selling carwash/laundromat value

[wisconsin]

I am thinking of putting my carwash/laundromat/dogwash up for sale and wanting input on value. Facility is 4 years old, high quality precast concrete/aggregate construction, and well maintained. One futura millenium auto, 2 customkraft self serve bays, a 1400 laundromat, and 2 dog wash bays. This is in a small town with no competition and a slowly growing area. Shampoo and fragrence vacs and also 2 regular vacs and shurvend auto vendor. This is a prime lot for this town right next to a grocery store/gas station on the main road into town, 30 mph speed limit. Only drawback is town is only about 2000 population but a decent amount of rural population comes to town to shop. I have switched jobs since we built the wash and work lots of hours with lots of driving to and from. I would like to sell the wash and move closer to my new job. I spent about $825,000 putting this wash in and know I would not get that out of it. I gross about $100,000 per year with low expenses as I do all the work myself. Based on past things I have read on here am I correct in assuming 5x gross plus land value. Say I would be in-line to sell for about $625,000? I have 1 acre of land with room for a small fast food resturant and a additional carwash bay if needed. Sorry about the novel I wrote but would appreciate some opinions on this. Thanks,
Jeff

 

[I.B. Washincars]

Most would say that 5X gross INCLUDING land would be high price.

Oops, forgot about the laundromat. Even so, if you're only grossing 100K I would think the #s would still be in line.

 

[Red Baron]

Not to hijack your thread here but how would one go about establishing a value on a wash with a recently-added 2nd IBA? We've had the worst late Winter in decades with rain/snow every 3-4 days for the last 2 months, but even with that, the gross revenue will be increased by $75,000 this year with the added IBA and all new equipment in the old IBA (and top wash price increased to $9).

I need to do a P&L for my bank and want to use real numbers. How much of that additional revenue do I get to factor into the value of the wash given that the new IBA has only been in for 3 months?

Back to WI, around here car wash owners expect to pay around 4 x gross, and that seems to be where banks are with loans too. But, land isn't worth much around here either.

 

[mjc3333]

4 times gross would seem in line considering the size of the small market. That said, with an extra acre of land, you may be able to get an investor who would want to build on what you already have. This would make the price higher depending on who would actually want the endevor.

 

[Scottswashandlube]

So let me get this straight, you stand to lose about 250k....not a good investment so far.What about leasing it to someone to cover your debt service? perhaps someone in the town that has a ton of energy and enthusiasm but not quite enough money to buy it yet.

 

[wisconsin]

My life is just way too busy and don't see anything changing with my regular job and apartments etc. I also live near the wash but about 50 min from my job and am involved in lots of overtime there. I am only concerned with paying what I owe the bank. Do you think this would interest a potential carwash owner for about $575,000. This is a very well built facility in a almost non-existant crime area, and equipment has been maintained well. I appreciate the responses and am only interested in a outright sale.

 

[Waxman]

I think it's an micro-economic issue, and not anything else.

If the income records (tax returns) of the business show the revenue supporting the debt service as well as operating expenses (c.o.g.s., utilities, taxes, wages, etc), then sure someone would be interested in it.

On the other hand, if the income shows a net operating loss month after month then NO, it would NOT be a wise investment for most folks, unless they need to show a loss somewhere for tax purposes.

Because you are currently in business I don't see a reason why you would fail to see the simplicity of the situation of 'determining asking price'.

 

[keniniowa]

I don't understand _x pricing.

Why don't you do a cash flow minus mortgage service? That number will tell you how much debt it'll support.

I'd start my asking price w/a zero percent return or if you really think that business will increase maybe a slightly negative return. Prospective buyers'll determine what they need for a rate of return.

I looked at a wash that they wanted 30% more for than it'd cashflow. To me that just made the seller and the realtor look dumb.

 

[wisconsin]

Thanks for the responses. When you would take cash flow minus debt service do you figure debt service after 20% buyer down payment or consider debt service as total amount wash is being sold for on a 20 yr. loan? I know with some other income properties such as apartments the % return on investment is after a 10-20% down payment is taken out of the debt service. Thanks alot

 

[wisconsin]

My numbers are:
Income is $90,000 to $100,000 per year
Expenses are about $40,000 total including taxes, chemical, electric etc.
So a cash flow of $50,000 +
Please tell me based on these numbers I am not sure on a 4 year old wash if this should be based on a 15 to 20 year with money down or not.
Thanks alot!

 

[Greg Pack]

Please tell me based on these numbers I am not sure on a 4 year old wash if this should be based on a 15 to 20 year with money down or not.
Thanks alot!

15 year amortization max, IMO. Twenty year schedules do not pay principle down fast enough. I shoot for ten, It hurts but the blow can be softened through a large down payment.

Here's an example as to why: Lets say you paid 500K . If you get a twenty year amortization you will only pay 1/3rd the principle in ten years. At that point you will have a fourteen year old automatic that needs replacing. As a result, you will have likely have to refinance a new automatic. You're right back up to original principal amount that you started with, or even higher.

 

[Jim L.]

Just curious…what is a 1400 laundromat?

 

[wisconsin]

1400 square foot laundromat. We intentionally slightly overbuilt the laundromat carwash and dogwash as the area we are in is growing, and didn't want increased expansion costs and hassle down the road.

 

[mjc3333]

Wisconsin

I am going to assume the $40,000 does not include the debt service to the bank etc.

If you use your figures, $50,000 cash flow is not enough to justify asking $625,000 with lets say 12% down ($75,000). The loan would be for $550,000 for say 15 years. That would equal $60,000 per year in debt service at a conservative 7% interest. That's if the buyer could or would want the equipment portion to be longer than 7 years to begin with. A longer loan would not be a good option, as the equipment would need to be replaced or updated as time goes on. The buyer would start out in the hole $10,000 per year right from the start. If they would have to hire someone to attend to the location, more $$. I do not think you have enough customers to justify the $800,000 + complex you built.

Unless the buyer could come up with the difference in the loss each year, or add to what you already have for some extra income without adding a significant amount of extra debt, the numbers do not pan out.

 

[Waxman]

I apologize for being so blunt, but what I think is that your place is a dog. A wash you built for $800k that only grosses $100k a year, even with all the additional profit centers, isn't going to pencil out for anyone with half a brain unless the potential investor needs to show a loss to offset profits from another business.

 

[Randy]

I don’t think right now is a good time to be selling anything. A really nice well maintained 5 & 1 on a huge piece of property just sold here for $370K, it grosses around 135K a year. 2 years ago this wanted 775K for it. The owner didn’t have to sell he got tired of the BS that went with business and wanted out.

 

[Jim L.]

I have to agree with Randy on this one. I wouldn’t sell now unless I had no other choice. My closest competitor listed his 4/1 last year for $625K. It didn’t sell and was reduced several times till it got down to $325K early this year. According to county records it sold in Feb. for $265K.

 

[mjwalsh]

Jeff - Wisconsin,

Does the 1400 sq ft include all the space in your back rooms or just the washer & dryer area intended for the public? Do you have large capacity washing machines?

MJ

 

[wisconsin]

1400 square ft. actual laundromat space. I have 6 load washers, 3 load washers and small front loaders. Stacked dryers and also 75# dryers.