3 bay Touchless Car Wash Purchase

[kg468]

Hi, first time poster long time lurker here...

I'm under contract for a 3 bay touchless car wash - purchase price of 1.65 million. The Revenue in 2023 was 600k (including sales tax). NOI ~ 375k in 2023

2024 t12 numbers not as good. Gross Revenue of 475k - NOI is around $260k

Equipment is new (last 3 years - all new touchless washes, new doors) - 3 Petit Acutrac 360-I installed in 2022. I total it was a bit over $1 million in cap ex including 3 new machines and all new doors.

I live quite a bit away from this - like 1.5 hours away. I do have a contact onsite that I can trust to show up in the case of an issue.

How much hands on would this require? Do I need a full time employee to be there? The terminals are currently cashless (this was cited by an outside company I'm talking to as one of the major reasons for revenue decline). I do have someone that can refill chemicals and do basic maintenance as well as a trustworthy company that does larger service items and supply chemicals (remote coded access as well as security cameras on site). I have a plan for the customer service issues - better than what the current ownership is doing.

Financing terms have been favorable for this - looking at around 80% LTV loan - possible to get 90% LTV depending on appraisal.

My background is in real estate investing. I do have a full time job and am able to work that while managing my own real estate portfolio. Would a touchless car wash be able to be run the same way - semi-passive? Not that there isn't work in real estate, for the most part I never have to be the person showing up there to get something done. I can usually just make a phone call and have someone else show up.

I'm not concerned with maximizing every dollar out of this business - but obviously I would need this to make more money that my typical real estate investment (this is priced at like a 16 cap, whereas I can look for months and not find a 9 cap in real estate). My wife would be able to help with some of the things that would be needed - I'd probably reinstall terminals that accept cash and have her go collect that as needed.

As with any investment / new business I'm clearly overlooking very large aspects - things that you can't learn until you're in the business. Could someone help provide me with some insight into what I'm missing? What aspects of managing this business I'm not considering? How hands-on does an owner need to be on this business?

Any guidance would be appreciated

The land itself is probably only 200k or so in value despite being on a busy road - it's in a small town.

 

[Keno]

Those revenues don't line up for a small town wash, be very cautious about verifying those numbers.

 

[Rapidoil]

to build a one bay petit you are looking at north of that purchase price. I'd say it seems like a good deal if you can make the numbers work

 

[jahlewskii]

what is the daily traffic like on the street?

 

[kg468]

Thank you all for the quick replies! I'm looking for any angles I have not explored.

1 mile population ~ 5k, 5 miles ~ 35k, 10 miles is ~70k. I do trust the data provided - this is an agent I've worked with previously on a few real estate transactions. I will obviously verify during the due diligence period.

Traffic counts: 11k on the road itself. It's a block off an intersection with another 8k. It's right off an exit from a highway with 28k vehicles

I did not realize it cost that much to construct a single petit touchless system? Cap ex details provided were just over $1 million for all of what they did. I'm in touch with the vendor who installed it who said he's going to get me the exact costs. Are you talking about ground up construction including acquiring land / installing utilities, building the bays?

Bigger questions for me are how much work does this entail? Can I run it somewhat passively? I understand it's not a passive business, but can I run it relatively passively? I have a reliable company that I contract with that will do lot sweeping 2-3 times a week - mow the small patch of grass, etc. Do I need a full time onsite employee?

 

[MudMoney]

You better figure on a full time attendent,divide hours among employees. Constant maintenance issues and keeping a parts inventory to minimize breakdowns. This is a hands on business to survive and not cost effective to have breakdowns fixed by outside techs.

 

[Waxman]

I would never try to own/operate this business from 1 1/2 hours away. I've owned my 2/1 car wash for almost 20 years. I have employees there detailing cars and I still show up 6 days/week, down from 7 days/ week for the first 15 years.

As a real estate investor myself, I'd suggest apartment buildings instead. Car wash is too hands on for you and you'll wind up getting ripped off or having too much downtime etc if you try this your way.

 

[AnalyticWash]

3 Petits... I would buy this in a second at that price and those numbers. I would definitely be figuring out why you had the drop in gross revenue (i don't buy the cash being the only reason).

For a good deal 1.5hrs is nothing. Spend some money for onsite labor to handle the daily bs (cleaning).

I own multiple Petits across multiple sites so feel free to PM me if you have questions about the equipment or the business in general.

 

[Axxlrod]

Find out more details about the drop in business. Was the wash taking cash in '23? Then went cashless in 24'? Credit card customers spend more per wash than cash customers do, so the drop in revenue does not make sense to me.

Plus accepting cash is pain. You will need someone trustworthy to remove the cash each night and count/deposit it. Not sure such a person exists tbh. Having your wife go there and remove the cash "as needed" is a bad idea. Keeping cash in the pay stations at night is inviting vandalism/theft. Either remove it every night or remain cashless. FYI. I'm moving to cashless at my washes next year.

 

[Rapidoil]

I was the one that mentioned the 1 bay petit ground up build. Cost for entire project was @2 million. I underestimated the cost of the building and development and it's probably more of an economies of scale thing. I.e. it's more cost effective to build a 2 or 3 bay because it costs X amount for the contractor to build and develop the land. My estimate for 1 bay was @2 million. I bet it would be more like 2.5 - 3 million for a 2 bay. In the attached estimate the construction costs ballooned to 1.1-1.4 million.

 

[Car_Wash_Guy]

That seems like an awesome deal on a 3 Bay Petit!

Maybe I missed it but has any new competition came to town? Not sure what else could cause such a precipitous decline in gross besides competition or perhaps mismanagement.

I have a dual bay that does well. I run mine as absentee as possible as I spend time with my 91 yo dad. I’m a 4 hour flight from my wash.

I’m there about 2x a month for 2-3 days each and I’m literally busting ass 12 hours a day catching up with things and fine tuning. I’m not sure if you could do it on less. I also have a very competent manager who can do a lot.

Good luck from a few R/E investor.

 

[kg468]

After some digging, there is a new competitor in town that opened in December 2023. I still think this could still be a decent deal even assuming some continued revenue drops.

General consensus is that I need an employee onsite to run this thing? I can't just have a company come in and do lot sweeping, empty trash and troubleshoot equipment on an hourly basis, correct? Even if I'm not looking to maximize dollars and am happy with a pretty decent return here?

 

[Car_Wash_Guy]

It’s possible. I would calculate your labor cost and maybe cautiously figure that you’re gonna drop another 25% on your gross.

Calculate from there and see if it meets your ROI

 

[tdlconceptsllc]

Also need to figure in a total reload on 3 new machines 10 years from now to keep washing high numbers a rehab will it produce enough money to make bank payment and pay you and have enough left to do a reload 10 years from now when there wore out and tired not to mention inflation of bidenomics on what equipment will cost then to do such a project. This is a part new investors totally miss in this industry.

 

[kg468]

Also need to figure in a total reload on 3 new machines 10 years from now to keep washing high numbers a rehab will it produce enough money to make bank payment and pay you and have enough left to do a reload 10 years from now when there wore out and tired not to mention inflation of bidenomics on what equipment will cost then to do such a project. This is a part new investors totally miss in this industry.

So assuming 2.5% inflation, we're looking at 795k in 2022... looking at just over $1 million in a refresh? So 100k a year in reserves as a refresh? That's basically the majority of the cashflow... is that an aggressive estimate or just the industry standard?

 

[Greg Pack]

If the petits are as simple and bulletproof as most owners claim I don't think you'll need a reload in ten years. Many machines that have a reputation for reliability can go 20 years/ 200K-300K cars. But at some point you do have to replace them or expect to be penalized at the time of the sale if you don't. Some allocation needs to be done for that one way or another.

You can run remotely to some extent. But I think you must be willing to learn the technical side of the business to some extent or hire someone who will. Even though you don't want an employee it's the general consensus that attendants who are good with customer service tend to pay for themselves. I would at least consider someone on the weekends and peak hours. But I also understand the aversion to employees and this would be awesome test to see how this was works as a semi passive investment. Being these machines are touch free they need to be watched carefully by someone that knows what they're looking at. Plan on doing that yourself during the honeymoon period and learn what the cleaning capabilities are. A change in water or chemical quality can greatly reduce wash performance. Mediocre cleaning will cause a loss in loyalty and it's hard to get those customers back once they have a few bad washes. Once you get familiar with the wash process I'd say a minimum of two visits per week by a knowledgeable person is needed to test water quality, chemical effectiveness and to ensure the machine is not malfunctioning. petits have some nice tech advancements but I don't know if they can sense a major hose break, etc.

I wouldn't add cash, the industry is moving away from cash.

Anyway, it's a compelling deal, I would certainly be interested at that price if it was in my market and numbers can be verified.

 

[Dan kamsickas]

If the petits are as simple and bulletproof as most owners claim I don't think you'll need a reload in ten years. Many machines that have a reputation for reliability can go 20 years/ 200K-300K cars. But at some point you do have to replace them or expect to be penalized at the time of the sale if you don't. Some allocation needs to be done for that one way or another.

I can't agree more. It's overlooked far too often. I see a lot of operators who don't plan for it and when they go to sell have the harsh realization that the equipment doesn't have nearly as much value as they think. Many times, it's virtually worthless unless you can find a buyer who doesn't know any better. Or, they are faced with a machine that is in dire need of replacement and, because they haven't planned for it, can't afford to replace it and can't afford not to.

I have a customer that owns 8 washes(self serve and autos) and multiple gas station/c-stores. We were discussing some upgrades to old vacuums years ago and he decided to go with new. When I pointed out the money he could save by doing the upgrades he responded "But I'm still going to have 20 year old vacuums. I plan on replacing a piece of equipment the second I start it up. "

 

[AnalyticWash]

petits have some nice tech advancements but I don't know if they can sense a major hose break, etc.

They can...

 

[Roz]

and one can over think a good opportunity and have risk paralysis. As long as you are not looking to flip the place in the short term you should be fine. Just do not go into this purchase thinking that it is a totally passive investment.

One cannot plan for everything in life and work. Taking calculated risks is the only way to being a successful entrepreneur. While it is wise to seek advice from others who have traveled the path you are considering at the end of the day process the info and if you feel comfortable with the idea of running a carwash then jump in....If the place and valuation is a good deal then you should be able to sell it a year from now for the same price in the event you decide that this industry is not for you. Your biggest challenge will be getting a loan as banks are really risk adverse. Good luck, enjoy the ride, do not overthink the opportunity. Carpe Diem.

 

[Car_Wash_Guy]

and one can over think a good opportunity and have risk paralysis. As long as you are not looking to flip the place in the short term you should be fine. Just do not go into this purchase thinking that it is a totally passive investment.

One cannot plan for everything in life and work. Taking calculated risks is the only way to being a successful entrepreneur. While it is wise to seek advice from others who have traveled the path you are considering at the end of the day process the info and if you feel comfortable with the idea of running a carwash then jump in....If the place and valuation is a good deal then you should be able to sell it a year from now for the same price in the event you decide that this industry is not for you. Your biggest challenge will be getting a loan as banks are really risk adverse. Good luck, enjoy the ride, do not overthink the opportunity. Carpe Diem.

Agreed. I'll also add that assumption is the mother of all fck ups.

Having a 3 bay Petit is the ultimate anti EE tunnel solution. You might night compete toe to toe with one being built nearby but you will thrive better than you would with a friction machine or other touchless machines.

I'd budget an attendant there selling passes 8 hours a day.