cost to lease a self service carwash?

[Richard Hall]

I am talking to the owners of a 17 year old self service wash, it has 4 self service bays and one automatic bay. The automatic equipment is not working and needs replaced. I think the best way would be to lease the building and land and buy the existing equipment. How do I determine the fair lease price.

 

[mac]

Richard I think most here would recommend not doing this for several reasons. And I think I might know which wash you are talking about as I've been involved with two washes in Melbourne. Unless the owner is asking a ridiculously low price of $400 per month or so. The place must have a bad reputation and you will have to overcome that. Since it's been closed for a while it probably needs a good face lift. And you are most likely going to need new equipment. Now think about that. A new automatic, upgrades to the self serve and a face lift can easily hit 150K. And you would be placing that in a place with a poor reputation that you don't own. There are other washes in that area that have more potential that you can actually but. Good luck with whatever you decide.

 

[Richard Hall]

Mac,

Thank you but I think we are talking about different washes. This wash is open and in good condition. Based on volume how do I determine a fair lease price?

Rich

 

[MEP001]

Ask for financials and hope they aren't inflated.

 

[Greg Pack]

I think no more than about 25% of gross is a rough guideline.

 

[Rfreeman]

This is an odd question, typically the current owner would determine the lease price based on market comps or his/her desired return. If I understand you (Richard), you are the potential leasee correct? If that's the case, as MEP mentioned ask for the financials & hope their right, and I would base the lease price off of what would allow you to make a fair return for ALL the work your about to take on. Also I wouldn't buy any equipment, I would lease the land in the lease it includes all equipment. I would for sure include a first right of refusal to purchase the property, and I would lock it down of at least 10 years (initial term) with 7 year options going forward. Has the owner given their lease rate? Overall, I would look at another investment unless you could buy the land as the members already mentioned...good luck and keep us posted!

 

[JMMUSTANG]

I would ask that 50% of the lease payment be applied to an agreed upon sale price within the 10 yr. lease agreement.
I would also demand an additional 5 yr. lease extension for an additional $500 per month.
He’ll probably want more but you will use the excuse that by this time you need to replace ALL the equpement.

 

[mac]

Richard sorry about my confusion on the wash.The advice given is spot on. I would also ask to see his last three years tax returns just as if you were buying the place. Stop by the place often to see how busy it is, and go through all of the bays and auto to see how things work. You can also check with the city water department and get his water consumption and then do the same with other washes in the area as a comparison. If this is your first wash be prepared for the daily visits to keep the place in good condition. It will be more than you think. Generally operating costs will be around 40% of gross revenue. That leaves you with the money to pay the lease and what will be in it for you, and only you know what your time is worth. Most owners own the place so that they build equity in the business and in this case that is removed from the picture. Good luck with your decision. A little luck never hurts.