Hoping to build first tunnel July '17

[robert roman]

“….wanted to do a Lease to Own type deal for 15 years and only wanted the SBA loan be only 10 years...”

Ok, perform lease sanity test.

First step is to solve location problem. This means finding a site location that is suitable for the business model.

“My location I have picked out is a little over a 1/2 acre and can fit a 80' tunnel but I will probably start with a mini-tunnel for my first wash.”

Ok, so you have already solved location problem but business model (type of wash) is undefined as is anticipated sales volumes.

Since mini-tunnel is mentioned, assume exterior express, 50’ conveyor. Solving 50’ mini for production possibilities frontier is 52,000 cars per year.

Benchmark is $8.50 or $442K gross sales or $221K net operating income.

$221K divided by 12 months and 1.5 debt service equal $12,277 or maximum allowable monthly payment whereby project makes financial sense based on general assumptions.

Turnkey for mini express on 1/2 acre leased land is roughly $700K, fairly bare bones.

New-to-industry might qualify for 5-year lease for equipment and building ($500K) with stiff down payment and/or exorbitant interest rate.

Assume $200K out-of-pocket and lease payment is $11K.

This would leave $89,000 NOI to cover property taxes, rent and obsolescence.

Say, EBTD is $50,000, generous, or cash-on-cash return of 25 percent.

Miss lease payments equipment gets yanked and how do you wash cars? Miss rents get kick off property and how do wash cars to pay for equipment lease?

How confident are you this site location can wash 52K CPY?

You also haven’t considered taking a lower road - buy a used building (easily found) and used carwash equipment (abundant supply).

This requires cash for FOB, install, sales tax, working capital, site work, etc. but only $0.20 on the dollar compared to new for building and equipment.

 

[Waxman]

i started out detailing cars. did this on my own at my parents house in 1985. moved into a leased building and detailed with my sister and her husband. family business soured. lost the lease (landlord just changed his mind and evicted me), had nothing in writing. bought land and the owner held the note. built a litttle 2/1 car wash. did a full business plan with 3 years cash flow projections first. bank laughed hard at original loan request. refined plan and went back and got the loan. ran the wash a few years and added a 4 bay detail shop. after that added used car sales. then bought an 8 plex apartment building.

i think you need a good business plan and not pro formas from equip. salesman. i think leasing the land is a dumb idea. you want assets! i think your road is bad; too high a speed limit. 45 means they go 60. 60 means they dont stop at your wash. i think you are making up excuses to not work at a wash first ( i did and it was v eye opening).

i'm in massachusetts too and if you want to meet in person i can be more helpful.

 

[MEP001]

i think your road is bad; too high a speed limit. 45 means they go 60. 60 means they dont stop at your wash.

His road may not be ideal, but FWIW I drove past a car wash this Sunday on a 60 MPH stretch of road where it's dangerous to turn left into because the oncoming lanes isn't easy to see because of a curve. The wash was busy and it was raining.

 

[Waxman]

His road may not be ideal, but FWIW I drove past a car wash this Sunday on a 60 MPH stretch of road where it's dangerous to turn left into because the oncoming lanes isn't easy to see because of a curve. The wash was busy and it was raining.

and last week i saw a triple rainbow in the sky; doesn't make it a common occurrence.

if we are talking about a million dollar project, wouldn't you want an A plus location? i would.

 

[Hurricane350]

“….wanted to do a Lease to Own type deal for 15 years and only wanted the SBA loan be only 10 years...”

New-to-industry might qualify for 5-year lease for equipment and building ($500K) with stiff down payment and/or exorbitant interest rate.

Assume $200K out-of-pocket and lease payment is $11K.

This would leave $89,000 NOI to cover property taxes, rent and obsolescence.

Say, EBTD is $50,000, generous, or cash-on-cash return of 25 percent.

Miss lease payments equipment gets yanked and how do you wash cars? Miss rents get kick off property and how do wash cars to pay for equipment lease?

Ok, maybe its the internet in general but every post you make towards me seems condescending.. maybe its just me.

Anyways, with your numbers, no my wash would not work.

But I have no plans on leasing equipment, nor having a monthly payment for land/building/site/soft/equipment close to 11k! Last time the land was listed, the listing had $1/sqf annually and at 27K sq ft (dont forget this is an undeveloped lot) that is 2265/month for my leased land. And a 500K SBA loan at 5% amortized over 10 years is 5300/month and if I do a safer 15 year loan is is 3950/month so that would be 6200/month in lease/bank payments just about half what you had for me.

If you are going to put numbers in that are in favor of my failure, at least make them believable...

Eric

 

[Hurricane350]

i started out detailing cars. did this on my own at my parents house in 1985. moved into a leased building and detailed with my sister and her husband. family business soured. lost the lease (landlord just changed his mind and evicted me), had nothing in writing. bought land and the owner held the note. built a litttle 2/1 car wash. did a full business plan with 3 years cash flow projections first. bank laughed hard at original loan request. refined plan and went back and got the loan. ran the wash a few years and added a 4 bay detail shop. after that added used car sales. then bought an 8 plex apartment building.

i think you need a good business plan and not pro formas from equip. salesman. i think leasing the land is a dumb idea. you want assets! i think your road is bad; too high a speed limit. 45 means they go 60. 60 means they dont stop at your wash. i think you are making up excuses to not work at a wash first ( i did and it was v eye opening).

i'm in massachusetts too and if you want to meet in person i can be more helpful.

Another positive story starting out from essentially nothing.. keep em coming! Unfortunately for me, I don't think I have that kind of time. How long from detailing in your parents house til you opened your first wash? I'm guessing 10 years?

Also, I'm not sure if I put this out there anywhere but this lot is maybe 2 min from my house, I know that route very well. No way cars ever do 60, people usually don't do 50 because the cops sit in the church lot that is about 500' from my lot. And during the commuting hours, its stop n go past my spot so you barely hit 10mph, nowhere near 60, ever.

Eric

 

[Hurricane350]

did a full business plan with 3 years cash flow projections first. bank laughed hard at original loan request. refined plan and went back and got the loan.

Im curious what you revised that went from laughable to getting the green light.

 

[BBE]

Ok, maybe its the internet in general but every post you make towards me seems condescending.. maybe its just me.

Anyways, with your numbers, no my wash would not work.

But I have no plans on leasing equipment, nor having a monthly payment for land/building/site/soft/equipment close to 11k! Last time the land was listed, the listing had $1/sqf annually and at 27K sq ft (dont forget this is an undeveloped lot) that is 2265/month for my leased land. And a 500K SBA loan at 5% amortized over 10 years is 5300/month and if I do a safer 15 year loan is is 3950/month so that would be 6200/month in lease/bank payments just about half what you had for me.

If you are going to put numbers in that are in favor of my failure, at least make them believable...

Eric

Unfortunately you're not gonna build a wash for 500k...

 

[Hurricane350]

The loan is 500k, my down payment is 200k for a total of 700k for a mini-tunnel.

 

[BBE]

I don't know how "mini" you are talking. 35ft ish is a "mini" tunnel. But keep a few things in mind while you are doing your numbers. Even a "mini" tunnel is going to be tough at 700k, and as someone pointed out, you leave not a lot of margin for error or surprises with that. And there is ALWAYS surprises. Also, consider the volume that the length of tunnel you are planning to do is. If it's a true mini tunnel at 35ft ish, then you are going to be limited on your volume, and you want to factor that in to your numbers when you are making car count projections. If the mini tunnel is going to be more like 60, 80 or 100ft, then you are well over a million for the project without the land.

You also don't want to underbuild either. If you can only afford a 35ft mini tunnel and if this is not sufficient enough carwash for your area (which I assume it's not, otherwise you may wanna reconsider the area) then you do leave the door open for potential competition down the road. Just a few things to think about.

 

[robert roman]

“Ok, maybe its the internet in general but every post you make towards me seems condescending.. maybe its just me.”

No, it’s not you, because others here have accused me of being condescending.

Perhaps I come across this way because I don’t sell buildings, equipment or chemical.

In other words, I don’t have to be nice or cover up the ground truth with BS to gain trust.

I find many comments simply underscore lack of understanding of development process, industry best practices, etc.

Last time I looked, banks prefer total project financing for SBA and requires several prior years of closely related management and ownership experience and personal guarantee.

Personal guarantee means collateral or cash, real estate and personal assets the lender can grab if need be. SBA 504 loan is not possible without real estate.

So, doesn’t this mean you are limited to conventional bank loan, hard money or lease financing? I sure would like to see the term sheet for your project.

 

[Hurricane350]

I don't know how "mini" you are talking. 35ft ish is a "mini" tunnel. But keep a few things in mind while you are doing your numbers. Even a "mini" tunnel is going to be tough at 700k, and as someone pointed out, you leave not a lot of margin for error or surprises with that. And there is ALWAYS surprises. Also, consider the volume that the length of tunnel you are planning to do is. If it's a true mini tunnel at 35ft ish, then you are going to be limited on your volume, and you want to factor that in to your numbers when you are making car count projections. If the mini tunnel is going to be more like 60, 80 or 100ft, then you are well over a million for the project without the land.

You also don't want to underbuild either. If you can only afford a 35ft mini tunnel and if this is not sufficient enough carwash for your area (which I assume it's not, otherwise you may wanna reconsider the area) then you do leave the door open for potential competition down the road. Just a few things to think about.

The mini-tunnel I was referring to is 50' in length and can do 65 cph. I was always planning on doing an 80' tunnel but unless friends come through for an extra 100k, I will have to do the mini-tunnel. And I agree 700k is low, I planned on a 800K loan with my 200k down payment, I was just adjusting to fit Roman's numbers.

Eric

 

[Hurricane350]

“Ok, maybe its the internet in general but every post you make towards me seems condescending.. maybe its just me.”

No, it’s not you, because others here have accused me of being condescending.

Perhaps I come across this way because I don’t sell buildings, equipment or chemical.

In other words, I don’t have to be nice or cover up the ground truth with BS to gain trust.

I find many comments simply underscore lack of understanding of development process, industry best practices, etc.

Last time I looked, banks prefer total project financing for SBA and requires several prior years of closely related management and ownership experience and personal guarantee.

Personal guarantee means collateral or cash, real estate and personal assets the lender can grab if need be. SBA 504 loan is not possible without real estate.

So, doesn’t this mean you are limited to conventional bank loan, hard money or lease financing? I sure would like to see the term sheet for your project.

I don't think anyone in this thread has tried to sell me anything... no building, equipment, chem, or any type of sales pitch from any of the contributors but they haven't put me down either. I feel like the fat kid back in school getting pushed down at recess when I see a response from you.

Look again. Nothing states that a real estate purchase is required.

https://www.sba.gov/loans-grants/se...-small-business-loans-7a/use-7a-loan-proceeds

 

[Waxman]

you need to develop a much thicker skin if you plan on entering the car wash business. quit complaining about how you are being treated and see the advice for what it is; help.

it's a bad idea to lease land.

if all you want are 'atta boys' and fairy tale stories with happy endings, you came to the wrong place.

the folks here are giving you real-world advice based on personal experience and years in the car wash industry.

time to wake up.

 

[robert roman]

“I feel like the fat kid back in school getting pushed down at recess when I see a response from you.”

That’s because you are in denial.

For the past 17 years, I’ve worked with people who wanted to get into the carwash business, get better at it or get out of it.

Compared to 2000 estimates, the industry has contracted in establishments, wash revenues and cars washed.

Years ago, this forum had a ton of participants. Did Robert Roman’s condescending ways chase them away? LOL

Some people don’t comment here anymore because they are out of the business and not by their own choice.

I’ve seen people throw away $400,000 in cash and more because they bought or built a pig-in-the-poke against all advice.

Yes, there are lots of success stories.

For example, there is a fellow who used to come to this site regularly that I worked with during the planning phase of his first carwash project.

Three acres, eight profit centers, $14 million.

This guy had no prior carwash management or ownership experience. So, how did he do it?

One of the reasons is he stuck with the fundamentals of carwash development.

Sorry you feel pushed around.

However, when I see someone with the cart before the horse, I feel obligated to tell them.

If a taxi driver gets buyer’s remorse, they can simply trade the vehicle in for another model.

There is no such animal in the carwash industry.

 

[rph9168]

Like any other business there are risks and rewards. The reason many fail in our business is that they let their passion or desire get in the way of reality. Building on leased land then leasing the equipment creates risks before you even get started. Not seeking and at least listening to advice because it disagrees with your goals creates even more risk. It is hard but not impossible to be successful when some of your original design works against you. You definitely need to find an unbiased consultant to help you sift through all the issues and in the end sometimes the best decision is to either alter your plans to increase chances of success or give it up. I remember more and regret the times I failed to talk someone out of a project that I thought would fail and it did than those that were successes.