Value / Apraisal of a Self Serve Wash

[washregal]

I know this may be a silly question to some.. but I am asking it anyway.

Does anyone have a rule of thumb on what a self serve car wash might appraise at.. just asking from a standpoint of revenue.. Ex. $1,200 a month per bay multiplied by 3 years gross profits?

Just curious if anyone has knowledge on this they could share with me...

Also.. How to calculate estimated value of an automatic bay.

 

[Waxman]

Check out a book called "The Carwash Appraisal Handbook."

It answers all your questions.

I bought it and read it myself awhile back.

 

[washnvac]

From all the appraisals I have had done over the years, it seems that a newer, well run wash will go for 5-6 times annual gross. A lesser quality facility around 3-4 four times annual gross, and poor facility 2-2.5 times. I know that is simplified, but that is always what my wash and the comps worked out to be. I would assume in the current environment that an appraisal would come in on the "low" side. I hope that helps you. ( this is for self-serves with ibas)

 

[Patrick H. Crowe]

There is no way a wash can sell at 5-6 times annual gross and stay afloat. There was a long posting on Gross Income Multipliers (GIM) some years back and the math was there to prove it.

I once wrote a light touch piece demonstrating that if a person "messed" with the income and expense numbers enough a GIM of 1 or a GIM of 10 was proveable.

I wrote the original Car Wash Appraisal Handbook. The 2009 version, vastly updated and expanded has just been published.

Each time I spoke on car wash values at a regional or national convention I drove home the point about how silly a GIM of 5 was by offering to sell any or all of my washes to any buyer who would pay five times annual gross. I never got a single taker.

Moreover the age and condition of the wash are factors in determining the gross income so to state that many different GIM's are needed simply shows a limited understanding of the process of determining fair market value.

Patrick H. Crowe

 

[Bubbles Galore]

In spite of all the good suggestions, you still have to factor in your local market. Mr. Crowe is refering to some things that I have no knowledge about, but I should definitely get educated about. What I do know is that I got comps on my wash and investigated the market as thoroughly as possible and made my offer. My offer was accepted by the owner because it was higher than the rest (duh). I was able to pay a little more due to the fact that I was aware of two large retailers, 2 franchise restaurants, and 3 strip malls that were applying for their zoning within a two mile radius of the wash. I am sure some will scoff and say I must be out of my mind, but the wash is doing very well and things are only looking at getting better even in this market.

Mr Crowe: Did you have an article printed in the 98 issue of SSCWN talking about this very thing? I was scanning through some old copies and remember seeing your name.

 

[washnvac]

Here is a reality. A wash is only worth what someone is willing and able to pay you on the day you decide to sell.

 

[JMMUSTANG]

Pat what if the property by itself is worht more than 5 times gross?
I've looked at self servs with one thing in mind, if or how can I add a small tunnel to the location?
This changes the way I look at what a wash is worth.
That said I sure don't want to pay to much.

 

[Patrick H. Crowe]

Dear Bubbles Galore:

Yes, I did have an article about this published years ago. That led to a far more extensive analysis and The Car Wash Appraisal Handbook. The 2009 edition was just published and it informs the reader how to determine the FAIR MARKET VALUE of any wash. It's a complex and difficult task and many professional appraisers know verly little about it.

I'm pleased to hear your wash is doing so well.

Simultaneously it is my opinion that there are ao many washes which have or are about to belly up because the folks who bought them simply did not know how to determine their real value and thus paid too much.

So far as the claim "it's worth what ever you can get for it" - - yes, obviously. That's like suggesting all there is to the stock market is to "buy low and sell high". I wonder why there are scores of books in the library on stocks? The five word explanation hardly tellls one when and how to "short calls".

Patrick H. Crowe

 

[Greg Pack]

There is no way a wash can sell at 5-6 times annual gross and stay afloat.

Patrick H. Crowe

Why can't a wash stay afloat at 5X gross?

200K/yr wash with 1 million sales price and 45% expenses would give 110K to service the debt. Debt on 800K at 15 yr @7.0% is about 86K.

 

[washnvac]

cfcw.... I agree. A great running wash could support debt on 5 x.

 

[Sequoia]

I drove home the point about how silly a GIM of 5 was

Hmmmm.

I could board up my wash and sell the land for 5x gross. But with the wash operating, it brings in revenue, of course.

Although Mr. Crowe considers anyone an idiot who pays 5x gross, I wouldn't consider selling for less, as it would be less than the land value alone.

 

[Patrick H. Crowe]

Dear cfwf:

What you have done exemplifies what oversimplified and unrealistic numbers do to an investor. Please read on.

1. There is very little chance that a car wash buyer could possibly get a 7.06% commercial loan. There is even less chance that he/she could get such a loan at a FIXED rate, right?

2. Dear Sir, I speak from experience. A fixed rate commercial loan on a car wash? If you assume the buyer is of large net worth to debt ratio (who is?) then maybe but extremel unlikely. In my 40+ years, even with a seven figure net worth I never got such a loan. But then no doubt you have or can anme three folks who have. Do so.

3. What a prudent buyer needs to do, on a 15 year loan, is look back at the rates over the last 15 years. In 1992 I was paying 12.5% on a variable rate commercial loan. Now do the math and you'll see the consequences.

4. Next consider that if this loan was taken out three years ago then the chances are, in most but not all locations, the gross has inched down to 140K. Now do the math and you'll see the consequences.

5. The problem of determing the fair market value of a car wash is complex. It merits book length discussion. Send me your snail mail address and I'll send you a free copy of the 2009 Car Wash Appraisal Handbook.

Then, having read and studied it, please post your review. I'm sincerely convimced you'll see why GIM of 5 (let alone 6) is ABSURD.

I intend no offense but these sort of amateurish oversimplified answers are flat out dangerous.

Patrick H. Crowe

 

[Patrick H. Crowe]

JMMUSTANG:

You ask the question: What if the property alone is worth more than five times gross for the wash?

You no longer have a car wash appraisal problem. I assume by "property" you mean land, right?

Under these unusual conditions the buyer is purchasing land which merely happens to have a car wash on it. I had this happen to one of mine and I've seen other such cases though they are rare.

A prudent seller gets rid of the land because under anything close to normal circumstances the capital will earn more elsewhere than as a car wash. That's why there are no self-serves in downtown Tokyo or New York City.

The concept is known as "Highest and Best Use". It tells any owner with a car wash on land much better suited to another use, e.g. a McDonalds, e.g. a Walgreens - - never mind a high rise office building - - that the value is all in the land and the car wash will be demolished for the new use.

Of course any owner is free to not sell and keep earning less washing cars than by selling. That's free enterprise in America. He/she may have personal/emotional attachments to the wash. These have noting to do with the determination of FAIR MARKET VALUE. It is not a car wash appraisal problem. The car wash is not worth a GIM of 5 or 6. It is a land appraisal problem and those who confuse the two simply to not understand basic appraisal theory.

Patrick H. Crowe

 

[I.B. Washincars]

FWIW, I borrowed just over 2 mil in April. I got 6% locked in for 10 years. I have a friend in a nearby town that got 5.5% locked in for 10 years with prepayment penalties for the first 5.

 

[Greg Pack]

Pat, we can tweak these numbers and change the situation however we want and this car wash will swing from being hugely profitable to a terrible investment. But at the loan terms I mentioned a car wash can cash flow at 5X gross sales price. But I do agree a lower multiple reduces risk substantially.

Fixed rate commercial loans are readily available in my area.

 

[Sequoia]

JMMUSTANG:

What if the property alone is worth more than five times gross for the wash?
You no longer have a car wash appraisal problem.

Patrick,

If you wish to be known as a qualified appraiser, then how can you be so quick to dismiss one of the most key and intriguing aspects of SS ownership-- the land value? Since it is considered wise to own the property your SS wash sits on, this makes an ability to appraise the land value that it sits on very, very important. Casting this aside is .... amateurish .... isn't it? Or does your expertise not extend past just your immediate market with it's factors?

In my market, I see SS washes marketed at 10x GIM several times each year. A wash near me was marketed for just under 12x and I actually offered 10x and it was a good deal. (It eventually fell through for other reasons.) All of this was based on the earning and appreciation potential of the land underlying the business. If RE is included, I would bet every SS near me would sell immediately for 5x or more.

A SS wash can provide income, pay ongoing expenses while sitting on rapidly appreciating land. During this time, it can migrate from formerly being the best and highest use to no longer being so. Only when the new best and highest use outstrips the cost of demolition and new construction does it make sense to pull the trigger on that.

I'm a licensed RE broker in multiple states, (including appraisal training), a business opportunity specialist, a car wash owner, and I've built a multi-million dollar high tech company from scratch. All of my experiences tell me that if you dismiss land value you are missing a key step in SS valuation.

 

[Waxman]

10-12X GIM???

Hold the Phone....


I'm RICH!!!!!

$$$

 

[pitzerwm]

Waxman, I'm sure that someday you will be.

 

[Sequoia]

12x gross

To be fair to Patrick, the wash with the 12x asking price was a "best and highest use" issue. It was grossing ... allegedly ... $24k annually, and it's asking price was $275k. (6-bay SS) I didn't believe it was even doing $24k but that wasn't the real issue.

The backup offer behind mine was accepted when I withdrew due to uncertainty of permitting and other risk issues for business conversion. That gent removed the wash equipment, converted the equipment room to a customer waiting area, and put roll up doors on all of the bays to create a 6-bay auto service garage.

Asking price after 3-4 months of minor conversions was $675k. I believe it sold for about $625k.

Again, I say if you don't factor the land value you are missing, potentially, a large piece of the SS puzzle. It was certainly true in this case.

 

[Sequoia]

8-13x

These washes are a little outside my area, as they are Southern California whereas I am Northern California. And, some of the numbers look slightly off to me-- but generally in the ballpark.

Based on the data quoted, there is an 8x GIM, a 10x, and a 13x.

http://www.bizben.com/listings/128239.php
http://www.bizben.com/listings/108900.php
http://www.bizben.com/listings/112023.php