Pawn Shops. Are they +EV?
 

I have been considering opening a pawn shop/pay day loan service for quite some time. It seems to me that this is purely a profit based business. Anyone have an input? Am I being overly optimistic of this type of business?

Re: Pawn Shops. Are they +EV?
 

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I have been considering opening a pawn shop/pay day loan service for quite some time. It seems to me that this is purely a profit based business. Anyone have an input? Am I being overly optimistic of this type of business?

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I don't have any direct experience, but I know two guys that each have multiple pawn shops. One guy makes a decent living off his 3 locations, but hates the work and the people, and wants to get out of the business. The other guy has 5 locations, is a millionaire because of those locations, and has managers run all the stores. IMO, a pawn shop is the kind of business that I would consider if the right opportunity came along.

Re: Pawn Shops. Are they +EV?
 

are you very hairy? do you cap w/ draws on the flop and turn? do you enjoy a hookah while playing backgammon? can you turn raw hamburger into a delicacy? do you have fake loius vitton bags in the trunk of your 1998 mercedes? if so a pawn shop is ++++++++++++++++++++ev.

Re: Pawn Shops. Are they +EV?
 

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are you very hairy? do you cap w/ draws on the flop and turn? do you enjoy a hookah while playing backgammon? can you turn raw hamburger into a delicacy? do you have fake loius vitton bags in the trunk of your 1998 mercedes? if so a pawn shop is ++++++++++++++++++++ev.

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I meet 3 out of the 5 of your requirements so I guess I'm good to go. I was actually hoping to hear criticisms towards owning a pawn shop in general. There must be downsides(aside from making money off of desperate people.)

Re: Pawn Shops. Are they +EV?
 

Buying stolen goods without knowing it is an obvious downside. And getting robbed. In general it just seems like depressing, but profitable work. Everyone i hear of that own multiple pawn shops is rich.

Re: Pawn Shops. Are they +EV?
 

You need to check what is required in your local jurisdiction.

There is usually an application and various licenses and permits you must obtain if approved. There is also a bond requirement of 50k or more for most states.

Add the cost of location, fixtures, security, utilities, initial inventory and cash for loans and opening a pawn shop requires a lot of capital to get started.

Re: Pawn Shops. Are they +EV?
 

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You need to check what is required in your local jurisdiction.

There is usually an application and various licenses and permits you must obtain if approved. There is also a bond requirement of 50k or more for most states.

Add the cost of location, fixtures, security, utilities, initial inventory and cash for loans and opening a pawn shop requires a lot of capital to get started.

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Yeah, you might need different licenses for each part of the business as well. Like the pawn shop is one, the payday loan is one, title loan is one, etc. Thats gonna be some serious red tape.

Re: Pawn Shops. Are they +EV?
 

In a lot of locales you are not responsible for buying hot goods.

You see a homeless dude come in with 10 big screen TVs. Don't ask, don't tell in a lot of places.

Re: Pawn Shops. Are they +EV?
 

Instead of a pawn shop, what about those payday loan places?

Re: Pawn Shops. Are they +EV?
 

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Instead of a pawn shop, what about those payday loan places?

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yeah, payday loan is a better deal IMO. Title loan is good too, but Payday loan would be the best.

Re: Pawn Shops. Are they +EV?
 

Not that it really matters to most of the people who post on these forums, but those payday loan places really screw over a lot of people. So how much is your piece of mind worth?

Re: Pawn Shops. Are they +EV?
 

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Not that it really matters to most of the people who post on these forums, but those payday loan places really screw over a lot of people. So how much is your piece of mind worth?

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They don't screw people. People screw themselves. Yes, they charge pretty exhorbitant interest rates, but no one forces you to live above your means or take out loans you can't afford.

But I'm guessing most of the people that use those places are also not bright enought to know the difference between peace and piece.

Re: Pawn Shops. Are they +EV?
 

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But I'm guessing most of the people that use those places are also not bright enought to know the difference between peace and piece.

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Dude, no need to take low blows. I was just pointing out that the business model is pretty morally unsound and that should factor in to one's decision on whether or not to pursue it. I think its a pretty fair assumption that opening one of those places in a location where there previously were none increases a person's likelihood to use the service and thus negatively affect their financial situation.

Re: Pawn Shops. Are they +EV?
 

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But I'm guessing most of the people that use those places are also not bright enought to know the difference between peace and piece.

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Dude, no need to take low blows. I was just pointing out that the business model is pretty morally unsound and that should factor in to one's decision on whether or not to pursue it. I think its a pretty fair assumption that opening one of those places in a location where there previously were none increases a person's likelihood to use the service and thus negatively affect their financial situation.

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I don't really see how it is immoral. Payday loans provide a service that people obviously need, otherwise they'd be out of business. If someone needs a small loan and has no credit and can't borrow from family or friends, payday loan is a great choice. Sure, the lender takes a fee for the service, but why shouldn't he? Is the bank immoral for the interest that they charge on my mortgage? I don't think so.

IMO, everyone wins. The borrower gets the money to pay bills, buy birthday presents, whatever, and the lender gets to make a profit. What is immoral about that?

Re: Pawn Shops. Are they +EV?
 

The regulations on payday advance type operation are much less stringent than that of a bank loan. Payday advance operations take advantage of this fact by charging an exorbitantly high interest rate. I agree that the idea isn't immoral in principle, only in practice. If someone started one that charged reasonable rates I'd have no problem with it.

Re: Pawn Shops. Are they +EV?
 

Why do you think the rates are so high for payday loans? its a risk

If I am going to get a payday loan vs using a credit card, I am in need of cash badly and therefore I would pay the extra $

Re: Pawn Shops. Are they +EV?
 

Well here we have new regulation that limits the interest to 60% per annum which is considerably less then the 500%+ that is common for payday loans.

After inquiring more I've found that it takes a $10,000 bond just to get the licences. After that the only investment is rent, utilities, and stock/cash. Maximimum loan here is 1500. I'm not sure what kind of start up capital is going to be required. Think a half year's worth of rent and utilites plus 20k for stock and lending is enough to start?

Re: Pawn Shops. Are they +EV?
 

Look at bluehippo.com- complete and utter rippoff- I laugh everytime I see their hilarious commercial. They blatently rip off retards. Its so obvious that these people deserve what they get. Its called Darwanism. Pawn shops are no different.

Re: Pawn Shops. Are they +EV?
 

Your argument that payday loan places are immoral is silly. They charge interest for a loan. Banks do the same thing. Both have hidden fees. The only difference is in the amount of interest. The market however determines the amount of interest. There are enough payday loan places around to ensure adequate competition. If it was illegal to charge interest above a certain amount, then there would be a group of people with high credit risk who couldn't get loans because no one would lend to them at the legal rates. This would probably open up a black market for loan sharks complete with leg breakers showing up to people's houses. Why send this business underground? Where do you draw the line at interest rates? If inflation were to take off as it did in the 80s, normal interest rates could go well above 10%.

Re: Pawn Shops. Are they +EV?
 

Just because a competitive market is determining the interest rate that they use does not make the interest rate morally sound. Likewise just because the alternative may be worse does not make the current situation justified. Also, justifying the high interest rates associated with payday loan on the basis that the customers they serve are high risk is more of an excuse than a reason.

Look at the Nobel peace prize winner for this year. He was awarded it for starting a program that gave micro-loans (on the order of a few hundred dollars, the same as a payday loan place) to people who would not be able to qualify for a traditional loan. And he did it while still offering the loan at a very reasonable rate.

Obviously he was not running a business based on accruing interest off the loans, but what he was doing was unarguably more morally sound than a payday loan place.

Now don't get me wrong, I'm not implying that people on this forum should all give up their goals of accruing wealth and start charitable organizations that offer micro-loans at low rates. I'm just trying to illustrate the fact that although people in this thread are arguing that a competitive market justifies the high rates, really all it does is give an excuse for one to hide behind. You just need to accept the fact that you are offering the high rates for your own monetary gains and you could offer lower rates if you weighed the benefits of others over that of yourselves.

Additionally everyone here should be aware that I'm not claiming to be morally superior to the rest of you. I certainly don't run a charity and I read this forum to gain knowledge that will help me gain wealth. But I also admit the fact that I do so to the detriment of others and just because I take place in a competitive marketplace does not justify this fact on a moral basis.

Re: Pawn Shops. Are they +EV?
 

How do those payday loan businesses get money from people who have bounced paychecks and stuff? Is it worth the time in small claims court or whatnot?

Re: Pawn Shops. Are they +EV?
 

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How do those payday loan businesses get money from people who have bounced paychecks and stuff? Is it worth the time in small claims court or whatnot?

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Most likely no, and that is EXACTLY why they charge high rates. It gets absorbed into their business as an expense.

Re: Pawn Shops. Are they +EV?
 

I would assume that the capital you lose from bounced paychecks is negligible. Remember, the checks are from the company they work for so in order for it to bounce the company itself would have to bounce the check or the check would have to be fake (which you should easily be able to spot).

Re: Pawn Shops. Are they +EV?
 

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I would assume that the capital you lose from bounced paychecks is negligible. Remember, the checks are from the company they work for so in order for it to bounce the company itself would have to bounce the check or the check would have to be fake (which you should easily be able to spot).

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None of this is true.

Re: Pawn Shops. Are they +EV?
 

Please elaborate.

Re: Pawn Shops. Are they +EV?
 

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I would assume that the capital you lose from bounced paychecks is negligible. Remember, the checks are from the company they work for so in order for it to bounce the company itself would have to bounce the check or the check would have to be fake (which you should easily be able to spot).

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Please elaborate.

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ok sorry for the short reply. The checks aren't from the company they work for. You go in and write them a personal check and they hold it until you get paid. You can always go in and buy the check back but if you don't then they just deposit your personal check.

I am guessing that a very high number of these bounce and that is why the fees are so exorbitant. I am also sure that they make a very healthy profit margin but it isn't a business that I would like to be in. I can't see calling all these deadbeats about bounced checks as being fulfilling.

Re: Pawn Shops. Are they +EV?
 

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I would assume that the capital you lose from bounced paychecks is negligible. Remember, the checks are from the company they work for so in order for it to bounce the company itself would have to bounce the check or the check would have to be fake (which you should easily be able to spot).

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Please elaborate.

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ok sorry for the short reply. The checks aren't from the company they work for. You go in and write them a personal check and they hold it until you get paid. You can always go in and buy the check back but if you don't then they just deposit your personal check.

I am guessing that a very high number of these bounce and that is why the fees are so exorbitant. I am also sure that they make a very healthy profit margin but it isn't a business that I would like to be in. I can't see calling all these deadbeats about bounced checks as being fulfilling.

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My guess is they don't persue the deadbeats too heavily - they just chalk it up as an expense after a couple of tries and then ban the people from future activity.