How to evaluate this carwash (numbers)?

[SwordRiver]

Here is a wash I'm looking at. 1 auto/5 self bay. It seems overpriced to me, but what would you make of the numbers, below.. its hard to decipher the true cashflow:

Asking price of $1,200,000

Fixtures:
-Freytech reclaim
-Datamate center

Land:
The land was assessed at $160,000. It sits on the feeder from a highway.

What's going on here? What do you figure the true net may be? Please chime in on this.

 

[Earl Weiss]

Based upon indiustry average of SS bay + Vac of about $1500 per month per pay $7500 this location, + lets say $6000 per month for the auto thats $13,500 / month or about $162,000.00 per year. Either the place is gangbusters which should be easy to see, or it's laundering something besides cars.

 

[Earl Weiss]

Why the wild swing in CC Fees and utilities?

 

[MEP001]

Why the wild swing in CC Fees and utilities?

And payroll...

 

[Greg Pack]

Who gets "payroll expenses"?

What is the category "change for carwash" for? IMO that effectively reduces the gross another 21k

Have you run the amoritization numbers? A loan payment of 53K /yr will only cover about a 500K mortgage

There may be money to save in expenses, but no way I'm paying 5X gross (and over 1m) for a 5/1. You're signing up to work for peanuts(or worse) until the term of the loan ends, unless you have a big down payment.

 

[Waxman]

and chems and insurance?

 

[rph9168]

Cheimical are way out of wack. Something is just not right with these numbers.

 

[SwordRiver]

The numbers are so screwy folks, I didnt know how to make anything of them. The broker informed me that the seller is in financial trouble (the bank wants their money) and is needing to sell ASAP. So, I cant make an offer without first understanding the "true" financials, which in this case seems impossible. It IS in a good location however.

 

[SwordRiver]

Who gets "payroll expenses"?

What is the category "change for carwash" for? IMO that effectively reduces the gross another 21k

Have you run the amoritization numbers? A loan payment of 53K /yr will only cover about a 500K mortgage

There may be money to save in expenses, but no way I'm paying 5X gross (and over 1m) for a 5/1. You're signing up to work for peanuts(or worse) until the term of the loan ends, unless you have a big down payment.

All great questions (keep em coming), which I'm set to ask the seller.

 

[SwordRiver]

Cheimical are way out of wack. Something is just not right with these numbers.

what is considered the norm on a 5/1

 

[rph9168]

My guess is that the owner was tapping into the chemical expense and taking a chunk out in payroll. If you adjust the numbers of those two you get a better picture of income. I would still be wary of this wash.

 

[I.B. Washincars]

What is the category "change for carwash" for? IMO that effectively reduces the gross another 21k

That jumped out at me as well. 2K cash on hand should be more than enough for a 5&1.

 

[Waxman]

You need 3 years tax returns here. How can you tell what's going on with these 'financials'?

Is the carwash in trouble financially?

I think a big part of this story is missing...

 

[MEP001]

What is the category "change for carwash" for? IMO that effectively reduces the gross another 21k

I didn't even notice that. If he's buying quarters for the changer and counting it as an expense, then can you really rely on any of his numbers?

 

[Earl Weiss]

[Perhaps you have to consider contract labor and payroll together? Maybe he switched from Contract labor in 2007 to Salaries sometime in 2008? Was he only open part of the year in 2007?

 

[robert roman]

I?m not a CSI, but I have been around the block a few times. Based on your description of circumstances, ?stated? income and expenses and a quick analysis of the numbers, my guess is the seller has been taking as much cash as possible from the business because of some financial trouble unrelated to the wash. Quite possibly, mortgage payments have now been skipped but reported in P&L. Throw in a broker and questionable business records and you have a recipe for disaster.

The wash might be a worth pursuing, but I would recommend a rigorous forensic examination to see if there is any merit.

 

[Greg Pack]

I'd feel fairly safe offering 3X gross if it could be verified via deposit history. My bet is that YTD revenues are 15% off last year. Also make sure no express tunnel has been built or is planning to be built within a 15 minute drive of this wash.

 

[mac]

I wouls wait for the bank to take it back, then offer 5 to 6 hundred thousand.

 

[robert roman]

Quite frankly, waiting for the bank to take the carwash into foreclosure may actually turn out to be a bankrupt idea. First, this usually means allowing the wash to further deteriorate in terms of quality of operations and most likely closing the wash down at some point causing an interuption of operations and loss of customers, thereby, causing the new owner the time, effort and expense of re-building the business (opportunity cost).

Instead, the time may be right for a hero to come forward to rescue the seller and save the bank the potential time and expense of foreclosure proceedings while the existing customer base is still intact. This would require some compromise and negotiation and, of course, there would be some expense to rid the broker.

Sometimes it pays to be pro-active in trying to buy a carwash property rather than take the bottom-dweller approach.

 

[mac]

It's always refreshing to read the opinion of a respected consultant, aka Mr Roman. Also comforting in knowing that I am a bottom feeder, maybe my mom was right. I however, can put this jibberish aside to address the issue. It would be quite fun to watch Mr Roman await his hero to come forward and save the day. Where is Duddley Doright when we need him? So Robert, your opinion is that if you have deep pockets and a hero complex, you can come in, negotiate to rid the pesky agent, and maybe only spend a little over a million for a questionable wash. Much better than to buy it in foreclosure for half that? I've actually bought a couple of washes from a bank and did quite well in reopening them and selling right away. There is simply no way this could have happened if I bought from the previous owner at a reduced price. For the person who started this thread, I think that if he can save a half million dollars in buying the joint, he will be in a much better position to either run it at a very reduced monthly nut, or sell it if he wants to. But then, I'm not a consultant, just someone trying to make a living.