Valuing SS Wash

[JamalM510]

Looking into buying a SS wash on leased land. Property owner built it in 2020. All new equipment. 5 large vehicle wash stalls. Token based systems. Also has 3 double-system vacuums for a total of 6 stations. There is a money changer system on site and some vending machines. Claims equipment is $250k alone

purchase price: $295k
Yearly revenue: $119k
Rent from taco truck on site: $3k/year
Yearly expenses: $23k

Operator is currently the landowner so he doesn’t pay rent. Buyer would pay $4500 rent and to be negotiated. Rough part of Oakland CA. Hours 8-8.

Thoughts on value?

 

[Keno]

Run away, not enough meat on the bone

 

[edredtop]

Looking into buying a SS wash on leased land. Property owner built it in 2020. All new equipment. 5 large vehicle wash stalls. Token based systems. Also has 3 double-system vacuums for a total of 6 stations. There is a money changer system on site and some vending machines. Claims equipment is $250k alone

purchase price: $295k
Yearly revenue: $119k
Rent from taco truck on site: $3k/year
Yearly expenses: $23k

Operator is currently the landowner so he doesn’t pay rent. Buyer would pay $4500 rent and to be negotiated. Rough part of Oakland CA. Hours 8-8.

Thoughts on value?

If I'm reading this right:
He gets $295K up front, takes almost half of the gross, leaving you with the bills, maintenance AND you get to deal with whatever jackpot Oakland's finest can throw at you?
If your $295K note is for, let's say 10% for 10 years (a common lease term) your payments would be $3,898.45 a month and after all that, at the end of your 10 year lease, HE still owns the land ...

 

[Axxlrod]

Taco truck rent is $3k per year? Seems really low.

 

[kentadel]

Been in this business, like many, a long time. Buying on leased ground and partnerships are 2 of the don't do, especially for someone new. This is one sided as for who would be getting a good deal.

 

[JamalM510]

Been in this business, like many, a long time. Buying on leased ground and partnerships are 2 of the don't do, especially for someone new. This is one sided as for who would be getting a good deal.

yeah I’m new to the forum but those points of emphasis appear to ring true. Will keep digging. Appreciate you all

 

[washnshine]

Even if all the numbers looked good, I’d shy away from the “rough part” of anywhere. There are plenty of operators who have washes in rougher neighborhoods, but if you are just starting out and will be doing this for a while, that is probably not where you want to begin your journey into this industry.

 

[Dan kamsickas]

Claims equipment is $250k alone

He can also claim that the sky is green. If it was original to the site, it's not worth even a fraction of that. Maybe pennies on the dollar. Who is the manufacturer, how old is it, does he have records of maintenance(I doubt it). Is he willing to let you have an outside evaluation of it done?

He's delusional. If he does find a sucker to take him up on his "price" he's going to be back running the place in 12-14 months.

 

[Waxman]

I wouldn't buy anything on leased land. Part of the benefit of operating the car wash business over an extended time is to pay off the loan on the buildings, land and equipment. That way at the end of your journey in the car wash business, you have a real asset to sell and make a decent amount of money for whatever you want to do later in life.

 

[Roz]

valuation is off but don’t let the leased land scare you especially if you have limited money to invest.

$119K - $23k expenses - rent ($54K) - NNN

take what is left over and multiply by 3. That’s the top value for this setup. Guessing you have maybe $35K left. So value is about $105K if lease is long enough and equipment is good.

That said for a wash with such a low revenue and poor location you are essentially paying the owner to become an employee with a long term commitment so I would pass. If you think you can grow the revenue then perhaps worth considering. If more of a headache given the location then maybe the owner hires you for $35k to run the place for him?

 

[JamalM510]

valuation is off but don’t let the leased land scare you especially if you have limited money to invest.

$119K - $23k expenses - rent ($54K) - NNN

take what is left over and multiply by 3. That’s the top value for this setup. Guessing you have maybe $35K left. So value is about $105K if lease is long enough and equipment is good.

That said for a wash with such a low revenue and poor location you are essentially paying the owner to become an employee with a long term commitment so I would pass. If you think you can grow the revenue then perhaps worth considering. If more of a headache given the location then maybe the owner hires you for $35k to run the place for him?

interesting perspective. Leaves me $42k after it’s all said and done. So x 3 would be $126k. He said he hasn’t raised prices since opening, and maybe can add food truck and raise their rent (only $250/month). But $295k still too rich. He’d have to come down on the rent.

 

[864real]

I wouldn't buy anything on leased land. Part of the benefit of operating the car wash business over an extended time is to pay off the loan on the buildings, land and equipment. That way at the end of your journey in the car wash business, you have a real asset to sell and make a decent amount of money for whatever you want to do later in life.

This is really my angle on these washes. Many times you can buy these for about what just the land is worth. Use the sweat equity in the business to pay back the real estate. You make some money along the way doing this and that is just a bonus. If ran well, and purchased right, you have paid for real estate in 10yrs or less. At that point, can continue to run it now with more cash to you, or sell it and make money on the appreciation of the real estate and hopefully a more profitable business for the next person. I personally would never buy on leased land. If you can make it so, the owner finances the land and the wash, that should make more sense. Then the owner still gets an income stream, and long term you own it.