First Time Buying Car Wash

[KeepItSimpleStup1d]

Hi guys,

I have been a frequent browser on the forums but this is my first post.
I am interested in purchasing a car wash with 3 self-serve bays and 1 Automatic bay. The Building was built in 2005 and seems pretty good however for some reason is classified as a Class C building. It sits on a .34 Acre lot. The car wash has been shut down for more than a year and the owner is asking $650,000. The equipment inside is Water Wizard 2.0 for the Automatic and Super Saver for the Self Serve. The owner's reason for closing the place is they had a partner who was stealing from them so they decided to just close it down (Seems Fishy). The owner is not willing to turn on equipment to show it or willing to share financials (again seems fishy).

The Land Assessment is 175k
and the improvements is 300k (according to the owner)

I am 32 and this would be my first business. I have a lot to learn and would appreciate any feedback you guys have.

I have a few questions for the vets here:

1. For anyone with the Water Wizard 2.0 System or Super Saver. How is the equipment? Has it been troublesome or fairly reliable? Since it's been closed for 1+ Years what's the likelihood I would have to replace the motors and pumps or the equipment itself? I have attached images below of the equipment.

2. What would you value a place like this for without the financial and no knowing the condition of the equipment? I have attached a few photos of the property.

3. Is there any possibility this might be a good business or are there too many red flags and should I just walk away?

 

[Roz]

You can make some assumptions about the revenue and built a What-If Proforma for the place.

Assume that self service bays can make $1000/bay/month. (Say $36K/year). If you can get number to industry average $1500/bay/month this number becomes $54K. If location is poor the average goes the other way.

Look at the wash count on the IBA counter and see if you can get info on number of years the place has been operating.

Say the place washes 6000 cars per year (as an example), create 4 wash packages with prices and distribute 25%/25%/25%/25%. See the total revenue in this example using 7/9/11/13 for prices (prices should be comparable to local area) = $60,000.

Total income is approx. $114K in this example however the revenue will change based on real data. If Revenue is $114K then ask should be in the 2x-5x revenue range (with many sales being at the 3x number).

Assume that your expenses are 60% to be conservative.

At the end of the day the owner responses should be a red flag because if the numbers were good he would share them with you as it would sell the place for him. If the equipment works it should not be a big deal for him to turn it on for you or any other potential buyer, another flag as you mention.

Pics look very nice, place has curb appeal so you might consider a variable offer based on some metric however there are many factors that contribute to a wash's success or failure. Do some area research demographic and car counts for your road. If it was me and business is not operating then it is not a business, just an asset sale. Land $170K + $300K building using his numbers means place is worth $470K.

Check age of the equipment, assume there are things that need repair that owner is not mentioning, deduct the money needed to bring equipment up to use level from the number you calculated. If IBA does not work it may cost you $100K to replace. No harm making an offer that works for your analysis. Let him come back and show you why your number is wrong, or ask him how he came up with the $650 number to see his logic.

You are smart to be cautious given the lack of transparency....Good luck

 

[MEP001]

The Coleman SS equipment is relatively simple and reliable, which makes it pretty easy to maintain for someone with basic mechanical aptitude. The IBA is much more complicated and harder to understand - if you don't plan on learning it and maintaining it, a lot of your income will go to a service company. I wouldn't touch it for that asking price based on that alone.

If Roz's net worth is accurate based on your location, then he's definitely asking way too much. Even with new replacement cost of the equipment added, it's barely worth that asking price. Again, I wouldn't touch it.

Something else that looks very fishy is the fact that they left the SS equipment on the casters. Makes me think it was built with an expectation of eminent domain takeover. Any financials you do get might be highly inflated if he was laundering money through it to show a massive gross income as a way to demand a higher buyout price.

How good is access to the property? What's the traffic count? Those make a huge difference in potential income.

 

[Dan kamsickas]

Nope, that's beyond fishy. If the owner won't turn things on for inspection and won't provide any financials I would assume nothing works and it's losing money and tell the seller that when you low-ball them on an offer.

 

[slash007]

I agree with most of the comments, but the casters are not necessarily a big deal. I installed some on my Super Saver when I bought it used and the idea was because it was a tight space, I could push it further back and roll it forward when needed. It is a super easy system to learn and work on. Many other red flags though.

 

[OurTown]

Red flag after red flag. Tell him that the equipment is scrap value without verifying its condition properly. Land value needs to have the cost of repurposing (razing) removed from its value if sold as land. What you have there is a piece of land with a specialized building (and zoning) that could possibly be reopened as a car wash. Is this a property that you approached the owner about selling and not on the market? Is it listed with a broker or agent? As others have said it would be interesting entertainment to see how he came up with the asking price.

 

[MEP001]

...the casters are not necessarily a big deal.

Probably true, but it's really odd. They aren't intended to be left on the stand. I've seen someone do the same thing with new equipment in a car wash that was making at best $1000/month.

 

[MEP001]

As others have said it would be interesting entertainment to see how he came up with the asking price.

My guess would be he lost his ass on the deal and he's trying to sell land, building, and equipment at full assessed value.

 

[Axxlrod]

Ridiculous seller living in fantasyland looking for a sucker.

Would you buy a used car from a shady guy who wouldn't let you even turn the car on or show you any paperwork?

If he wants to play that game, then the property is only worth land value then basically.

 

[KeepItSimpleStup1d]

Thanks for the responses guys. A bit more information so the traffic is +12,000 on the road so it's not a concern. I contacted Coleman Hannah and will have someone who services these machines go look at them as a precursor for sale. Also, he is now more willing to show financials so let's see how that goes.

 

[Greg_T]

I'm just a newcomer to the carwash industry as well, so I won't comment on any of the details the more knowledgeable members have added above.

However I do like the idea of picking up a business that has been run down / neglected and can therefore be picked up at a good price. If you can do your homework and at least get some information regarding previous financials and equipment condition, then I can see some merit in making an offer (at the right price!).

The attraction of a run-down or neglected business is that it will scare away many other potential buyers, so you can potentially be the "last man standing" with a genuine offer. We've done it twice, and it's been good fun and worked out well financially.

However it pans out, good luck with it.