Who would live above a carwash?

[SAB]

Hello everyone,

I am currently looking at a wash that has a 2 bed 2 bath apartment above it, I don't feel this adds any value to the wash. I am curious what others in the industry think.

Details on the wash are as follows

Asking price $650,000.
Days on market 784
Built 1998

Gross 90,000 ish


14,000 car per day
Towns population is 7200, with a town 10 miles away at 50,000
median income is only 32,000, the larger towns median income is 45,000

2 bed 2 bath 1984 sq/ft apartment with large balcony
1 rollover touchless Mark VII (probably original)
4 SS bays, One that was built to add another rollover (cashier pedestal and wiring conduit)
4 Vac stations
1 Shampoo station
1 vending machine with car products
1 Pop machine

0 competition, not even another SS
Wash prices are $5, $6, and $7 dollars

Using a gross multiplier of 3- 4.5 would suggest a value of 270K-405K. They say the apartment rents for $800 a month, but its not currently rented. I think a person would be lucky to get $500 a month out of it. I personally see it as a liability, Not an asset. I haven't contacted the seller yet because I think it is too far over priced to consider. The seller will carry, with 145K down, because he knows the buyer can't take it to the bank. (according to the realtor)

Overall it is a nice wash, well built but it needs better curb appeal and the touchless needs updated as it does not do a good job, soap does not get rinsed off and the dryer does not come close to drying.

Any opinions on the Wash are welcome, and thoughts on the apartment would be appreciated.

Andy

 

[Overachiever]

The obvious benefit of the apartment would be to have an employee living there (or yourself) that could assist customers day and night. But yeah, he's asking for too much unless you want to gamble on the reported income.

 

[rph9168]

I would stay away from a wash with unreported income. Without tax returns showing revenue you would be taking a big risk. I don't think any respectable real estate agent would handle something like this.

 

[SAB]

I was lead to think that the 90K was reported, but that there might be more.
My thought on this wash would be to do a master lease for two years so improvements could be made and reported income increased. That would be contingent on getting the purchase price in the right realm.

 

[Randy]

I’ve seen a number of car washes that have an apartment above the car wash. The last 2 projects we wanted to do the municipalities required that we have an onsite manager 24/7 with an apartment above the car wash. The problem in most of Washington state is the land values have gotten so high that in most cases it doesn’t make much sense in using the property for a car wash. I’m in that situation, I’d be better off the remove the car wash from the property and sell the dirt. $650K might be a pretty good number if the land value is there. Not knowing the location of this car wash makes it pretty hard to give a good answer as to if it’s good deal or not. I sent SAB an e-mail asking the location of this car wash but he never replied.

 

[SAB]

Thats interesting about an apartment being required. I'm not trying to mysterious about the location, but I don't believe the land value to be the main portion of the price nor increase drastically any time soon. The wash sits on approx. 1/3 of an acre. There is 18 acres for sale down the road for $329,000.

 

[robert roman]

Perhaps the original intent was to have the property caretaker live above the wash.

When evaluating “as improved,” I begin by looking for smell factor.

18-year old wash (probably original) means the equipment is obsolete and incidental to market value.

“The seller will carry, with 145K down, because he knows the buyer can't take it to the bank. (according to the realtor)”

No, it’s $145,000 because the property has been on the market for over two years.

Why? Because $90,000-ish is about 1/2 of the benchmark for a facility of this scale and scope and market size.

After all, this is not bank appraisal but rather calculation of value that would result in a sales transaction.

My wife owned a 1995 Camaro 6-clyinder base convertible in cream puff condition. It needed $2,500 worth of parts and DIY to restore to “like new” condition. We sold it for $2,700 to former GM factory worker who restored it for sentimental reasons.

Reason being it was not a collectable vehicle. In other words, it was a very, very nice car but it had no value-added like a Z-28 convertible in cherry shape.

Same applies here.

If current gross net is $50,000-ish, does it make financial sense to chase it?

If land was vacant, would you build same carwash facility or something else?

Hope this helps.

 

[rph9168]

I agree with Robert. Just the fact that it has been on the market for over 2 years should raise some suspicion. With no accurate accounting of revenue along with the factors Robert brings out this is more than just a risk, it almost seems like a scam.

 

[Waxman]

Sounds more like a wash worth $400-450k. I like the idea of an apartment to rent; what a nice easy moneymaker compared to the car wash!!!

Have you run the numbers to see what your net income would be? Variables; raising price across the board, re habbing and renting the apartment out at a decent price. At what level of sales and rent do you profit 'X' amount?

How does the automatic run? A new one is $100K-150k.

 

[robert roman]

Hey Andy,

10 or 12 years ago, a client brought me to upstate N.Y. to evaluate an opportunity to buy full-service business-only, $400,000 cash down. One of co-owners was former NBA player.

The wash was supposed to have mostly new tunnel equipment and a full-stocked convenience store.

I pushed one of the rotating side brushes backwards to test the recoil and there was none. The “convenience store” was rows of empty shelves and coolers. Mechanical room, in the basement, was in shambles, coat hangers were being used to suspend extension cords.

I suggested this fellow run away, don’t walk.

Over next several months, I begged client not to buy while he argued why he should buy.

Sometime later, a friend told me he actually bought the wash and had to refinance at the end of the first year. By end of year two, I was told he no longer owned the wash.

Bye, bye $400,000.

Personally, I attribute his loss to celebrity disease so enamored with fact co-owner was former basketball player.

It clouded his better judgment.

 

[rph9168]

From my experience usually when an owner offers to finance a sale of a wash it means that no lender would consider lending the amount they are asking for. The wash has been on the market for over 2 years which should be enough to cause most to stay away. If you still are convinced you want to proceed I would get an impartial appraisal of the business and check to see if a lender will meet or beat his terms.

 

[Car_Wash_Guy]

My wash has a 3BR 1BA apt above it. It's nicer than my house. If I were a single guy I'd be living up there. .

 

[SAB]

Currently, no, it doesn't make sense to chase it. I think I could get the sales up but it would require new equipment, and better signage, which I know is not cheap.

The numbers indicate about a 1/3 of a percent capture rate, which seems to be on the low side from the numbers I've seen mentioned on this site. I think it is low because the wash doesn't do a great job. I also worry about the fact that the median income is so low compared to the neighboring town.

Currently the equation looks like this to me.
90K-expenses - debt obligations - capex reserves = A PITA job.

I do understand that to build this facility with the apartment could easily go over his asking price the numbers just don't work. For me.

 

[SAB]

Sounds more like a wash worth $400-450k. I like the idea of an apartment to rent; what a nice easy moneymaker compared to the car wash!!!

Have you run the numbers to see what your net income would be? Variables; raising price across the board, re habbing and renting the apartment out at a decent price. At what level of sales and rent do you profit 'X' amount?

How does the automatic run? A new one is $100K-150k.

I think that in this market you would be lucky to rent that apartment out for $500 a month. From the pictures, it doesn't appear to need to be rehabbed. My biggest concern is getting a deadbeat renter in that quits paying and starts to cause havoc with customers. I understand screening them properly, but the number of people that would want to live above a car wash seems like it would be limited.

This would be a question for a good attorney, but say I hire a site manager to live in the apartment and down the road the manager needs to be let go, how is that affected by renters rights? I have owned rentals, and luckily haven't been down this road, but have heard horror stories of not being able to get the renters out of the unit.

 

[SAB]

Currently, no, it doesn't make sense to chase it. I think I could get the sales up but it would require new equipment, and better signage, which I know is not cheap.

The numbers indicate about a 1/3 of a percent capture rate, which seems to be on the low side from the numbers I've seen mentioned on this site. I think it is low because the wash doesn't do a great job. I also worry about the fact that the median income is so low compared to the neighboring town.

Currently the equation looks like this to me.
90K-expenses - debt obligations - capex reserves = A PITA job.

I do understand that to build this facility with the apartment could easily go over his asking price the numbers just don't work. For me.

I meant this to be a reply to Roberts post

 

[SAB]

My wash has a 3BR 1BA apt above it. It's nicer than my house. If I were a single guy I'd be living up there. For now, I have a kid living up there that keeps an eye on everything at my wash, which is nice.

How populated of an area is your wash in, and how much under market value does it rent at?

 

[SAB]

Thanks to everyone that took the time to reply, I didn't mean for it to be a one and done post.
I had a bunch of work come in then off to a recertification conference which hopefully will wrap up this flying season.

 

[Car_Wash_Guy]

How populated of an area is your wash in, and how much under market value does it rent at?

Population of county is about 150K. Not sure about how much it would rent as the first owners/builders committed a mortal mistake. They made the entrance to the apt. through the equipment room rather than separating it on outside.