Getting Into A Lease on Self Serve

[washregal]

Hello - Seriously considering leasing a facility that has been dormant for about a year - the guy is using it as a car parking lot for now. The place has strong traffic count and currently is a 4 bay ss with in bay touchless machine.. There are no SS facilities within 20 mi radius. I was thinking of removing the IBA to minimize my headaches and make that a 5th bay SS. Stick with all cash / token for collection for the time being then add CC down the road.

I am thinking of asking the landlord to give me a 4-6 mo grace period without any payments until I can get the place back to functional on my investment - then negotiate a low payment lease for say 2-3 yrs. After the 3rd year increase the payment based off of total net revenue as a percentage - what would that percentage be ? High side and low side? Have the lease carry out indefinitely - and of course propose a walk away clause should the facility not make x $ per year...

Has anyone out there worked similar deals like this?

 

[Roz]

IBA will probably yield more revenue and NOI than the bays combined. If touchless is in good working order I would use it. No way to totally avoid work, SS can be more work than IBA cleaning the crap customers leave on the floor. Frankly you want to own the property so any work and effort you put into the place comes back to you. Most leases you are just a slave to the landlord worrying if you are going to have two weeks of rain such that your numbers are low for the month. You might look to see what other car washes are around you to understand why he turned it into a parking lot and ask for the P&L prior to it being mothballed. Check to see if you have damage from the winter as he may not have taken care of the place too...

 

[Earl Weiss]

1. See how much money you need to sink into it and base negotiations off that. Snakes in grass can include floor and trough heat as well as paying to have pits pumped.
2. Get a purchase option if you can and also a right of first refusal.
3. IMO credit card countup is a game changer. Also Bill accepters if you think it can be secure enough. Do a couple of bays to see how it works out from ROI.

 

[tdlconceptsllc]

Roz is 100% right if I never heard it better "a slave to the landlord". I myself am currently leasing and don't wish that on anyone especially in this business, because all your doing is fixing the place up and paving the way for the landowner unless you have a solid concrete lease. Make sure you get a set rent that you know will work then get you a option to purchase after X years for X price in the lease get that done no matter what & first right of refusal. The landowner doesnt have to know your net profit. I would think about that bc then they will jack the price up couple years later on the property after you have done did the blood sweat and tears part and have the income up then they reap the rewards umm he** to the no. Also are you going to pay the property tax and insurance or the landowner. Me personally after leasing for 7 years and watching other operators buy washes and remodel in that time period. The lease would have to be a very very very good one in my favor to do another one. I would much rather own the dirt anyday bc it will get to a point where you start spending so much money & time you will wish it was yours. This is Advice from my personal experience.

 

[Main Street Carwash]

If you think the owner would even consider giving you free rent in order to fix the place up and get it running, why wouldn't you try to structure an owner finance deal with favorable terms instead? Most SS carwash owners know the real value is in the dirt and the only other value of significance on the business side is "goodwill". Used equipment sells for pennies on the dollar so not much value there. Income is usually a function of how well the business is operated so multiples of income valuation is really "goodwill" because it is determined by the work ethic of the operator. It may give you a good idea of potential income though. I think you find a lease attractive because it is much less perceived risk and less money to get started...BUT it is also a double edged sword because if you improve the place and get it running well, it will then be much harder to purchase for a great price. I am not sure anyone in their right mind would include an option to purchase in a very long term lease, say 5 years or more. I know I wouldn't. First right of refusal, yes, option to purchase at X amount, no way buddy. One of my properties has appreciated over 100% in five years and another close to 100% so purchase option at set price is not even a consideration. That being said, the owner of that wash may not see it that way. IDK the demographics around there but if you can make money leasing it, surely you can make money buying it. It may take a while to get cashflow but it will be worth it in the end. I would approach the owner about selling it using owner financing first and if that gets no traction, then try the lease idea. Just my .02.