Lease a 6 bay self serve for $900/mo?

[kbomb]

I might have an opportunity to lease a self serve wash that is very old and worn out. It has a total of 8 bays: 6 are self serve but only 3 are functional. 2 of the bays are enclosed on one side and have a roll up door on the other. These presumably could be used for a detail shop.

A buddy of mine that drives part time for my courier company knows the owner of the wash and the same guy owns several adjacent commercial properties. My friend is a veteran of the detailing business. He would like to take on the lease, but the place needs a lot of attention and certainly would require some money to get things up to snuff. He doesn't have the money right now. I told him, I would take on the lease and rent him two of the bays to to kick off his own detailing biz and I would get the self serve bays going and try to make some money from that.

I would make an office out of one of the closed bays for my courier biz. Below is a picture of the place and a link to a 22 sec video driving by the wash. The city population is around 60,000. There are 3 other self serve washes in town. The other washes are within 1-3 miles of this one. The traffic per day if I read the traffic map correctly looks like 6,100 cars per day.

According to the owner it brings $500/mo right now. As you can tell it's totally neglected and has been for years as far as i can tell.

I wouldn't be relying on the income as my other business supports us fine and is pretty stable. This would be a supplementation and cheap rent for my office and there is room to keep my courier vehicles on the lot.

I like the idea of the challenge and the potential to turn it around and bring it back to life.

What do you guys think? Is it worth it or just too much a pain to bother with?

http://www.youtube.com/watch?v=yHuk2aABPCU

 

[Waxman]

Why don't you just see if you can buy it right?

Rehabbing can be a great way to enter the carwash business.

Read the SS Carwash Bulletins by Patrick Crowe; they have alot of great information about rehabs vs. building new. You won't regret reading them to help your decision.

 

[I.B. Washincars]

That place looks like a money pit to me. Getting it running properly and some curb appeal will suck up a lot of money. Even if you accomplish those things you will still have to overcome it's present reputation. With a 6100 CPD traffic count I don't see much potential.

 

[Jeff_L]

500/mo gross is extremely low. You would have a lot of reputation repair work to do along with the physical repairs. Personally I'd seriously think about taking on the challenge. Since you'd be using part of it for your already established business, you can spend time fixing things up and slapping some lipstick on that pig. Before I'd try to attract business, I'd probably focus on getting everything in working condition so you don't upset any new customers.

 

[Greg Pack]

At this point it is an uphill battle. I fought those before and have won a few, and lost a few. Don't sign anything long term, but have renew clauses so that if it does start to work you guys can lock it in. If it was a wash only it needs to gross 3K a month or more to be able to net any meaningful amount out of it. I would ask for a short term renewable lease and ask the landlord if he would take repairs to facility in lieu of rent for a period of time. It improves the facility so that revenue might increase but limits the damage that can be done to you guys financially.

The place looks closed-that can't be good for business. Kill the weeds!

 

[kbomb]

Thank you so much for your replies! I definitely value your opinions.

I have a few more questions:

1. How long should I lease it for? Do you think a year would be long enough to determine it's viability (after repairs were made)?

2. What would be the absolute first thing you would do to the place? Paint, get the bays working properly, vacuums, new signage, remove weeds?

3. Do any of you have experience with leases with an option to purchase? Can you provide any tips?

4. Are water usage records from the city generally public info?

$500/mo gross actually was one of the encouraging factors for me. The fact that it draws that much money in this condition gave me some hope. That's assuming his figures are accurate of course.

 

[rph9168]

Before you do anything concrete or make any decisions you need to get estimates on necessary repairs, upgrades and any other miscellaneous expenses involved. This could be a costly project with little or no return and possibly losses. Don't fall in love with the project before you know what you are getting into. Rehabbing the site and building volume is a long process and sometimes impossible to do successfully. I would be very careful on this one. This one has a lot of danger signs.

 

[kbomb]

Before you do anything concrete or make any decisions you need to get estimates on necessary repairs, upgrades and any other miscellaneous expenses involved. This could be a costly project with little or no return and possibly losses. Don't fall in love with the project before you know what you are getting into. Rehabbing the site and building volume is a long process and sometimes impossible to do successfully. I would be very careful on this one. This one has a lot of danger signs.

I hear you. Thank you for the sobering caution. I talked to the owner today. Only three of the bays work and are collecting coins. Two of the bays don't have pumps, wands or brushes. The ground heater isn't working at all.

What would be the minimum investment just judging it from the small video and picture in order to build up any clientele at all? Just for kicks what price range do you estimate is needed to rehab 4 of the bays? (worse case to best case)

What do you think of the following as a plan? Close off two more bays that do not work and use those as storage. So it would be 4 closed bays and 4 open self serve bays. Then focus on getting 4 self serve bays working properly and the place looking decent. Use the closed bays to run my existing business. I already am paying $1,000/mo for my current rent anyway and that could go away and be redirected towards this beast.

 

[Jeff_L]

Personally I would get the bays working. Whether that'd be 4 or 6 bays, you got to have them working to demonstrate to the customers you're there for business. Then build from that.

As for leasing, I've never been involved with one so don't know how I'd structure it. I liked cfcw's opinion of having the owner let you make repairs in lieu of lease payments. Otherwise if you break the lease, who would own the equipment?

 

[rph9168]

In addition to estimates and costs you need to look at the competition. What shape are those self serves in? Are there other types of washes in town? What are the demographics of the area? How willing is the current owner to negotiate? Rehabbing four bays could get very costly not to mention renovating and remodeling the entire site. Most people would be very hesitant to invest this much into leased property. If you think this might work why doesn't the current owner invest in at least some of these changes?

The more you describe this project the more it seems very risky. How much rent would your friend kick in? How skilled is he at detailing? Does he have any current business? What are the chances of him failing and bailing out? It would be nice to save current renting expenses for your business but that seems to be the only real constant here.

In reality the only thing of any intrinsic value here is the land. In its current condition that is all this wash is worth. There is no business to speak of and you would be taking a considerable financial risk. You will be making major improvements in the property that will benefit the owner if things don't work as planned. At least if you owned the property you would have something to sell after all this effort.

If you are dead serious about this project you should probably gather up all this information, put together a proposal and either go to the bank or negotiate with the owner on purchasing the property rather than leasing. At the risk of sounding cruel if you cannot afford to do this you probably should look at a less ambitious venture at this time.

 

[Jeff_L]

If you're already paying 1000/mo in rent and this guy is offering you his place for 900/mo, then what are you waiting for? Unless your current location is situated to advertise your courier business, I would be pretty excited about the move. Less rent, a couple other lines of biz (detailing and self serve). Might be worth putting pent to paper. One thing you really need to line out is about the cost of parts you'll need, as in who will foot the bill and ownership of those parts, etc..

 

[Tpoppa]

I took on a wash a couple years ago that needed cosmetic and functional improvements. I took the project in 2 stages.

First, I made every thing work properly before trying to attract more customers. 2 new pumps, all new coin acceptors, new low pressure system, new hoses, guns, brushes, lots of little fittings and repairs.

2nd I took on the cosmetic stuff. Paint, minor ladscaping, signage, and new coin boxes in the bays. Mine has grown 50%, which is about where I thought I would be.


Be realistic about growth potential. Traffic count and size of the town are limiting factors. Doubling or tripling the business isn't going to happen overnight. I would request 2-3 years of water bills from the previous owner (leaks and weeping water in the winter will skew the numbers). I would observe the other washes in the area.

I would get some clarification on the floor heat system not working. If there are leaks under the bays, I would run away from this deal.

 

[kbomb]

I would get some clarification on the floor heat system not working. If there are leaks under the bays, I would run away from this deal.

*How would I know if the floor heat system is leaking?
*If it is cost prohibitive to repair floor heat, can you run a wash without it? Thanks, Scott

 

[Tpoppa]

*How would I know if the floor heat system is leaking?
*If it is cost prohibitive to repair floor heat, can you run a wash without it? Thanks, Scott

If the floor heat system is leaking glycol you have a problem. If the leak is under the bays you have an expensive problem (think digging up concrete). Without floor heat, you will have an lots of ice build up in the winter & likely some slip and falls to deal with. You need floor heat in cold climates.

 

[robert roman]

If you take $900 a month for rent and work backwards using general rule of thumb, you would need to gross $43,200 annually to net $10,800. At this level, you might be able to pay yourself a little and put in some low cost improvements like fresh paint and a few signs.

If you could double this gross, you would net at least $32,400. At this level, you might be willing to pay for some equipment upgrades to offer more services.

Consequently, the problem is to first determine what level of sales the location and site would possibly generate.

 

[diycarwash]

If the revenue is $500 a month right now. Why don't you offer him $500 a month? He will come out ahead of where he is at right now without the expenses of running the business. He can sit on his ass and still make more money. It is very expensive to rehab a wash and this one looks to be on the HIGH side.

 

[pitzerwm]

I'd offer him $1000 a month, after he repaired everything. I wouldn't touch this if it were free, until it was all up and running. IMO, I would make every dime that you spend fixing things apply to the lease payment.

 

[Indiana Wash]

Hmmm, would it be wise to lease someone's failing business and invest considerable money in it to increase the value of his property? From a legal standpoint, leases end. If you build the business, he benefits. If you don't build the business he benefits. If you build the business, you may or may not benefit depending on the length and terms of the lease. If you don't build the business, you lose.

After reviewing this deal, I will lease my car wash to you for 180% of the current monthly gross.

 

[rph9168]

Without knowing much more than has been posted here I wouldn't walk away from this deal. I would run.

 

[mac]

There is one aspect that hasn't been mentioned that would make some sense to do this. That is the fact that kbomb would be able to get into the car wash business with little cash up front. A common issue brought up here is how it's so hard to get funding to outright buy or build a wash. He could get into this and after two years he's got the experience that banks want to see. That being said, that's the ONLY reason to do this. The owner needs to be slapped around and made aware that he needs to fix the place. It sounds like it could swallow 20K to 30K in a heartbeat just to get the basic operation back. It would be a good learning experience, but the learning curve would be very steep.