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Want to Lease my car washes

washallday

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LEASEING CAR WASH INPUT PLEASE

I am thinking of leasing my car washes and would like some input and wisdom. Has anyone done this or looked into it. At this time if I sell them outright capital gains would kill me. I was thinking of a triple net lease. I am willing to do lease to own. Not sure how to determine what the monthly lease amount should be??
 

chaz

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No clue.
But I know with my car wash the ultimate exit plan will be the land value...so I don’t think I’d ever want to be leasing.

the other thing that comes to mind if u lease or lease to own...there’s the risk the guy runs the place into the ground and then leaves u a mess to deal with and need to rebuild biz.

...my thoughts
 

washallday

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Leasing is just like anything else u need to select the right person and keep an eye on what they are doing and have items in the lease that cover you if they are not taking care of the property or wash so you can take it back. I was thinking Leasing is a way to defer the capital gains until something changes or until my situation changes to help with the tax consequences. Years ago I leased to own two rental properties and that worked out great for me and the seller. I will look into the 1031 exchange. The reason for doing this is because I want to become a snow bird.
 

tdlconceptsllc

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Why not Owner Fianance them to someone and also make money on the interest? Would be a excellent time to offer this with the Covid19 the Banks are overwheelmed with Loans to the public. Also I hear now on a 1031 you have to have the other real estate deal lined up prior to take place same transaction no more time frame. I don't know how true that is.
 

washallday

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I looked into the 1031 and it has to be liked property, I am not looking for another wash. Owner Financing it is hard to find someone with the down payment. I am not sure if you have to pay the capital gains right away, not sure how that works. I appreciate the ideas, keep them coming.
 

OurTown

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Talk to your CPA to find out all your tax liabilities for the various options.
 

Allen

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The Like Kind property does not have to be another identical property. It does have to be real property used for investment purposes.
After selling your property you must identify the replacement property within 45 days and close within 180 days. All funds go to an intermediary. Pretty sure it can even be a vacation home or condo used as a rental only. You can stay there no more than 14 days a year, but after a few years I think you may be able to convert it to your principle residence. I would ask an attorney or CPA who does a lot of 1031's and find an experienced intermediary.
I exchanged a farm and warehouse for two of my washes years ago and will probably do the same when I get out.

Owner financing is also a great way to go if you can get a pretty good down payment.
 

KleanRide

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I looked into the 1031 and it has to be liked property, I am not looking for another wash.
From what I've read it doesn't have to be another car wash. The definition of "like-kind" is fairly broad. Here's some text I copied from an investment website:

Many people believe that like-kind properties must be of the same size or type to qualify. But that's not true—different assets can be exchanged as long as they qualify. Primary or principal residences—which are for personal use for the most part—do not qualify and cannot be exchanged. Properties must be held for business or investment purposes. Here are a few examples of like-kind property exchanges:
  • A multifamily property for an industrial building
  • Vacant land for a medical complex
  • An apartment building for a shopping center
  • A hotel for a retail property
  • A condominium rental for a single-family rental
 

Rfreeman

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As everyone mentioned contact a CPA or attny that specializes in this. What has been mentioned above is true...it doesn't have to be another car wash. I have done a few 1031x for various types of properties and the section of the code is very advantages to defer capital gains taxes but eventually uncle Sam has to get his lol.

I would also be very cautious about leasing or leasing to own. This business can be very taxing as we all know dealing with people and their garbage literally....hate to see you lease it to a "good" leasee then something happen to them and they ask their friend to help them out only to run it down.

I would look to cash out by a solid commercial property that produces stead cash flow to turn you into the snow bird.
 

Waxman

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No clue.
But I know with my car wash the ultimate exit plan will be the land value...so I don’t think I’d ever want to be leasing.

the other thing that comes to mind if u lease or lease to own...there’s the risk the guy runs the place into the ground and then leaves u a mess to deal with and need to rebuild biz.

...my thoughts
Yes there is a risk you get back a run down wash. But what mitigates the risk is the fact that you get to keep all payments made if new owner defaults! I'd set some aside in case that happens.
 

washallday

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In the lease there would be clauses that state items that need to be addressed and if they start to get run down then the lease will be voided. If auto is not in running condition for more than 30 days, same with HB, Validators, coin machine, vacs, you get the idea. Regular inspections will be made to insure items are being addressed. There are ways to help limit the risk.
 

jfmoran

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Talk to your CPA about doing an installment sale, This allows you to spread the capital gains tax out over several years, rather than getting hit all at once. The risk being, that the Capital Gains tax could increase in the future.
 

Waxman

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I like the idea of selling your wash and using the proceeds as the downpayment on a large apartment complex. As long as you know the vacancy rate in your area, this can be a great business and I think it would work well for a snow-bird. It could also be a nice way to increase your personal wealth and defer capital gains tax.

Yes, ask a CPA but be sure and find a good one, because I have gotten my share of crummy ones along the years and their advice was crummy, too.
 

KleanRide

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I have a couple of friends that own apartment complexes right now and Covid is killing them. Tenants aren't paying rent and they can't evict them. Our Government tripped all over themselves to take care of tenants but no one is taking care of the landlords.
 

MEP001

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I have a couple of friends that own apartment complexes right now and Covid is killing them. Tenants aren't paying rent and they can't evict them. Our Government tripped all over themselves to take care of tenants but no one is taking care of the landlords.
It would kill their credit, but they can just refuse to pay their note. The bank will do just about anything to avoid repo'ing a property that's costing so much money.
 

Waxman

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COVID won't last forever and I think the situation we are in is rare.

I think the vacancy rate in a given area is more important when considering apartment rentals.

None of my tenants has had a problem paying rent.
 
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