Help with valuation of potential purchase

[Apadams11]

Hi there. I'm looking into buying a 6 bay self service car wash with 8 vacuum stations. The land is leased at $4,300 per month and net income is approximately $50k per year. Car wash itself is in decent condition but could use a little bit of sprucing up. Owner is asking $250k. Is it worth it? Thank you for any advice.

 

[Rfreeman]

Can you buy it with the land? Otherwise you are buying a job and I think if you looked on this forum you will see most of us are against buying washes on leased land.

Is the seller leasing the land right now? Therefore the $50K NOI includes the land lease of $4,300/month or does he own the land and want to lease the business to an operator? If its the latter, then there goes your profit because you would be paying $51,600 in rent each year.

 

[Apadams11]

The current owner is leasing the land

 

[traveler17]

The current owner is leasing the land

Let me get this straight and if I’m wrong correct me. This guy wants to sell you lease business for 250k and you’re net income is 50k and that’s what your lease would cost you? If that’s the case hard pass unless you like working for free.

 

[Apadams11]

No, the net income is $50k per year after all expenses and lease are paid

 

[Rfreeman]

So your question, is it worth it....well only you can answer that. Since the NOI includes the lease rate looking at cash flow with 20% down and at WSJ Prime rate (your probably not going to get prime btw) over 15 years your looking at $22,932 in financing cost. This is IF YOU CAN GET IT FINANCED and that is a big IF because its leased car wash....arguably your paying for the right to work the property and earn the income there is no assets to back the loan in a worst case scenario....and banks don't like that.

But removing your financing cost from the $50k NOI leaves you $27,068 NOI assuming all your other cost are in the $50K NOI. That's not a bad return on your $50K down payment BUT is worth the time, energy, and work your about to get with owning car wash????

Only you can answer that.

Personally, I wouldn't do it because its a lease but if your comfortable with the lease, then decide if the return and work load are in line for you, your family and life.

 

[traveler17]

No, the net income is $50k per year after all expenses and lease are paid

Ok I was hoping I had that wrong. So did you take into consideration the debt on the 250k? As I’m sure you’re aware interest rates are stupid right now. Or do you have this kind of money to throw at it? I personally am not big on leasing because at the end of the road you don’t have anything to show for it. If you have access to that kind of money or borrowing power I would hold out for a wash with the dirt.

 

[sjb]

I agree with the above thoughts…

without owning the long term asset of the land, you would be in essence just working for the man…

So my advice would be to keep looking…

Best of luck!

 

[thegoat999]

Probably only worth 120-150k assuming you get a long lease with options with the rent on that. With the dirt it's probably 350k~

 

[tdlconceptsllc]

4300 a month for a lease that's nothing to sneeze at. For a straight self serve wash it better do some big number. I would RUN not walk RUN and count my blessings.