How did you finance your wash? Please share your experience with me!

[RS5_2022]

Me and my wife have been wanting to build a 3 self wash and 2 touchless auto wash near us for sometime now. I talked to a builder and have an idea on how much it cost to put one up, but im wondering how you guys went about financing. These things are so expensive! and the down payments are nuts.

I would really appreciate any experience you guys have to offer. I personally HATE tunnel systems for my vehicles, while convenient, I prefer to do the work myself lol and get a better clean.

 

[Keno]

Is it even feasible for you to build a new wash. Very, very few instances now where it makes sense to build a new SS/IBA wash

 

[washnshine]

I see more new double IBA installations than SS plus IBA or strictly SS.

 

[Randy]

Me and my wife have been wanting to build a 3 self wash and 2 touchless auto wash near us for sometime now. I talked to a builder and have an idea on how much it cost to put one up, but im wondering how you guys went about financing. These things are so expensive! and the down payments are nuts.

I would really appreciate any experience you guys have to offer. I personally HATE tunnel systems for my vehicles, while convenient, I prefer to do the work myself lol and get a better clean.

If you live in Western Washington I know of 4 or 5 car washes for sale.

 

[Rfreeman]

Yeah I don't see many locations penciling out. With material cost through the roof and now interest rates WSP at 8.5%.....yikes!

To answer OP, I lucked out bought my first out foreclosure and bought it right with cash. Bought 3 more financing at the bank and one with cash.

Your in a tough spot from a bankers perspective...single use property based off of a proforma. It would be a little easier if you bought an operating wash and rehabbed it....at least you would have a cash flow history.

 

[mucoucah]

Mine was a mix of using our 401K for down payment (ROBS) and SBA 504. The bank picked up 50%, SBA 30% and we put 20% down. We also had a 7(a) approved for repairs and upgrades, but turned out that we were able to cash flow everything the first year. We purchased the land with the business, it's a 5 SS 1 IBA

 

[scarwashed]

Mine was a mix of using our 401K for down payment (ROBS) and SBA 504. The bank picked up 50%, SBA 30% and we put 20% down. We also had a 7(a) approved for repairs and upgrades, but turned out that we were able to cash flow everything the first year. We purchased the land with the business, it's a 5 SS 1 IBA

How did you end up valuing the land versus business in your purchase (or what ratio)? I've seen the typical 3-5x gross revenues mentioned for ss but not sure how the land value moves a deal up or down. Thanks!

 

[mucoucah]

How did you end up valuing the land versus business in your purchase (or what ratio)? I've seen the typical 3-5x gross revenues mentioned for ss but not sure how the land value moves a deal up or down. Thanks!

I had all the finances from the owner and I did a basic underwriting to see if it would cover the loan properly. Once that hurdle was over (with a nice margin) I did a very rough discounted cash flow for the business and compared to the multipliers. All numbers looked pretty good, despite the fact that the FED rates were skyrocketing, which was a huge extra hurdle at the time. (Banks were getting cold feet, asking for endless amount of data, etc)

For the land I wasn't too worried because I live in the area and I know how ridiculously fast the land prices are going up here. It would have been a moot point.

The bank made me pay for a proper appraisal, and we worked with a guy named Cleyton from Florida who has done 100s of these and gave me an amazingly detailed report.

I used that to review my calculations they were pretty darn close, so I was happy enough.

If the wash is underperforming this approach becomes very difficult, because your cash flow may not service the loan properly. Then you need to analyse the performance of your wash. I was told by several people (not my numbers and I haven't validated them, so be very, very careful with this information) that an average wash should make in the neighborhood of $1k to $1.2k per self service bay per week in average each year (averaging high and low season), and an automatic about twice that much. A "good" wash should make $1.5k./week/bay At the time my wash was not meeting those figures but they did in the past (less competition, before COVID), so I knew I had room to improve, and even thought my loan service was good, I could make it better and add value.

I ended up spending way more on maintenance than I expected, but I also ended up ramping up the revenues way faster than I had planned for.

I'm not an expert at all, so don't take any of this as gospel. I realize I could have done many things differently, but I don't regret. I am really enjoying this business. It seems to match my skills very well and we are being recognized in our community.