Leasing a closed Wash

[allthis4adream1]

I found a wash that has been closed for 1 month. It was an exterior wash and the original and only owner ran it since 73' until his death. His estate took over and when it came for a lease renewal the landlord did not want to go over 10 years. Aside from the lease not being long enough, the other reasons for closure are the economy and that a 10 year lease does not make sense since the equipment needs to be replaced. Or at least that's what the widow told me. I've also asked around and ppl said the wash was busy, neighboring businesses mentioned there was an issue with the lease.Now......what do I have to look into?

Traffic is 40mph on a busy street (traffic count pending). 4 lines with a divider but there is access through the divider to the wash. About 8 exterior vacs. Competition wise there is in in bay hand wash behind a gas station .5- 1 mile away. One a street parallel about 1-2 miles away an SS. And 1-2 miles there is an actual full serve wash in what looks to be an off location/ dead end.

The idea is to run it for 10 years and take what's earned and leave. I also plan on running it as an automatic and once the equipment dies convert it into a hand wash.

Any thoughts, input, criticism, or wisdom?

 

[pitzerwm]

Most of us won't lease the land, anyway, I think that most of us won't lease. I sure won't. In your case unless the lease is dirt cheap, which I doubt, I wouldn't touch it.

You kill yourself and have to walk away. Why bother. If you could get a 20 year with a 20 renewal, then you might have something that you could build up and then sell.

 

[Earl Weiss]

I have leased 3. One with an option to buy and another just a lease. If you can get an option to buy or right of first refusal get that as well. The owner should give you one because $ is $. It should not make a difference to him if he sells to you or someone else. If you are deaking with some huge corporate landowner, say if it is part of a shopping center, then they may not give you an option.

Now, equipment being what it is typicaly is made up of "consumeable parts" . With the exception of blower technology and pendulum style wraps little has changed in the last 30 years. Brushes go 'round and 'round and mitters go side to side, up and back or in a circular motion. Conveyors will die structuraly and repair costs can exceed replacement and that is the biggest ticket item to be concerned about.

so, the bottom line is can you make $. How much will you need to invest to:
1. Turn out a clean dry car
2. Promotion to let people know it's now open and thats what your doing.

You will need to find a good car wash service guy whose not just looking to sell you pretty stuff who can tell you what is needed vis a vis new cloth, some bearings and motors and what you need to spend to accomplish #1 above. Then you need to figure your fixed costs for rent (taxes?) insurance, scavenger, labor, postage, printing, phone, etc. Then figure your incremental volume cost, determine your pricing and break even levels and see if that is realistic to exceed your costs and then make you some $.

 

[Earl Weiss]

Also see if you can get some sort of option to extend.

If it needs an infusion of capital to get it running well perhaps you cna get some initial rent concessions to offset the cost.

 

[Waxman]

I own the land my business sits on and wouldn't do this any other way. Too much work in this business to not be invested in real estate.

Otherwise, you can't dream of Taco Bell showing up one day with their checkbook to buy your dirt for a taco store.

 

[Waxman]

I found a wash that has been closed for 1 month. It was an exterior wash and the original and only owner ran it since 73' until his death. His estate took over and when it came for a lease renewal the landlord did not want to go over 10 years. Aside from the lease not being long enough, the other reasons for closure are the economy and that a 10 year lease does not make sense since the equipment needs to be replaced. Or at least that's what the widow told me. I've also asked around and ppl said the wash was busy, neighboring businesses mentioned there was an issue with the lease.Now......what do I have to look into?

Traffic is 40mph on a busy street (traffic count pending). 4 lines with a divider but there is access through the divider to the wash. About 8 exterior vacs. Competition wise there is in in bay hand wash behind a gas station .5- 1 mile away. One a street parallel about 1-2 miles away an SS. And 1-2 miles there is an actual full serve wash in what looks to be an off location/ dead end.

The idea is to run it for 10 years and take what's earned and leave. I also plan on running it as an automatic and once the equipment dies convert it into a hand wash.

Any thoughts, input, criticism, or wisdom?

What if 'what's earned in 10 years' is a negative number?

 

[Indiana Wash]

What if 'what's earned in 10 years' is a negative number?

That's exactly what I was thinking!

 

[Earl Weiss]

That's exactly what I was thinking!

How is this different than risks of owning. Make no $ for 10 years and the value of the property is less than the acquisition cost? Maybe even less than the mortgage balance?

 

[briteauto]

I also plan on running it as an automatic and once the equipment dies convert it into a hand wash.

Any thoughts, input, criticism, or wisdom?

Be careful of this - you will see labor costs go way up, quality will not be as consistent (relying exclusively on the human element), and you will probably not be able to wash the same volume as an automatic. If you take Earl's good advice and get your equipment working effectively and start getting a good customer base with the automatic equipment, a switch to a hand wash could undo some of your efforts and potential for maximizing your income. Also might want to consider, if you ever do own the whole place - what will be easier for you to sell someday?

 

[Waxman]

"making no money' is too vague a stament, perhaps, to use in a comparison.

If you consider real estate part of your overall business investment strategy then one might argue that a lower number on an annual p&l may be less worrisome if you own real estate vs. lease.

Although operating profitably is what most owners desire, some years you don't.

However, if I own the land and it is a good, prime piece, the highest and best use may be an Arby's. If I lease the land and do not own it, the Arby's check is not made out to me.

 

[Earl Weiss]

True enough. That's why as part of a lease arrangement you need to protect yourself by trying to get the following:

1. Make sure the initial term is long enough.
2. Try to get options (I have one with 3 ten year options)
3. Try to negotiate an option to purchase price. (Have exercised one myself)
4. Get a right of first refusal.