Looking to purchase an existing wash!

[Dieselonly]

Hello all and thank you for reading my post! I have been researching the carwash industry for about a year now and I have found a carwash owner who is looking to possibly sell the wash he built. If you guys could give me any sort of advice, ideas, if you feel it’s a good deal, or anything I would greatly appreciate it! Here are the details:

Location: Near Dayton, Ohio
Built in 2006
2 IBA (Wash world Razors installed in 2017)
2 vacuums (new 2017)
1 fragrance/shampoo (new 2017)
Hamilton auto cashiers (new 2017)
Wash package options are $8, $10, $12
Gross sales $150,000
Net $48,000
Also this is on leased land which is a big expense at about $20,000 per year.
I would love to be able to buy the land but don’t know if it would be an option.
Owner feels the wash is worth $625,000 but for me personally I’m not will to pay more than $530,000 for the current financials to make sense for me.

Any thoughts or comments?

I’ve have done a lot of research but the experience and knowledge you folks have will be priceless!

Thanks

 

[chaz]

If I’m reading this correctly....you are willing to pay $530,000 for what is basically a job paying $48,000 a year?!
Sounds like a low volume wash coupled with a hi land lease

 

[Randy]

The value of the car wash is the property the car wash is on, not in the car wash. With that said “No land, No deal” $530K is too much for a car wash with a net of only $48K. Sorry it’s not a good deal, in fact it’s terrible.

 

[Dieselonly]

Chaz thank you for your feedback! Though $48,000 doesn’t seem like much money this opportunity would afford me far more flexibility than my current situation. It would also present some great tax benefits that could help me offset other income. I was thinking I could probably drive more business then the current owner as he has not made a huge push to market and drive more business. It seems he treats it more like an investment/hobby. But I am going to see if the land owner would be willing sell and then go from there.
I am curious how do you personally value a wash? A big factor I used is Capitalization rate
(NOI / purchase price). This is one number I use when looking at buying multi family real estate as well so I was thinking it would carry some weight in valuing a car wash too.

I noticed your profile says you are located in Cincinnati. If you don’t mind me asking where abouts and how many washes do you own and how long have you been in the business?

 

[Dieselonly]

Randy thank you for your insight! You guys are great. I was kinda thinking I need to see if it would be possible to acquire the land as well.
Just curious how do you determine what is and isn’t a good deal? Also could it be possible that the owner is padding his pockets with some of that cash flow and not reporting all income?

 

[chaz]

I’m in Cincinnati (Norwood). I’ve git one wash 1 Auto. 4 s/s
Rallys Carwash 513-351-4111

 

[mac]

Sorry, but just can not see this as anywhere close to a good deal. So this wash has two almost new automatics and that is the gross revenue? Something is wrong here. Let's assume you buy this place. After five years what do you have? Very little equity in then 7 year old equipment.

 

[Rfreeman]

Dieselonly,

I understand you looking at cap rates when valuing this deal & real estate (cost, sales, income approach/cap rate).....7 cap not bad....(a 9 on your $530K bid) I have a finance and real estate background. I also invest in multi-family properties in my market and use this method all the time to evaluate an investment. In 2014 I dipped into the car wash industry because I had been eyeballing it since 2003 and I have 2 washes looking to pull the trigger on another one here soon.

That being said your cap rate in evaluating any investment is a gauge on your return but also a reflection of the risk involved in that deal. Additionally, cash flow and land/property appreciation are the 2 components that are studied when looking at real estate deals, you don't have 1 of the 2 in this one, therefore just my 10 cents your cap rate would have to be a lot higher in order to do this deal...too much risk involved in not getting the real estate on this one.

 

[OurTown]

Hello all and thank you for reading my post! I have been researching the carwash industry for about a year now and I have found a carwash owner who is looking to possibly sell the wash he built. If you guys could give me any sort of advice, ideas, if you feel it’s a good deal, or anything I would greatly appreciate it! Here are the details:

Location: Near Dayton, Ohio
Built in 2006
2 IBA (Wash world Razors installed in 2017)
2 vacuums (new 2017)
1 fragrance/shampoo (new 2017)
Hamilton auto cashiers (new 2017)
Wash package options are $8, $10, $12
Gross sales $150,000
Net $48,000
Also this is on leased land which is a big expense at about $20,000 per year.
I would love to be able to buy the land but don’t know if it would be an option.
Owner feels the wash is worth $625,000 but for me personally I’m not will to pay more than $530,000 for the current financials to make sense for me.

Any thoughts or comments?

I’ve have done a lot of research but the experience and knowledge you folks have will be priceless!

Thanks

Random thoughts:

With those gross sales it would have been great if it was built as a single bay. 20 cars per day (I'm estimating) per bay is pretty low.

Do the expenses include any labor or does the owner take care of the daily maintenance his/herself?

We come from a real estate investor background also and feel like owning the land is very important. With land ownership there is at least a chance of a backup plan. If you bought the land for $200K then what would your numbers on this deal look like?

The other auto in town is a D&S i5000 which is kinda on the other end of the spectrum compared to the Razors but they are charging less at that location. It would have been great if they put in a friction machine in place of one of the Razors when they replaced them since there is not one around there. It could be done still but would it be worth it at this point?

I'm sure you could get the sales up a bit but really they are not that bad considering the traffic counts and the small population of the area. I think it is in the best part of town though.

 

[tdlconceptsllc]

Dude you need to buy some more Appartment complexes or a strip mall, if thats what your currently into already. You will be disapointed for the amount of work involved in a carwash for the ROI. Just saying

 

[Roz]

You can value the place based on assets or based on revenue. If you can lock in a long term lease then there is something to consider but the demographics, location, and level of competition still need to make sense. An offer (LOI) with contingencies for negotiating a long term lease could make sense. If you can get a 20 year with two five year options at the same cost (or close) then you will be able to sell the business at some point in future as you are matching life expectancy for the equipment.

Most businesses sell for 3x EBITDA so figure out that number and perhaps add a little for the new equipment.

 

[Dieselonly]

All,

I really appreciate all the feedback! I was told to post on this site to get everyone’s opinions and you guys definitely did not disappoint! I am going to contact the owners of the land to see if they would be willing to sell and then go from there. Thanks again for all your feedback and I will keep everyone posted!

 

[Waxman]

This deal is a non-starter without the land. I also own apartments and agree that for an investment of half a million dollars I would buy more apartments. You get the land and building and add to your equity as you pay down mortgage. It's also alot more passive income than the car wash. With 2 automatics, you will soon be immersed in troubleshooting, repairs and maintenance. The lot and building require cleaning and maintenance on a weekly basis. There's chemicals and supplies to be ordered, vacuums to maintain, and vending to be stocked.

With apartments, it is far simpler. Trust me, I know.

ps; I didn't even get into managing your car wash employees!!! ( and there will be employees......)

 

[Drepiv4]

Hello,

If you are willing to relocate to the panhandle of West Virginia, I have a very nice 2 in bay and 4 self serve bay for sale and it includes land. here is the loopnext listing, price was reduced to $1,195,000 but is not reflected in this listing. Many new upgardes since 2015. Gross sales for $290,000 and growing every year. https://www.loopnet.com/Listing/1685-Valley-Rd-Berkeley-Springs-WV/14823681/

 

[CarwashArchitect]

The value of the car wash is the property the car wash is on, not in the car wash. With that said “No land, No deal” $530K is too much for a car wash with a net of only $48K. Sorry it’s not a good deal, in fact it’s terrible.

While you are right that this is a terrible deal, I’ve been involved with a very successful car wash on leased land. The value is not just the property.

 

[chaz]

What you decide. Feel free to call me and come visit