Building a Rental Car Small Business on the Turo Platform – Small Business Show 141

The Small business show episode 141 for Wednesday, October 18, 2017. Greetings, folks and welcome to the Small Business show here at BusinessShow Co, the show by, for and about small business owners. Here in Durham, New Hampshire, I'm Dave Hamilton.

And in Lafayette, California, I'm Shannon Jean. How are you? Dave Hamilton.

I'm Dave Hamilton.

Today. Some days, just to make sure everybody got it.

Yeah, that's right. Some days that's a good thing, some days not so much. But, you know, today's a good.

Yeah, yeah, right on. That's great. That's great. Hey, I want to jump right into this because we have a couple of guests that I'm very interested in talking about. And you know, one of the things that I was pleasantly surprised to learn after starting my first company many, many years ago was when my accountant said, hey, you know, you guys are making good money here. You ought to get yourself some cars. And I said, well, what do you mean? He's like, well, yeah, it's a great write off. You could go lease a couple of cars, whatever you want. And so I was thrilled. Right?

Oh, yeah, yeah. That's one of those really nice conversations.

Yeah, it's a great thing to do. So, always been able to drive nice cars, you know, and I've always leased them through one of my businesses or another. Take advantage of the write off and some tax stuff. But I've been intrigued lately. What if you want access to multiple vehicles? Maybe a dream car, but you wanted to offset the expenses even more. I've done some research about this and I'm really excited. We have a couple of guys here, Gurjeet Singh and Kevin Chow, two entrepreneurs that are running their small business on the Turo car rental platform. Welcome to the Small Business show, guys.

Hey, how's it going?

It's good, it's good. It's Kevin, right?

Yeah.

Okay, great. I'm going to try to keep track of each of you. And Gurjeet, you're there. How are you doing?

I'm good, how are you?

Awesome. I'm doing great and we're excited to talk to you about. So let's just kind of get started and give our listeners a little background on. I probably could figure out the why, because you have such awesome cars. How did you get started building this fleet of cars that you rent out on Turo?

So this is Gurjeet. I'm gonna pretty much take the lead here for a little bit. Sure. I think it goes back to the same kind of perspective that you guys had when you initially just want to rent a car and you figure out, you know, what it takes and you go to Hertz Enterprise and usually you don't get the car that you want. And we started browsing around because initially we wanted to go up to Tahoe and we were looking for like a four wheel drive car and there weren't very many options because you're not sure if you're actually going to get the car that you're basically making a reservation for these like rental enterprise companies. So we were doing some research and we saw relay rides and we rented out a. I think it was like a. Or we were looking to rent out a four wheel drive Suburban, you know, just to take up to, to Tahoe.

Sure.

And I think we rented out a car one time and we recognized the potential for us to start renting out our own cars and kind of having, you know, a utility vehicle that would subsidize the cost of ownership. So in a way like, you know, we get to take our boards, our stuff, our friends and family up to Tahoe for a weekend, but at the same time the car doesn't sit idle and we make the payments when it's not in use. So I think from that perspective is like kind of where the initial thought started. But we first ventured in with two Mustangs actually when we. Oh, actually, sorry. My friend Kevin started off with a BMW. That's when we started.

Yeah. Because I initially, before I was doing this, I was driving for Uber and they just piloted a program called Uber select which is kind of in between UberX and Uber Black. It's kind of like a luxury vehicle without paying the Uber Black prices.

Okay.

And my fallback plan if that didn't work out was to rent it out on Turo. And so that's what I ended up doing. And the second renter, I actually ended up using a fake military license and stealing the car.

Oh no.

They found it a couple weeks. Cops found a couple weeks later totaled in Hayward. Repair bill ended up being about $11,000 and it all. So that's when I decided that they were a legit company and I and I told Gurdeet about it and we decided to start acquiring vehicles from there.

So there was a quick hiccup there. You said that Turo did cover the 11 grand, is that right?

Yeah, it was kind of interesting. So they covered everything and then I sold the car shortly afterwards. And for some reason the company I sold the car with was Shift. It's kind of like the online Car buying and selling platform in sf based on SF now they ran their, their auto check on it and the accident didn't even show up on their end. So they listed the car as a clean Title zero accident car and actually ended up getting more than I paid for it when I car.

That's wild. That's great. Well, and you know, so those are kind of the, you know, the humble beginnings, but you guys have really, you know, blown this thing up. How many vehicles are you managing on the platform right now?

So it's between me, Gurjeet and a couple other friends of ours, but we have about 12 vehicles right now that we're, that we're managing.

That's awesome. So what do you, what have you found to be, you know, the most challenging part of. Because I look at that and I'm like, oh, that's great, man. There's gotta be a way. I want to, I'd like to drive this car and I'd like to have that and I could pay for them, hopefully. What's the toughest part about managing a successful car rental business?

A couple things. First things first, the worst aspect of TURO right now is dealing with damage claims. It's always fighting tooth and nail to try and get reimbursed with them. They have really strict rules on you have to take photos 24 hours before the trip and then you have to take photos 24 hours within 24 hours after the trip to qualify. And if you, if you take a photo 25 hours later after a trip after you find out there's damage, they won't, they won't pay you out. And we learned that the hard way. Besides that, I guess the second hardest thing would be just servicing all the vehicles because they all tend to, because we have high horsepower rear wheel drive cars, the rear tires and brakes tend to go out faster than your, than your regular Toyota Priuses and.

Yeah, I can imagine.

That's interesting. Yeah. Thinking about how people are going to drive those particular vehicles that you have will sort of inform your repair costs. That makes sense. Yeah.

Yeah, for sure. So, and is TURO the primary? Is that the exclusive platform that you're renting out is any other way that you're generating revenue with these vehicles?

As of right now, that's the only platform that we're using to kind of secure our insurance with, you know, because it becomes really difficult to track down Renner's like, you know, background check with his driver's license history and whether or not they're, you know, accredited enough to, you know, rent a car or, you know, if it's, if they qualify, you know, it makes sense right now to use Turo as like the back end people who qualify and make sure that, okay, this renter is actually legit.

Yeah.

So, so, so they, they significantly limit your risk. I don't want to say they take it all, but, but they, they provide a structure where, where you can really kind of manage that risk.

Exactly. And it makes it very easy, like in case in point. Although the reimbursement stuff is really difficult, if they go over miles, it's very easy to adjust and say, hey, you know, we allotted you 100 miles and you went 150 miles. How would we get that payment once the. If the trip was already over? But through Turo, they provide an easy access because the credit card's already on file. They automatically enforce that because we have photos before and after.

Sure, that's great.

So you really, you have to. It's not like you can just leave the car in a lot and have the next person pick it up. You've got to sort of go and check in between every single rental. Turo is not doing that for you. You're doing that for you.

There's a few. There are instances where we're allowed to use a Turo valet service, which is currently in San Francisco and in LAX, but there is a 24 hour window where you can drop it off and pick it up. After that, they start enforcing fees for any extra days that we leave it there. So, yes, only if they fly into San Francisco. There is that opportunity where we don't have to manage it directly. Where those photos and inspection and like, handoff is done without our active oversight.

Yeah. Yeah. Okay.

Makes sense.

Yeah. Interesting how.

Yeah.

And this is just me, you know, kind of thinking through the numbers and all that, how, how much time, what's the percentage of rental versus, versus not rental? Like, I mean, are you able to rent these things most of the time that you want to, or is it kind of fall in the middle there?

So I'd say our average is maybe 10 to 20 days a month, winter being the slower months since we mostly have convertibles.

Yep, yep.

And during summer, 20, 20 days is, is about average or sometimes more. But there's always going to be a day or two in between each rentals because of the time that one person returns it versus the time that someone picks it up.

Sure.

You don't, you don't usually get people to get the car late at night, and then you don't usually get people returning the car like in the middle of the afternoon kind of thing.

Right, right.

Makes sense.

And so is this. I mean are you, we don't have to go into the numbers, but are you making money at this or does it allow you to break even? And now Instead of owning one car, you've got 12 and you can drive what you want when you want.

Yeah. So we've been doing this a couple years now and I'd say each car makes about two to three times its monthly payment, maybe even more. We've been trying to become more efficient and aggressive. Aggressive with the pricing and going over miles and things like that. Where when we first started off, TURO used to have a flat rate fee of any mileage. Overage would be 75 cents per mile. And they changed that a couple months ago after they started enforcing fees on the additional miles that they, so that they get their own cut. Then they allowed renters to put whatever price, I think from 0 cents to, to $4 now for each additional mile.

Okay, that's great. Cool.

Yeah, and that's, that's some excellent information because I was curious about that too. You know, I, I own vacation rentals and often, you know, you're just trying to cover your cost and, but have a great place to go someplace, whether it's Tahoe or you know, the beach, that kind of stuff. So it's, it's, it sounds like you have a, you know, a growing enterprise there. That's, that's really cool. So you know, you talked earlier about you partnered with a few, you know, you have some friends, you know, looks like from your TURO page up there that we'll link up in the show notes. You know, you've got locations, San Francisco, Louisiana and Las Vegas and you allow one way rentals as well as you mentioned, access more vehicles. How's that worked out for you? It sounds very logistically challenging to make all that work.

Yeah. So it's pretty much a lot of active management between me and Kevin. We have one friend that rents out his car with us through our profile, but for the most part he just uses it as a way to subsidize his cost on his car that he bought around the same time that we bought ours, which was like a Jaguar F type 2014. It was like a V8. And we kind of told him what we were up to and he decided to kind of go in on it and use our profile as a way to advertise his car. But for the most part, all the one way Stuff between going to LAX or going to San Diego or Las Vegas, it's pretty much on me and Kevin where we book flights ahead of time. Once we recognize that someone is trying to do a one way, we'll allot the car or we'll allocate the car for that time period and then they'll book the the trip through Turo and we'll just make a note through our conversations in Turo that hey, it's a one way trip leaving at this point returning say in Las Vegas and we're going to be driving it back. And so we, me and Kevin, or one of us would just drive out there or fly out there on a one way trip and then pick up the car from them at the airport. So realistically, it's not us actually managing the car in those locations. We just offer like more of a trip. Like if you fly from, you know, the east coast and you want to go from San Francisco to LA and just drive the one freeway. Because people really like to tour California because it's such a tourist destination. It allows them some flexibility if they're traveling in a bigger party to save some money or just to tour California. So that kind of gives them that option.

That's great. So are you charging a fee for a one way to cover those expenses? How does that work out?

Yeah, the fee pretty much only covers the extra miles and the one way plus our time to drive the car. So realistically, say we charge $500 a flight down to LA, we can get ahead of time for like 100 to 150 and then it's about a five hour drive plus 400 miles on the car. So it pretty much just evens out. It's not really a money grab or a profitable like venture, but it creates, you know, an opportunity to get more business for people who are looking to do that.

Yeah, absolutely. I think that's great that you know, you guys have come up with all these different ways to manage this. It's really creative and I think that's bodes well for your, you know, for your future success.

I think just to add on to that, I was going to say that it creates like a tailor made experience for the person who's running at the car because for the most part a lot of these people are a little bit more affluent and have some flexibility in pricing for most often when they're renting these like luxury cars, they're looking for an experience and if we're able to manage that, so it's not as inconvenient far as like delivery or pickup and return. It creates something that other users aren't really offering because they're just doing it more in a passive sense when we're trying to actively create something for our users.

Yeah, that's awesome.

That's a great lesson right there. Yeah. For somebody who is, you know, targeting affluent customers, you're not fighting on price first. Right. You're, like you said, you're, you're offering managing an experience for them. That, that's a, that's a valuable thing to look at when you're trying to decide what kind of business to get into. That's interesting. Yeah, yeah.

I think that was the real niche for our market that we started going up market because there's a lot of daily vehicles for use in Turo. But when people, you know, don't really have the options for the renter or the person who's looking to rent, for the most part they get filtered out. Like, you know, if they can't book right away or if they can't book from their location or if they couldn't get delivery, I think it creates more hassle for the, for the renter. And if you're targeting affluent people or like a higher up to your market, they are usually not fighting the price, they're fighting convenience. They, they want the, they want to be able to do things as they please. And that's usually where we, you know, make our money.

Right, right. Yeah, it makes total sense.

Yeah, that's great. So you talked about cars a little bit, you know, and if you look at Turo, I mean, there's tons of just, you know, normal, you know, daily drivers, cars, trucks and all that kind of stuff. And then there's. Then you kind of go into the more exotics and different things. Have you found that there's, you know, kind of a sweet spot regarding the types of cars that you have more success renting out?

I think just in general, any, any car that we've, we've been interested in. We're both car guys, always watch Top Gear and, and all the car shows. Yeah, just any, any sports car, convertible will do well in the Bay Area. We did a lot of, or, yeah, we did a lot of research on Turo to see which cars were getting rented out the most before we, before we purchased any. And there was some cars that we purchased where we saw that there was none available on Turo in the Bay Area. So we decided to purchase those cars and those ended up doing really well. Since we have pretty much zero competition that's great.

And are you buying all brand new cars or late model stuff or just kind of depend on what's out there?

So we try to get all our cars a year or two old so that the first owner takes most of the depreciation hit. And then we also try and buy a lot of vehicles certified pre owned. A lot of car companies now their certified pre owned program is better, their warranty is better than the original factory warranty. Using the Jaguar S Type as an example, I think brand new, you get maybe 36,000 miles, two years or something bumper to bumper. With their certified pre owned program, it's six years, 100,000 miles.

So that's nice.

It doesn't make sense to buy, to buy brand new at that point because.

Only one person gets to drive the brand new car. Right. And the second renter could care less.

Yep, pretty much.

That's it. That's right. No, that's very cool. I mean I'm really impressed with the, you know, the research behind it and you know, using it, using the platform to really build, you know, your own business, your own car rental, you know, fleet up there. It's fantastic. So how much time do you guys think that, you know, estimate that it would take to manage your, this fleet and this business, you know, each week and are you, do you have specific duties split up amongst yourself? How does it work? Because I think you guys are doing other stuff as well in addition to this business. So give us some feedback on that.

Yeah, so for me it's pretty much my full time job. Gurjeet has a regular 9 to 5 job that he was doing and because he lives in Union City, it's not really close enough to the touristy, busy areas in San Francisco. Whereas I live in Emeryville where it's a lot easier for people to either Uber to my place or for me to deliver to SF because that's where majority of renters come from. They're either flying in from SFO or they live in SF and they want a car to go to Napa or down to. Down to Carmel or Santa Cruz for the weekend.

Makes sense.

That's great.

And then are you like Gurjeet, are you doing certain aspects of it and Kevin managing different things. How do you split those duties up?

For the most part I would say that I try to help out. I would put in maybe 10, 15 hours on the weekend. From weekend, from week to week, just depending upon, you know, how active or how busy our schedule is with rentals. Like if there's deliveries. It's really tough on Kevin to just go out to say, you know, San Rafael and drop off a car and then Uber all the way back. So my weekends are pretty much just allotted to oh, what car stuff or what deliveries do we have going on? And beyond that, I just try to help with like, you know, any tax stuff, any business stuff. As far as like development for our business and how we want to expand and grow. That's really just between conversations that me and Kevin have, like between dinner and lunch and just kind of seeing what we, what we want to get next or what, how we want to grow the business even further.

When, when was the last time? How many cars have you bought this year, for example?

So in 2017, how many cars have we bought?

I'm just curious. I mean, you know.

Five or six maybe. Yeah, it's hard to keep track.

I can't keep track of the dates.

Are you always out there looking for deals that you think would add to your fleet if you could make the numbers work?

Definitely. We're also trying to remove cars from our fleet that we feel are coming up on an age or if they're not profitable as much as they were before, we've sold off like a Porsche Boxster and now we've upgraded to a Porsche Boxster S or you know, we've sold off the BMW and, and my old Honda Pilot or 2016 Honda Pilot. So there are cars in our fleet that weren't as active or not as doing as well as some of the cars that we had research and moving forward we were trying to. So there's that aspect where we're trying to just keep our fleet up to date. There's also, you know, just managing like any tickets or reimbursement stuff that is going on between the cars and making sure that all that stuff like paperwork wise and registration and dmv, you know, fines are, you know, taken care of and we're not, you know, overdue on anything.

Yeah, that makes sense. So are you, is there a, you know, a certain size that you want to be or. I mean, so talking about future plans, do you want to kind of keep where you are now or is your intention really to grow it larger? Where do you want to be and what's the plan moving forward?

Currently we're looking to grow and expand, of course, but it has to make sense monetarily and we are running up into a little bit of, I would say, I don't know. The best way to explain is to establish our business. You need two Years of business credit. And we just started it right when we opened up our business. So it's coming up on two years in February. And so in order to get like a credit line to, you know, take on a new employee to manage some of our active stuff, or whether it's to get a consolidation loan to kind of bundle up the cars that we haven't paid off yet and put it into one business loan. So we don't have so many credit checks or so many credit accounts open against the cars that we're currently paying off. It's. We're crunching the numbers and trying to figure out, okay, what makes sense from that aspect. And without having a lot of experience doing this in, in the market beforehand, Banks are a lot more reluctant to give out loans for cars just because of how leveraged we are or versus how much experience we are currently just trying to get. So it just. We're at that stage where we're at a fork almost where we're trying to figure out what we're.

Well, if you've, if you've not listened to this show before, we have a certain special place for bankers in our, you know, we always, yeah, we're always complaining about that. And bankers looking for a sure thing versus jumping into something new like this, that is, I'm sure it's hard to explain to them. And they probably kind of look at you like, well, I don't know about this, this kind of thing when you're trying to work with them.

I think now that all of our taxes have kind of just been. It took us a while to do our first years because we took an extension for the first six months and then we did our amended K1s. We figured out how we were going to do our pass through taxes. And now that we have, I would say paperwork or back, I would say experience on how that stuff works and being able to pass that along to the bank and have them, you know, have, okay, we have tax files, filings, and, you know, we're up to date on our car fees and our banks or, I mean, our, our loans and our, all our payments are current. I think that would be a kind of withstanding, like knowledge to pass along to them saying, hey, you know, we are competent business owners and we're looking to grow. And it just comes down to whether or not they, you know, they agree.

Yeah. Yeah, makes sense. Yeah. So now you, you know, your car guys, I mean, do you get kind of jaded, you know, with all these, you know, beautiful cars around? Are you still, you know, excited to just jump in and go, okay, hey, I'm going to take the vet out or the, the alpha, you know, that kind of thing. What you guys still love, what you love driving them.

So I have become. But there are still cars that we want. We're really eyeing a Lamborghini Huracan right now.

Nice.

It's kind of out of our price range and we would rather have a warehouse or property where we can actually park the car inside. That's another issue we're running into right now is I have a lot of these cars parked on the street just outside, which is not ideal. So we're actually looking for a property or warehouse closer to SFO that we could, we could house these cars in. But yeah, I mean, I always enjoy driving the cars, but I mean, after, after you hit over, over 400 horsepower, that's really too much power to use on the street. I would have to say right now my favorite car is the Tesla just because it has autopilot. And here in the Bay Area, dealing with traffic using autopilot is a game changer.

Oh yeah, that's great.

I would also add that the cars are definitely still a thrill to drive and we enjoy them. It's when you have active management of the cars and you're using them on a day to day basis to generate income, it's hard not to look at them more as a, as an investment. I would hope that if we were able to take on an employee or two and, you know, our business grows, that it can become more of a membership type feeling where you have a lot of days and then within the year you can come and rent the car and no questions asked. And your, your membership is already applied to the amount of days that you get and you can just pick up a car or, you know, assign it or mark it off on a calendar for the day you want to use. And for me and Kevin, that would be applied to us too. We would just give ourselves some days throughout the year that we just want to reserve it and, you know, say we want to take our girlfriend or fiance up to Napa for wine tasting or just, you know, just a day trip. It would be nice to have that feeling. But right now we're still in that bootstrapping process where we're trying to grow and be, you know, maximize our profits and minimize our expenses. It just makes it hard to just think of them as toys.

Yeah, yeah. And I asked that question because I've, I've found it myself in that position before. You know, where I'm a tech. Tech guy, and I love this technology, and then once I get into it and it becomes commerce, it changes my whole outlook. Where you're like, I just don't even want to touch this thing anymore.

Yeah. Once money comes in, it becomes a feeling of how can I take advantage of this opportunity rather than how can I enjoy it? And you balancing that right now is just not in the cards. If we're trying to grow. I think if we were doing more of the passive thing like most of the other tarot people, it would feel like that it wouldn't be as arduous of a task to rent out and manage.

That makes sense. Yeah. Yeah. Well, you know, we really appreciate you guys sharing your story, you know, so what's the best way for our listeners to learn more about your and see the cars that you have available in your fleet?

So that's the problem with Turo is they don't really market too well. I don't think a lot of people that hear about Turo is either through word of mouth or.

Okay, so how do you. Let's back up a little bit then. How do you guys market it then? You know, how are you getting the word out about. I mean, I found you through Turo and I was doing some research and then jumped over to Facebook. I mean, are you using social media to drive people to the. To the site?

I think that's the venture that we're pushing now. I want to push our market or our brand onto YouTube and kind of just start talking about how you. Just the same way you guys have this podcast for listeners to how they can, you know, generate some passive income or be small business owners of them themselves. I wanted to start pushing that platform on YouTube, so hopefully I can provide you a link for that pretty soon. The other way is definitely Facebook. The Gentleman's Garage, that's where we get a lot of messages from people who are trying to seek out more information than what they get on Turo. And otherwise than that, we will have an Instagram profile going forward for just dust the business. But currently those are just the three platforms.

Sure. So we'll go ahead.

We'll be.

Like I said, we will link to your Turo, you know, page up there as well as on your Facebook, to the Gentleman's Garage. And we really appreciate you coming on and talking about. It's really an exciting new, you know, way to, you know, generate revenue. And sounds like you guys are having a good time and learning a lot and pushing out, you know, taking on new things, which is great. And thank you very much. Of course.

Yeah. No, this was a blast, you guys. That's awesome, folks.

Check them out.

We'll put a link to their Facebook page, a link to their Turo page. You can find us businessshow.co. keep living that charmed life. See you next week.