Help: Key things to know when purchasing an existing Self Serve?

[Pro-Techt]

After years of dreaming about wanting a Self Serve, I finally decided to pull the trigger and move forward in a more serious manner. At this point I am at the initial stages of looking at existing Self Serve washes and I have some questions.

I have 1 wash that I am going to inquire on and wanted to get some advice from the pros here. What are the key questions to ask the seller that can help determine if this investment is feasible?

Here’s what I know so far:

Asking price: $259,000
Grosse Income: $58,000
6 Bays / Built in 1991
$259,900 with $75,000 down, 7% int., amortized over 25 years, balloon @ 10 years.

 

[MEP001]

I hope you have other funds on hand to make improvements, because you aren't going to bring in enough to pay your bills and mortgage with those numbers.

 

[DiamondWash]

Amen to that.

 

[Pro-Techt]

you aren't going to bring in enough to pay your bills and mortgage with those numbers.

Ok, but here’s my math:

Loan amount: $184,000
Monthly Payment Amount: $1300 X 12 months = $15,600
Taxes / Insurance (est): $5000


Income: $58,000
Fixed Expenses: $20,600
Income before Variable Expenses: $37,400

Can you tell me how much of this amount will be exhausted into the remaining expenses?

 

[Kessler757]

I just purchased a 6 bay

I just purchase a 6 bay that has been closed for 6 months and have already spend close to $50,000 on improvements, and I am not done. Replacing pumps and old pipes, running new lines, coin boxes, booms, brushes parking lot repairs and spray guns, vending equipment repai parts... on and on and on... Plus if you can get someone who really knows what they are doing to help you on the things you don't know... you can expect to pay no less than $50 a hour for your help, plus travel and lodging expenses and that is cheap.

I have learned alot ...

So I hope you have some extra money for the unexpected.

Good Luck!

After years of dreaming about wanting a Self Serve, I finally decided to pull the trigger and move forward in a more serious manner. At this point I am at the initial stages of looking at existing Self Serve washes and I have some questions.

I have 1 wash that I am going to inquire on and wanted to get some advice from the pros here. What are the key questions to ask the seller that can help determine if this investment is feasible?

Here’s what I know so far:

Asking price: $259,000
Grosse Income: $58,000
6 Bays / Built in 1991
$259,900 with $75,000 down, 7% int., amortized over 25 years, balloon @ 10 years.

 

[rph9168]

A wash that has been down for six months can be costly to bring back into working condition. Before you make the leap you need to know more about the cost involved in bringing the wash in good running condition. I think the numbers are a little thin as you describe. I would get at least two written estimates on repairs that need to be done and negotiate a fair price. If you can't I would back a way for a while to see that either someone pays the price and ends up losing it again due to the cost of repairs or the owner gets a little more flexible with time.

 

[Earl Weiss]

Ok, but here’s my math:

Loan amount: $184,000
Monthly Payment Amount: $1300 X 12 months = $15,600
Taxes / Insurance (est): $5000


Income: $58,000
Fixed Expenses: $20,600
Income before Variable Expenses: $37,400

Can you tell me how much of this amount will be exhausted into the remaining expenses?

Things vary widely by location. Are you in a cold climate? You'll pay a lot more for floor and trough heat, equipment room heat than someone in a warmer climate. Water rates also vary widely. I am not sure what you lumped into "Fixed expenses" Insurance? Scavenger? Phone? Accounting? Advertising" Labor?
Variable wil include water, electricity, perhaps gas or propane, maintenance, replacement parts, cleaning solutions, Office supplies, Bank Charges, Postage, printing,

 

[JMMUSTANG]

What's the competition?
#1: Express Washes
#2 Self Servs.
#3 Full service or Flex wash tunnels
#4 IBA's
Distance? Price points? Coin box time?
Do you have 3 years of financials? Has the gross been going up or down?
DON'T pay asking price.

 

[ScottV]

I'd want to see a 3-5yr history on the gross income numbers from that location. Is it holding steady, declining, etc.?? They may have lost half of their gross rev's because of new competition in the area.

1 year of financials doesnt tell a complete story.

 

[rph9168]

Declining revenues and equipment problems are a deal killer. Without 3-5 years of decent financials and a relatively clean bill of health on the equipment I would not pursue this deal any longer.

 

[Kevin James]

And in what mystery city is this car wash located? I say BUY IT!!! Then you’ll find out firsthand what a low profit business the car wash business really is. We have looked at a lot of car washes and almost all of them are only worth the dirt they sit on and in some cases less. Find out what the tax value of the land is and go from there. There’s normally a pretty good reason why all these car washes are for sale, it called no profit or low profit.

 

[rph9168]

I really think that the biggest reason some washes fail is that the individual went into it thinking of it as an investment rather than a business. Granted that some failed washes were built in bad locations but in my experience the most common reason for failure is poor management.

I worked for a national car wash chain back in the early 90's. At one time I think they owned almost 40 washes. All their washes were successful operations. It is interesting to note that they had never built a wash. All they had were ones they had purchased.

I have no doubt that owning a car wash is a tough business but one that can be profitable if you plan to go into it as a business, not something you buy and are not actively involved in the day to day operation of it.

 

[Whale of a Wash]

I am still wondering about the loan 7% seems really high, as i am at
5.5%. But around here 15 yrs is max on a business loan, as things change
too much in the business world.

 

[robert roman]

I usually begin with a simple sanity check.

Average gross net less property tax and debt service based on sales of $58,000 and the terms you described should leave pre-tax profit of about $15,000 or 20 percent return on cash ($15,000/$75,000).

However, the exit strategy is a balloon payment of $145,000 and yet pre-tax cash flow from operations is only $150,000 (10 x $15,000). So, what is the likelihood you can improve business so exit strategy creates wealth?

For example, the revenue benchmark for six wands with vacuums and vending is $125,000. To reach this, you would need to increase existing sales by a factor of 2.16.

Do you have the know-how and sweat equity to generate $67,000 in additional sales? If not, you will need more cash for improvements and marketing and this will further leverage the investment.

It is suggested when exit feasibility in a venture is less than 80 percent, the decision made should recommend the business is not viable.

So the sanity check becomes - do you believe you have at least an 80 percent chance of making this site produce sales of $125,000 within the next two years?

 

[Waxman]

I'd say the price should be based more on the value of the real estate because the income is so low. The interest rate is too high at 7%. I just switched to 5.25% fixed for my biggest loan.

You'd have to spend alot of time at the wash and money for improvements to get the numbers up by a factor of over 2.

The guys here have given you some great free advice, some of it from consultants who are normally paid for this.

So at the risk of sounding rude, you saying : 'here's MY math' is a mute point. Our math is of better use for your project due to our experience. That's ostensibly why you asked.

 

[Pro-Techt]

Thanks for everyone's input. Very much appreciated and I will use it in my quest. Like I said, this is the early stages of my search. And this is the 1st business I have considered.

This wash is located in the Metro Detroit area (5 minutes from my home actually) and claims to have recent upgrades like new lighting, awning, sign, poles and repaint of entire building. Owner also claims to spend approximately 2 hours per day, 2 days per week maintaining this business, which I feel is pretty low and can be considered somewhat of a red flag.

In retrospect to what rph9168 mentioned, I look at this venture as both an investment AND a business. Not just something that only requires little to no time to collect on a return like so many people feel these types of washes are stereotyped as havng. I am not relying on this as my only source of income and will retain my current corporate job which is extremely flexible to allow the dedication needed to support this venture. As long as the business income can support comfortably paying the loan, is cash positive after expenses, I will either reinvest the profits into either improving the existing location or aquiring another when feasable.

Again, I'm greatful for everyone's input and encourage you to keep offering it in a productive way.

 

[Earl Weiss]

Beware of snakes in the grass. It's always nice to buy a place and learn you forgot to see when the last time they pumped the pits was and look at an addittional expense of $$$Thousands to take care of this.

 

[Washmee]

I don't understand why someone would want to take on an enterprise that requires 24/7/365 attention for a couple of thousand $$ a year profit.....

 

[rph9168]

Back in the 80's and early 90's I knew several companies that made good money buying up distressed washes, renovating them and reselling them. I doubt that this could be done today. While there may be some that can be purchased at a great price it would be hard to fix, resell and make any profit. If you look at it long term you probably can make a profit selling a wash that was purchased at a low price today but it would take quite a while to build up revenues to make it an attractive business.

 

[JMMUSTANG]

If there is not one around and the property is large enough it might be worth looking into knocking the wash down and building an express wash.
Cost and your time spent there will change drastically though.