Cost of a self Serve

[washregal]

Ok.. This has been batted around forever I know that in the hayday people were paying 10 x gross sales for a wash.

In today's market where do you thin it appropriate to pay for a wash?

 

[Randy]

Most of the Self Serve car washes that have been sold in our area are no longer car washes. They have been going for far more than they would bring in as a car wash, mostly for the value of the property. It?s almost cost prohibitive to build or buy a Self Serve car wash in today?s economic climate the numbers just don?t work anymore.

 

[MEP001]

It’s almost cost prohibitive to build or buy a Self Serve car wash in today’s economic climate the numbers just don’t work anymore.

And yet people still do it. Nearly every nice, new wash around here has gone up for sale within two years of being opened.

 

[Patrick H. Crowe]

Allow me to note that there is no way a self-serve could be worth ten times gross annual revenues.

Three major factors have impacted fair market values of self-service washes in recent years. 1.The faltering economy, 2. The rapid growth of "express tunnels", 3. Overbuilding (in some areas). I'll comment on each .

THE ECONOMY: The economy is in shambles. Unemployment is high and predicted to rise. Gas prices. Middle class income is declining. There are more facts but space is limited so I'll sum up: Folks are washing less than they were in good times; much less.


THE EXPRESS TUNNELS: As most folks know these are spreading. Here you can get your car washed for $3. Some offer free vacs as well. Almost all self-service owners know you can't wash and vac a car for $3 at a self-serve. This is serious competition.

OVERBUILDING: Currently not many self-serves are being built. Five years ago that was not the case. Worse yet, the new ones tended to be concentrated in certain areas. Some folks who follow the "build it and they will come" foolishness.

As I report in the 2009 Car Wash Appraisal Handbook these factors seriously impact the Income Approach and the Comparable Sales to determing the fair market value of a self-serve. The details are complex and lenghtly so I'll offer just one insight.

In using the Income Approach an appraiser looks at the last three years of gross revenues. Today those are apt to be in steady and serious decline. In earlier years up & down revenues could be averaged and a GIM applied.

In today's market these declining revenues must be weighted. In fact the lowest year, if most recent, must get the major focus. That's one major change.

Determining the fair market value of a self-serve merits painstaking work and especially so in today's market. Still, at FMV, opportunity knocks.

Patrick H. Crowe

 

[onebaywonder]

Most of the Self Serve car washes that have been sold in our area are no longer car washes.

So what have they been turned into for example?

 

[Patrick H. Crowe]

In the more than 40 years I have been active in this industry I have seen very few washes converted to other uses. They are often referred to as: "Single use buildings".

I saw a 4 bay, which happened to havr doors, converted to an auto repair facility. As stramge as it sounds I oncw wrote about a 2 bay auto which was converted to a porno shop.

Bob Clements was successful for many years (now bankrupt if Bill's info is correct) by converting self-serves with more than the needed number of bays into quick lubes. He also did a lot with unlimited time.

In my experience there are very limited other uses for delf-serves.

In the Kansas City area I know of three that are simply abandoned, bankrupt. These are in the slow, tedious foreclosure process and many have had their gas meters removed. By the time the lenders complete the foreclosure process they will be lucky to get much more than land value.

Many, many others are on the market but generally not selling. The owners often owe more than the place is worth because they paid too much. There was a time when buyers were willing to get SBA (imprudent?) loans and believed in 25 year terms and low down payments. They should have read my Car Wash Appraisal Handbook and resisted the lure of "easy money". Sad to tell, the government was there to help them and I think most of us know that dance all too well.

Patrick H. Crowe

 

[Whale of a Wash]

I am the only self serves in our area now, a 12 bay was blocked up and dryvitted and turned into an accountants office. Another 8-bay i believe was sold to a guy in really bad shape for $175k, he did nothing for a couple years and a bank wanted his spot and gave him $6-700K I was told. I thought i could change a 5bay into a Walgreens, but a gas station , a very busy one got the honors, just a block away. He won't tell the price, but I am guessing $900K or more. I still have alot of competition from 60-70 gas stations with washes, and our climate is very cold so it is expensive to heat. So to sell my car washes many would be best converted to a higher and better use, as some are on really nice land.
John

 

[Randy]

The high land value makes it almost impossible to operate or has forced a lot of the self serve car washes out of business here.
Port Angeles Washington, a nice 5 & 1 gone, a large Pharmacy chain has a store on the site now
Port Orchard Washington, 4 bay S/S closed a 4 bay brake and muffler shop is there now
Fife Washington, 5 bay S/S gone, RV parking lot
Tukwila Washington, 6 bay S/S gone Low income housing units in it place.
North Seattle Washington, 5 bay S/S gone, property sold for 1.9 Million, 25 unit condo project built.
Lakewood Washington, 4 bay S/S gone, property sold $600K, used for gas station expansion.
Kelso Washington, a nice remodeled 5 &1 gone, Dodge Truck dealership on site now.
With the high cost of property here car washes are not best fit for the land and the cities know this so they make it very hard or impossible to build a new car wash. The last car wash here came it at 1.3 million and it?s not making it.

 

[Patrick H. Crowe]

I took "converted to other use" to mean that the car wash building was saved and with modification, a different business went in.

When it comes to demolishing the car wash and building a different building on the former car wash location - - that does happen.

There are locations where land values have increased very steadily over the years and the land alone is worth more (for a different use) than the entire car wash business was.

This happened to one of my locations but it was a slow and steady process. The wash was near a major and growing medical center. The land steadily grew in value and was sold and the wash was demolished and the land put to another use.

It also sometimes happens that the land value declines and thus the value of the business falls. Various social/economic factors can cause this. It is commonly seen in high crime, urban core locations. Here one is apt to find abandoned buildings of different types and car washes are not exempt from this sort of change.

Patrick H. Crowe

 

[Bubbles Galore]

This very conversation was one of the many deciding factors in buying the wash that I did. I knew that the business had to support itself, but the area is undergoing some rapid commercial development in the next five years. Once I had fully conducted the market study, my lender basically said that we were getting a viable, profitable business for what the property was worth.

 

[pitzerwm]

A car wash, especially a SS is rarely the best use for a piece of property. The appeal to me was no employees and not a lot of demand for my time. And with the ITC, no taxes for 10 years. Bottom line is that you need to keep abreast of reality and be prepared to make changes when its smart to do it. Economies and districts constantly evolve and what might have been a gold mine one day can turn into a dry hole the next. Educate yourself at every opportunity, you never know when you might need that knowledge.

 

[Patrick H. Crowe]

Bill:

I disagree that:" A car wash, especially a ss, is rarely the best use for a piece of property". Not so in my experience. A few sit on land which appreciates to the point that it is no longer "the highest & best use" of the land. Of all the ones I owned that only happened to one of them.

What has happened is that folks have paid more than washes were worth because they simply had no idea how to evaluate them and in so many cases were "helped" by the SBA with unrealiustically long loan terms (25 years?) and foolishly low down payments.

Please do not mistake this for some assumption that "land is rarely suited to car wash use, especially ss." The majority of car washes built in my area were prudent investments, made years ago with conventional loans and competent, conservative management. Nearly all did well.

It was a combination of Bush's completely failed economy, overbuilding (due in large part of government "help"), folks foolishly thinking anybody can do this so it does'nt matter what you pay (the greater fool theory) - - - that has put so many washes in the dire straights they are now in.

I simultaneously agee with you that to educate one's self at every opportunity is critical to business success. Those who read, studied and understood Fair Market Value as it was stated in my Car Wash Appraisal Handbook did not get trapped like so may others who thought they knew better. Sad to behold! Reading, study and authentic education were then and still are, critical.

Far too many people, sadly mistook car washing as a quick & easy road to riches. Now you help them rationalize their foolishness by stating that few properties are ever well suited to car washing, especially self-service. Just not so at all, increasing land valuse are very rarely the "problem". Greed, incompetence and government "help" are far closer to reality then increasing land values.

Patrick H. Crowe

 

[pitzerwm]

Pat, quit promoting your book. Blaming Bush for putting more money in your pocket, which some stupid people used foolishly is foolish on your part. But I understand that the Dems are sure that they can spend your money smarter than you can, history proves that isn't the case. BTW, do not respond to this, because I don't want this to become a political rant. You made your point I have made mine. Its done.