Conversion of disused gas station to hand car wash - Posted by Daniel

Real Estate Investing Retail
1

Posted by tray@lcorn on January 06, 2003 at 14:48:27:

Daniel,

How messy the subdivision is will depend entirely on the local ordiance. Contact the planning department and find out what the requirements are for a single lot subdivision.

In many localities I’ve worked in, such a subdivision require only an administrative approval, hence no public hearing. However land use controls are entirely local, and how it is done in one locality has no bearing on the way it is done in yours.

Generally, this is a seller responsibility.

ray

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Conversion of disused gas station to hand car wash - Posted by Daniel

Posted by Daniel on January 04, 2003 at 08:49:23:

Hi everyone,

I have known of a gas station disused for about 8 years in the middle of a LOAD of other gas stations. Good thing about this one is, it is on a huge main road, right next to a burger king, kmart, and other stores in a large shopping center.

I know I could get the place for an excellent price, since no-one in their right mind would dare compete here as a gas station, and most people fail to see another use for one (except me, since I plan on opening a hand car wash there). Hence, the disuse for such a long time. I also have a cash buyer for a working hand car wash business when it is running, so I have to decide if I just want to hold the RE, sell the business to them and lease the property to the business, or just sell everything.

I am checking with the recorder’s office here on Monday to get details and begin, so here is a quick summary of my action plan. Any comments, nasty or nice would go a long way, and be much appreciated (newbie ears wide open, and mouth wide shut).

  • Find owner
  • Tie up using purchase option
  • Perform due dil.
  • Arrange financing (will attempt to have owner carry x%). Already have company here suitable to finance 80% LTV at 6% p.a. (I don’t see too many financing problems, I think)
  • Open corp. to hold property
    Excercise option. Close. Open business.

From here, I will need to develop my exit strategy a little better. I am leaning toward selling the business, and leasing the property to the business. If I can buy for $100,000, with the company as a tenant on a 10+10+10 lease, I could double the property value (by having a tenant), and have a NOI of about $3000 a month. There is also the option of selling outright, but I think I would prefer holding.

Anyone see any big problems? I am only a newbie, not even a residential deal done yet. I know I am leaping into the deep end, but I know I can buy loooooow here, so the deal looks a little too good to let go.

Thanks for any tips :slight_smile: Hope everyone ejoyed their holidays!

Daniel

P.S. Hand car wash business has complete business plan done, management team in place, finance almost arranged, and is very viable :slight_smile: I don’t know if I should be more excited about having the business (for a while at least) or the property! I guess having both makes it extra good!

3

Check out UST’s - Posted by Frank Chin

Posted by Frank Chin on January 04, 2003 at 09:03:17:

Hi Dan:

One BIG issue you’ll have to check out is UST (underground storage tanks) as required by Federal and State laws.

The station may be empty for years becasue it was uneconomic to dig up the old leaky tanks. Cleanup costs can be huge.

So you’ll have to do a Phase I environmental as part of any due diligience.

Frank Chin

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Re: Check out UST’s - Posted by Daniel

Posted by Daniel on January 05, 2003 at 01:34:59:

Thanks, Frank :slight_smile:

I guess the leaky problems wouldn’t exist, because laws here wouldn’t allow a leaky tank to stay in the ground at all… it would be compulsory to remove… it is more of a competition issue. The place went under becaue of stiff competition. One guy owns a chain of 13 gas stations nearby, and 2 of them are on either side of this site I want. Not to mention loads more around the place…

I will definately check it out, though. I talked to a fuel delivery driver and he said it is simple to check for leaks: a guy comes out, pumps the tank full of air, waits for a while, and measures if any air has escaped.

Daniel

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Re: Check out UST’s - Posted by ray@lcorn

Posted by ray@lcorn on January 05, 2003 at 20:10:58:

Daniel,

You’re missing the point… if the place went broke it is very likely that proper closure procedures weren’t followed, or that shortcuts were taken on the monitoring. If it was properly closed there will be paperwork and certification to that effect. You need to see those documents.

The question is not whether the tanks are leaking now, it is whether there has EVER been a leak. If you become the owner without knowing, then any problems are yours. It isn’t necessarily a deal killer, but it is very foolish to go in without all the facts.

The standard protocol for dealing with old gas stations is to get a complete Phase III report, which includes boring, sampling and testing of the soils. If you’re using a lender they will require this as a matter of course. Fuel spills can affect anyone in the chain of title. It is not something to assume is okay because it looks that way.

ray

6

Re: Check out UST’s - Posted by Daniel

Posted by Daniel on January 06, 2003 at 24:55:09:

Thanks so much, Ray.

I would never forget to examine documents of such importance or do soil testing. I have already been to order a report on code violations etc., found the owner at the recorder’s office, and am visiting my lawyer for extra assistance.

I did, however, find out that it is part of a lot where a furniture company has its store (two businesses/buidlings on one title). I guess I will also have to have the property divided from the existing larger property, and have its own title created.

Is that generally a messy procedure? Thanks again for the invaluable opinions :slight_smile:

Daniel