dmaged some of my "speculation" boxes.
Grr at my girlfreind for insisting I free up closet space.

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Re: Investing in Lego

Post by ncbarrett » Tue Aug 30, 2011 6:05 am

NIGELTTF wrote:I'm feeling sad on this as the hurriane flooded my basement and dmaged some of my "speculation" boxes.
Grr at my girlfreind for insisting I free up closet space.
Sorry for your loss, at least it wasnt all of them.
I have inoperable cancer and am unable to work. Any gifts would be appreciated. Thank you!

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Re: Investing in Lego

Post by slacker » Tue Aug 30, 2011 7:03 am

NIGELTTF wrote:I'm feeling sad on this as the hurriane flooded my basement and dmaged some of my "speculation" boxes.
Grr at my girlfreind for insisting I free up closet space.
wow, that sucks dude. When I was young, I used to put my comics in the basement. Wrong. Humidity killed them. Most turned yellow.

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Re: Investing in Lego

Post by NIGELTTF » Tue Aug 30, 2011 7:27 am

ncbarrett wrote:
NIGELTTF wrote:I'm feeling sad on this as the hurriane flooded my basement and dmaged some of my "speculation" boxes.
Grr at my girlfreind for insisting I free up closet space.
Sorry for your loss, at least it wasnt all of them.
Yeah, only moderate damage to two bigs Starwars sets sets, very light damage to an Indiana Jones and two "Dragon Fortress" sets from Orient Expedition. Maybe I should just open them and add it to the brick I build with.

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