Looking at buying a Car Wash

[Scheslock]

Some quick background:
No experience in this specific industry but am a real estate investor. I'm also somewhat handy so the small daily maintenance doesn't scare me and willing to pay technicians for big ticket items.
Deal is for 1 acre of land (all equipment conveys), car wash is on .39 of it. Remaining .61 is vacant land which I already have a plan for.
Property is 15 minutes from home and have the time to put in 2-3 hrs of daily maintenance.
Car wash is 4 bay, 2 Vacuum bays and the business has been closed for 8 years.
Owner retired (70s), and lives an hr away and agent said "was tired of driving an hour to pick up quarters every other day".
Equipment looks in great shape (pics below, owner still comes to cut the lawn himself) and owner has agreed to run the machines with machine technicians there to asses the necessary repairs, which will be reflected in the offer.
Smallish town (8,000) but only car wash of any kind in 3-5 mile radius, at the busiest intersection in town and a brand new 400 unit subdivision is going up right across the street next year.

My question is how do you valuate this business. The seller is listing it for sale "As a 10 Cap", selling price is $200K. Total tax assessment is $120K (Land $54K, Equipment $66K). When I asked for the last financials he provided and excel spreadsheet (LOL) which claimed to be making $4700/mo gross.

I'm definitely not paying $200K, but wondering what some people with experience running these businesses would consider offering. Right now in reality it's just a closed car wash business on an acre of land. Thanks so much for any input, it's greatly appreciated and helpful. Let me know if you need any more info or pics. Everyone have a great and productive day.

 

[MEP001]

The equipment is not in great shape going by the rusted stands and legs as well as erosion of the floor, and if that's all of it in your pictures you're missing some really important stuff. I assume there's just tire cleaner, foam brush, soap/rinse/wax? It's very unlikely you'll be able to establish utilities, turn things on and start operating. Equipment valuated at $66K, I guess that includes the building? That stuff in the pictures isn't worth $6600.

I don't like the line about "tired of driving an hour to pick up quarters every other day." Is this because the safes only hold about $150 each, or is he just feeding you a line?

I don't see this being worth more than $100k as-is, but if you can utilize the rest of the property for some zero-labor profit and work some used equipment and a couple more vacs into your loan and operate a really premium business you should have something nicely profitable for about an hour a day of work.

 

[Scheslock]

I don't see this being worth more than $100k as-is, but if you can utilize the rest of the property for some zero-labor profit and work some used equipment and a couple more vacs into your loan and operate a really premium business you should have something nicely profitable for about an hour a day of work.

@MEP001 That's the play. My main business is self storage. Thanks so much for the feedback, very helpful.

 

[Car_Wash_Guy]

Whats's the traffic volume on the road? Closest fast food/Big Box store? Without much info I'd say $100K. That's the price of the improved land minus the cost tot remove the structure. The building and components have no value especially with no income produced in 8 years you have a single use worthless piece of real estate.

I've bought now 2 washes - on that cost $3mil and the other roughly $1.5mil to build and were subsequently closed down for various reasons. I got them for little more than the assessed value from the tax assessors. The first I've brought back to life and it's been the best investment ( COC return ) of all my properties ( I own mostly retail commercial and office buildings ). The other I'm still planning the renovation and resurrection.

I'd also ask him to do a owner carry. Give him like $10K or $20K and carry it.

 

[2Biz]

$4700/month is definitely within range of what a 4 bay SS can make. Busiest intersection in town with no other carwash within 3-5 mile radius AND a 400 unit subdivision going in across the street adds significant value...IMHO....

Although, agreeing with Mep, the owner still cuts grass but was tired of picking up quarters! Really! The equipment wouldn't scare me as long as it ran ok when starting out. It doesn't take long to learn this business (And Mechanics of a CW) as long as your willing to put in the time.

The price will go up once the subdivision is in! Couple the CW with self storage and I can envision you'll have a goldmine with very little labor after everything is up and running good..

 

[Scheslock]

Whats's the traffic volume on the road? Closest fast food/Big Box store? Without much info I'd say $100K. That's the price of the improved land minus the cost tot remove the structure. The building and components have no value especially with no income produced in 8 years you have a single use worthless piece of real estate.

I've bought now 2 washes - on that cost $3mil and the other roughly $1.5mil to build and were subsequently closed down for various reasons. I got them for little more than the assessed value from the tax assessors. The first I've brought back to life and it's been the best investment ( COC return ) of all my properties ( I own mostly retail commercial and office buildings ). The other I'm still planning the renovation and resurrection.

I'd also ask him to do a owner carry. Give him like $10K or $20K and carry it.

@Car_Wash_Guy Luckily the main grocery store is right down the road (1/4 mile away) and we are sandwiched between a Family Dollar and Dollar General.

We've also talked about seller financing (not a price yet) and he's agreed to carry some of the note as long as it's a short term. I'm thinking of giving him 12.5% down (around $15-20K), interest only payments with a 5 year balloon. The 5 year window is enough time to build up the vacant land and refi out.

 

[Scheslock]

$4700/month is definitely within range of what a 4 bay SS can make. Busiest intersection in town with no other carwash within 3-5 mile radius AND a 400 unit subdivision going in across the street adds significant value...IMHO....

Although, agreeing with Mep, the owner still cuts grass but was tired of picking up quarters! Really! The equipment wouldn't scare me as long as it ran ok when starting out. It doesn't take long to learn this business (And Mechanics of a CW) as long as your willing to put in the time.

The price will go up once the subdivision is in! Couple the CW with self storage and I can envision you'll have a goldmine with very little labor after everything is up and running good..

I agree, I'm very interested to see what the technician has to say once we run the machines. I'm personally along the thinking that if it's not a complete rehab and it only needs about $10K of rehab ($2500 per bay) then it'll be worth it for the right price. If I have to do some major overhaul and most of the equipment is worthless I'll probably just walk.

 

[Greg Pack]

Most people don't close a vibrant business. Revenues likely just weren't worth the effort and a buyer couldn't be found. I say offer at land value only. If the owner wanted a 10 cap he should have sold it eight years ago.

 

[soonermajic]

Most people don't close a vibrant business. Revenues likely just weren't worth the effort and a buyer couldn't be found. I say offer at land value only. If the owner wanted a 10 cap he should have sold it eight years ago.

Couldn't agree more. He got sick of making nearly $5k/mo, but not sick of cutting the grass....
Also, MEP is correct, that equipment is NOT in great shape (& is missing some stuff). 2biz also makes solid pts.
Offer $100k, don't go above $160!

 

[cantbreak80]

... if it's not a complete rehab and it only needs about $10K of rehab ($2500 per bay) then it'll be worth it for the right price.

It's what you can't or don't see that would be concerning....
Floor heat?
Water heating?
Water softener?
Condition of the concrete?
Bay timers and coin acceptors?
Bill changers?

The age and being idle for soooo long could have a significant impact on the reliability of the existing systems.
A new floor heat boiler alone will blow up that $10K rehab budget.
Modern coin box components (timers/acceptors/credit card) can easily hit $1K/bay
Underground plumbing issues??? $$$$$YIKES!

 

[Car_Wash_Guy]

Luckily the main grocery store is right down the road (1/4 mile away) and we are sandwiched between a Family Dollar and Dollar General.

That's good.

We've also talked about seller financing (not a price yet) and he's agreed to carry some of the note as long as it's a short term. I'm thinking of giving him 12.5% down (around $15-20K), interest only payments with a 5 year balloon. The 5 year window is enough time to build up the vacant land and refi out.

That's what I just did on my recent. 4% interest only with a balloon. I'll refi asap.

 

[I.B. Washincars]

If this is in a region that experiences below freezing temps, that should be a huge factor. Has the place been heated through all those winters, or is it full of items that have burst?

 

[OurTown]

In the other identical thread that was made on this purchase there is a palm tree in one of the additional photos so there probably is not floor heat. Maybe rarely freezes there?

 

[Scheslock]

If this is in a region that experiences below freezing temps, that should be a huge factor. Has the place been heated through all those winters, or is it full of items that have burst?

luckily in Southeast so no below freezing temps

 

[Scheslock]

Most people don't close a vibrant business. Revenues likely just weren't worth the effort and a buyer couldn't be found. I say offer at land value only. If the owner wanted a 10 cap he should have sold it eight years ago.

@Greg Pack I agree. I'm in the Southeast and things have changed a great deal from 8 years ago. My guess is the income didn't justify the commute (whatever his excuse is) and he decided to shut it down and sit on the land. Now he's looking to cash out 8 years later. I think a lowball offer of just land ($54K) would be too much a sticker shock from his asking price and me may tell me to F myself. Whether it's right or wrong, usually when someone gets an offer 25% their asking price they just shut down and stop dealing with you. I'm thinking of offering somewhere in the $100K range with seller financing. The other parcel is where a lot of the value is so I don't mind overpaying $10-20K for the CW. I think my ceiling is $120K if he is willing to take a lower down payment.

 

[Scheslock]

It's what you can't or don't see that would be concerning....
Floor heat?
Water heating?
Water softener?
Condition of the concrete?
Bay timers and coin acceptors?
Bill changers?

The age and being idle for soooo long could have a significant impact on the reliability of the existing systems.
A new floor heat boiler alone will blow up that $10K rehab budget.
Modern coin box components (timers/acceptors/credit card) can easily hit $1K/bay
Underground plumbing issues??? $$$$$YIKES!

@cantbreak80 This is a great point. Will some of this stuff be flushed out when we run the machines or do you suggest I specifically ask for the technician to take a look at this stuff?

 

[Rfreeman]

Sounds like there is good potential for this location bc...sandwiched between 2 good retail stores, 400 unit subdivision coming, no competition for 3 to 5 miles and on a busiest intersection....I would rehab it just to inventory the land.

I like your idea of $100K to $120K price range thats where I was at while reading through these post.

As far as the wash, I just completed a complete rehab of a 6 bay for $30K and that was me and my guys doing all the labor and buying used equipment I rehabbed.

I'm talking full gut job on electrical (to the bays), LP & HP lines, new meter boxes (used ones but new to the wash), new FB and TF booms, used rebuilt vacs (4), repaired and painted the roof. Oh and I'm still not done but of course it was taking longer than expected so I opened it up with solid success. I will be adding a softener and a new change machine in the near future.

So when you talk about a complete rehab what did you have in mind? I would do a complete overhaul and make a big impression with a grand opening since the place has been closed for so long. If your going to do it go ahead and do it right....after all the higher the risk....the higher the potential return right?

 

[2Biz]

Any pictures of the outside?

 

[Rfreeman]

I believe some were posted on another thread

 

[Scheslock]

Any pictures of the outside?

I'll be driving by the location later today and will take more photos.