Re: Carwash - Posted by Jeff Lane
Posted by Jeff Lane on February 06, 2008 at 19:55:26:
Why is the carwash closed? The carwash is currently shuttered. The electric meter is not even turning. It is 5 years old and why he chose this location, I donâ??t know. My guess is traffic count and itâ??s located close to some better neighborhoods.
Why a turnaround? There is currently 20% equity in the asking price. It is in my price range (where most carwashes are not) and my end game is to own it for two years (no more than five). I have the time and interest.
Why a carwash? Itâ??s a cash business (which I like), it is a self serve carwash so there is no need for a manager as I could attend it during the week and be there on weekends. Once it is up and running it will be worth twice what I paid for it (100% in 2 years).
Have you ever turned a business around before? No but that is why Im here. From talking to local people, the former owner mismanaged it. I would think a carwash would be pretty simple (no employees, simple overhead, not a lot of skill involved in keeping soap in the dispensers).
Do you have STRONG sales and marketing skills? Not STRONG but GOOD marketing skills as I have started several moderately successful internet businesses from scratch. My personal thought is that most of the marketing will be in the form of drive-byâ??s and projects with the local school (3 blocks away). It has a count of 11k cars, 1.4 cars per household (3 mile radius), and several good businesses that I might be able to partner with (wash tokens).
You have no financials so are your getting the value based on the real estate and equipment? I have not put any money in this and am basing this on an appraisal the bank had done 3 months ago. It is a very in depth analysis of the market, the equipment, location, and demographics. It lists as many pros as cons and I feel this is a good starting point.
If you don’t mind revealing what city are you in? Texas/Oklahoma area
Are the expenses involved(sercurity/higher insurance costs) enough to jusitify the purchase? The cost of a good security system is included in the 20-30k mentioned in the first post. I have calls in for insurance quotes and will know more soon (I hope).
More info:
Asking 385k, appraisal 400-430k.
NOI appraisal 92k, my estimate 46k, lowest acceptable 25k
Using 20% down, and a 300k selling price, 6.5% interest (740 credit) and 46k NOI, cash on cash is 46%, DCR is 2.53, LTV is 55%. Using Rays formula of NOI over Caprate, the max purchase price is about 500k… nearly 250k more than I am paying… not bad if you can make it work…
To take it one step further,
If I use a 25k NOI and all of the above are the same then CoC is 11%, and a 1.37 DCR. Using Rays formula of NOI over Caprate, in this situation the max price is 275k (about what I will pay). An NOI of 25k is an income of about $38.00 a day for 22 days a month.
Hope that helps…
Jeff