give me your thoughts...what would this site be worth?

[washman]

Site built in 2010-

2010-2011 Gross Revenue of $140,011.76/NOI: $118,000
2011-2012- Gross Revenue of $172,042.06/NOI: $134,000
2012-2013- Gross Revenue of $219,077.35/NOI: $145,582.67
2013-2014- Gross Revenue of $248,815/NOI: $143,589.51
2014-2015- Gross Revenue approx $260,000/NOI: $145,000

The site has been investing in equipment upgrades, company vehicle etc as the gross has gone up. Very nice looking site with full landscaping. The size of the site 2 in bay automatics one touchless, one with friction. One bay that is self service, oversized to accept RV's and large trailers. Two in door pet washing stations. 2 vacuums and 2 shampoo machines. Built in the wall vending. There is an attendent on site 7 days a week 9am-6pm and the site spends about 30k-35k a year on attendents. site is located in a city of 28,000 residents. Competition is two gas station sites less than 2 miles away, one older 4 bay, 3 self service and one automaic site built in the 90's about 1/4 mile away and one 4 station self service facility that is really old about 4 miles away. Property is very limited and the site sits next to a grocery store. Cost to originally build the facility was 1,355,000 approx.

 

[robert roman]

It’s probably not worth as much as you might believe.

Since recession of early 2000’s, equation to value self-service adjusted negatively by 33 percent. Principal reason was shift in total available market (TAM).

In 2000, conveyors accounted for 37 percent TAM and self-serve 21 percent. Today, conveyors account for 74 percent TAM and self-serve 11 percent.

Visually, this would be like watching the Seminoles get wacked by the Ducks last night.

One factor that affects capitalization rates is industry strength. High scores are given to dynamic industry or sector with broad rapid growth likely. Lowest scores are given to those in decline not expected to recover.

Competition also affects capitalization rates. Few competitors in a growing market gets high marks whereas crowded area and sameness gets low marks. For example, index of retail saturation is roughly 90 percent based on your data.

Barrier to entry is another factor. IBISWorld and other sources rate barrier to entry for carwash as modest.

Alternative investment returns also affect capitalization rates. For example, express conveyor provides better ROI than self-serve and there are no conveyors in the city.

So, while there are high scores (some not mentioned), I also see many potential low scores (some not mentioned).

Greater is the risk, the higher the capitalization rate and the lower the income multiple.

$260,000 gross is in the upper quartile of the industry which means this carwash is pretty strong. Normally, strong merits a premium.

However, big question in many markets is how sustainable are continuation of earnings for new owner if someone decides to enter competitive market with unique product and service.

This question can’t be answered without more in-depth analysis.

 

[soonermajic]

K.I.S.S. do not pay more than 4x gross. But, there are quite a few variables to consider, like Rob Roman said. The #'s may move down some...maybe a lil more...but not move up higher.

 

[PEI]

Since you are still at the beginning stages of this project. I would highly recommend that you hire a car wash consultant to come in and help you get all the market information and numbers correct, so that you can make an informed decision about what the wash will realistically generate. It is worth it to spend money upfront to not overpay for a location. A good consultant like Bob Roman is invaluable at the beginning stages of purchasing or building a wash.

 

[rph9168]

Before you get too far with this deal I would recommend that you make sure you have financing in place if you haven't already. You need to find out what requirements the lender has and get at least some form of preliminary approval. I have seen many times where everything seems to be in place only to be blown up when the project cannot get financed.

Using a car wash consultant with solid, substantiated credentials is a good idea especially not only when analyzing the deal but also for putting together a pro forma and other information and data the lender might require. A good distributor could also be a plus as well. In some cases a distributor may even be able to know a lender that they have successfully worked with in the past which may expedite the process.

 

[cebo]

The only thing that affects carwash cap rates are carwash cap rates. Your lender is going to rely on the appraisal and today that can be a crap shoot. This horse has been beaten to dust over the past 15 years. Due to the lack of turnover with reliable data and the lack of homogeneous carwash sales you cannot determine a credible gross multiplier. At least not in my state. The feds have a new requirement on certain income producing properties where the Cost Approach has to at least cover the loan. In the past convenience stores, mini-storage, carwashes, etc have been worth more than the cost to build, but when the whip came down in 2008 values took a beating and the lenders were left holding the bag (hold on why I shed a tear for them). My biggest worry would not be new entries into the market but the other places upgrading. Basically my only competition did a big rehab 2 years ago and while it didn't really knock me backwards it has stabilized our income. I would talk to you potential lender to see who would be valuing the wash for the loan and see what they had to say. If you are paying cash, just figure out what you have to have to make it worth your time.