Buying a wash that has been out of service for years

[Mjf10]

I live in a small town of around 17,500 people. In town, there are three car washes. All are self serve/in bay touchless automatic combos. Two are right by each other on the north side of town and the other is on the southwest side of town. The owner of the southwest side of town is looking to sell that location as well as another on the south east side that he closed down (I suspect due to antiquated equipment). I mulled buying the southwest location but he’s asking $450k for very old equipment in a 5 self serve 2 touchless automatic setup with very little traffic from my observations. His shut down location is just off the main drag in/out of town with good visibility but a small bank in front of it. I’m pretty confident in the location but does anyone have experiencing rehabbing a 4 self serve/2 touchless automatic car washes? I’d want to rebrand and update with all new equipment with loyalty/rewards. I’m having trouble finding a straight answer on pricing for new equipment. Is there a good place to get a quick estimate online? Does anyone have suggestions for brands or models of automatic washes in a rehab? The seller is asking $250k for the shut down location but it’s been for sale for a very long time and I believe I could get it for a fraction of that. I’m 30 years old and this would be my first investment in any sort of real estate/business. Looking for guidance on gauging viability as well as equipment quoting. Below is a picture from the main drag through town at the main stop light followed by the closer picture of the wash.

 

[MEP001]

Sounds like too much. What's the property worth?

 

[Mjf10]

The tax assessment of the land and improvements is $165k. The land itself is just over a half acre and makes up $55k of that total tax assessment. The entire lot is paved and the structure is in good shape. Different from the tax assessment, the pavement and structure have a ‘assessed replacement value’ of $210k combined. The seller is older, has some health issues, and looking to sell his last few assets to fully retire. I believe $250k would be the value of this wash if the equipment weren’t dated and there was some revenue history to go off of, but there’s not. I would approach this opportunity with a targeted purchase price of something closer to $125k or $150k for the land and structure and then replace most equipment. Before proceeding, I’m trying to gauge what kind of costs I’m in for with two automatic bays and (potentially) four self serve. He claims they all run fine but at least the automatics would need replaced - I believe they are original from when the wash was built in 1995.

 

[MEP001]

I can tell the vacuums are D&S, but the rest is a mystery. Could be Coleman given the color scheme. Good self serve equipment is pretty bulletproof, but you're right about the automatics, they'll need to be replaced or they'll need a lot of regular maintenance. One really big potential issue to look into is the bay height - the autos' entrances are limited to 6'5". If you'd have to raise the roof to install modern machines, that will be a pretty big additional cost.

 

[Mjf10]

I walked through last night and the height restriction is 6’5” but the entrance is only made to be this high by way of 2x4 supports from the roof downward with sheer metal facing where the white signs are on the two far right bays. I could rebuild these myself to a different height. So available height for the automatics has potential to be the same as the four bays on the left.

 

[OurTown]

One other detail to not look over besides the automatic bay size is the electric service. Many times the older autos did not have dryers so the service may not be large enough for adding them. People expect dryers these days so you would want to add them. Most new machines typically start at around $100K each and go to about $200K each including install. If the pay stations need replaced then you might be looking at a starting price of about $10K each plus install and can go way up from there. It is possible to install used machines to save some money but you really need a good distributor to look it or them over and advise you before purchase. The vast majority of the used stuff out there is too old and clapped out to invest in the money to remove it and install it for a new life. Also a bank may not want to finance a used machine. I'm being a little negative about used machines but letting you know it could be an option. Most likely the self serve equipment can be saved and rehabbed for not a terrible amount of money. You would probably want to do a lot of cosmetic updates, add credit card readers and replace lighting with LEDs.

 

[Rfreeman]

I would ask him why he shut this location down? You mentioned he has health issues but how long ago was this site shut down? By what you said it sounds like the location is good. The building from what I can see looks to be sound and not run down so then why did this location close? I would also go into the local businesses and ask if anyone knows about the wash and what happened with it. Sounds like you have already called the owner to get the sales price but have you walked the property with him or seen the equipment room to check out the SS equipment? As Mep said SS equipment is pretty bullet proof, sure you can add new options BUT whatever you do I would go with used equipment vs. new to save a lot of money.

As for the autos, personally I think you should look at that later down the road if you do buy this property. My first site 5+1 (in my avatar) I rehabbed the 5 SS and vacs first ran like that for a year and half and business was great. Every time I was a the wash (and I was there a lot) people would ask me about the auto....if I was going to open it or what I was going to do with the bay. Eventually I felt that my customers really wanted an auto option as well and that's when I made the decision to buy one. I did it this way and I wouldn't do it differently if I had to do it over again because I reduced my financial investment and overall risk. Oh and this was a wash that had been closed down for 3.5 years and was owned by the bank. I had met the original owner 6 years earlier and approached him to buy the location but he wanted a fortune for it, he did however tell me what the wash was supposedly grossing at the time so I was creating a proforma off of 75% of those numbers.

 

[Mjf10]

Thanks Rfreeman. It seems i could be in a similar boat to where you started. I have walked the property of his currently open location a few miles away which was built the same year and he noted the equipment was the same at both. At the time of touring, I hadn’t studied up on equipment enough to know what I was looking for. I asked him why he shut this one down and he noted that he did not have time for it and circled back to health issues. Obviously I want more detail than that but I’ll have to push a bit to get it. It’s strange that he left one open and decided to close this one. I asked about historical financials for either location but hes pretty old school and only has credit card readers on the automatics in his new location and said since it’s a high cash business he doesn’t have rock solid financials. I’ve only lived here 3+ years, and I could talk to then bait shop owner next door to confirm, but I believe it’s been closed for 5+ years. Everything seems to be disconnected and winterized from what I can tell but can inactivity or the equipment for that long do harm?

 

[KleanRide]

it’s a high cash business he doesn’t have rock solid financials

Same dance, different song. When will these "old school" owners learn that you'll never get top dollar if you can't show top dollar. Bankers, these days, have zero patience for that line, especially when they're now sitting next to an 800 pound gorilla name Corona.

Just a thought: given the recent collapse in stocks and oil prices, his pool of potential buyers just got drained. Be patient and you might get a great deal.

 

[Mjf10]

Thanks KleanRide. The lack of financials is frustrating but I agree on this economic shift that we could be seeing - a deal could be had in due time.

 

[Randy]

I found the location of this car wash in Jasper Indiana behind the German American bank and next to Jeff’s Bait and Guns. It’s not a bad looking facility. I find it very odd that the owner would shut it down. There’s got to be some other reason for shutting it down, people don’t normally just shut down a business. The whole thing doesn’t pass the smell test, it smells like the owner is BS’ing you.

 

[I.B. Washincars]

I'm not going to be far from there tomorrow. If I have time I may make a diversion and check it out.

 

[Car_Wash_Guy]

Sounds like too much. What's the property worth?

+1


Offer price of property minus the cost to remove the structure. There is your offer.