Whats it worth?

[mgmtoo]

Hey guys, a question for the Pros.

Looking at a wash near me, 5 SS bays, one Washworld Automatic. Everything looks taken care of, painted, clean, newer coin accepters in the bays, well lighted. Even has logs for work that has been done. So my question is is it worth the $400k asking price? Corner lot, on a busy street, owner says it grosses about $90K/year.

Any advise would be great. Thanks in advance!
Marvin

 

[I.B. Washincars]

At 4.5 X gross, the price doesn't sound out of line. IMO, it would be worth checking into further.

 

[Waxman]

sure it sounds decent.

worth exploring.

can you offer to work there on the weekends to get a feel for the place?

can you look at financials?

 

[JimmyJaffa]

I think it is over priced.

Income per month@ 90,000 per year 7500 per month
80% loan 320,000 cost /month at 5% 20 year amo 2112
return on your 80,000 @10% return 667

remainder for taxes, insurance, water, electric, repairs, maintenance = $4700 (remember taxes will go up on sale. Check for new value!)

Take what is left after all expenses, annualize, and divide by .08 and that should be your value..

my fast guess will be between 300 to $325,000.

Good luck

Jimmy

 

[PaulLovesJamie]

I agree with all the above responses - I'd take a closer look, but IMO that 4.5x "rule of thumb" I.B. mentioned works much better for higher grossing businesses, at 90K I'm thinking its probably too expensive, but I'd certainly take a closer look. On a related note 90K for a 5+1 seems a bit low to me, try to find out why (location? competition? other?) and what the upside might be.

 

[pgrzes]

I agree with what Paul says, 90K sounds way low. I have a 7/1 also Washworld HV(awesome machine). The auto itself should be doing over 100k. 400k for a good 5/1 sounds reasonable, but are there underlying issues that are keeping business down?

 

[robert roman]

Marvin,

The current recognized equation for self-serve valuation, adjusted for risk, is well below 4.5.

So, you may want to consider using maximum allowable payment as a sanity test.

MAP = NOI / 12 months / debt service coverage ratio

MAP = ($90K X 0.6) / 12 / 1.5

MAP = $3,000

If the actual monthly payment is less than MAP, the price would make financial sense.

MAP = ($90K X 0.5) / 12 / 1.5

MAP = $2,500

And so forth.

Hope this helps.

 

[Dcalhoun]

I agree it is worth looking deeper. I also agree the revenue seems low. There might be a very reasonable explanation that a new owner can address to improve the revenue side of the equation.

 

[Greg Pack]

Be careful of overestimating upside potential. It sounds well cared for now. If the auto is cleaning well, what will you do to improve business?

 

[tdlconceptsllc]

cfcw is exactly correct a wash world automatic thats in excellent condition and cleans good good location with correct soap/set-up should be grossing 75-90K a year that is very low the automatic alone should take in 75-90K a year gross with no SS or vacuums added to that I would investigate this more why its not doing more SS should gross 6-8K alone also if the wash is a busy location and well maintained and not to much competition tell us some more information, town population, how many miles to next carwash, one way street, run down wash, poor chemicals, hard for customer to enter and exit driveway, ect..ect..

automatics should gross 75-90K Gross a year alone
5 SS bays should be bumping 5-8K a month gross
really good nice vacuums should do 200-$350 a week gross on average on the low side

year total gross = 190,000+ gross
30-50K net profit on a good year lots of snow pollen ect..ect very very maintained wash in the south with a killer location
I would highly check into to it sounds like the perfect set-up 5 bays and one auto has me wondering myself.

 

[soonermajic]

I agree w/ JimmyJaffa. $325k would be the MAX I'd give. Unless the guy is an idiot, why is it only making $90k/yr? There could be many reasons, why, & us folks from several States away have no idea. lol

 

[Whale of a Wash]

I have a 5 bay in MN that has the land alone valued at 300k on the city taxes, so I think if you want his wash, you will have to pay the price.