Author Topic: FI through self service car wash  (Read 6488 times)

Guizmo

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FI through self service car wash
« on: November 30, 2016, 02:57:59 PM »
Anyone reached FI and reduced working hours through owning and operating a self service car wash?

Saskatchewstachian

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Re: FI through self service car wash
« Reply #1 on: November 30, 2016, 02:59:35 PM »
Walter White????

Guizmo

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Re: FI through self service car wash
« Reply #2 on: November 30, 2016, 03:33:55 PM »
Haha, that was more like a full service car wash. I'm looking at some places and with a 160,000 down payment, I could operate a place that nets 60k a year before taxes. From talking to the owner, it's on average less than 2 hours a day of work. Seems like a perfect FI job.

Lagom

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Re: FI through self service car wash
« Reply #3 on: November 30, 2016, 03:47:10 PM »
Why is the current owner selling? What is the total cost of the loan? has that $60k/year been stable over multiple years? I have never really considered buying a business, but it does sound potentially interesting. Would love to hear from someone who has actually owned this sort of operation.

ender

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Re: FI through self service car wash
« Reply #4 on: November 30, 2016, 04:01:56 PM »
Haha, that was more like a full service car wash. I'm looking at some places and with a 160,000 down payment, I could operate a place that nets 60k a year before taxes. From talking to the owner, it's on average less than 2 hours a day of work. Seems like a perfect FI job.

Make sure you have a lot more clear understanding than just talking to the owner.

A lot of people have NO IDEA how to balance the books at a small business. They probably aren't accounting for a whole variety of things when it "nets $60k/year."

JoJo

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Re: FI through self service car wash
« Reply #5 on: November 30, 2016, 05:34:13 PM »
Haha, that was more like a full service car wash. I'm looking at some places and with a 160,000 down payment, I could operate a place that nets 60k a year before taxes. From talking to the owner, it's on average less than 2 hours a day of work. Seems like a perfect FI job.

Sure, 2 hours of work a day but 10 hours of sitting around waiting for the customers to roll in. 

calimom

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Re: FI through self service car wash
« Reply #6 on: November 30, 2016, 07:12:01 PM »

[/quote]

Sure, 2 hours of work a day but 10 hours of sitting around waiting for the customers to roll in.
[/quote]


I'm wondering if the OP is referring to a type of car wash that is about 4 or 5 bays with coin operated equipment? If that's the case it doesn't need to have someone there. The 2 hours a day likely comes from cleaning up after people, emptying trash, vacuums, getting the quarters and that kind of thing. There would likely be wear and tear and some gross stuff to deal with from time to time (people can be pigs) but could be profitable.

Saskatchewstachian

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Re: FI through self service car wash
« Reply #7 on: December 01, 2016, 11:15:16 AM »
Haha, that was more like a full service car wash. I'm looking at some places and with a 160,000 down payment, I could operate a place that nets 60k a year before taxes. From talking to the owner, it's on average less than 2 hours a day of work. Seems like a perfect FI job.

If that is truly the case, at those rates and time requirement it would probably even be worth it to hire a kid at part time to cover the few hours a day. This wouldn't put much of a dent into the profit and would then turn this from a side project into a passive income source.

v8rx7guy

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Re: FI through self service car wash
« Reply #8 on: December 01, 2016, 11:56:53 AM »
There are a few books out there about the economics and challenges regarding owning and operating car washes.  I know it can be a very lucrative business with minimal effort if you get the right location...  And location is everything for these type of car washes.

scantee

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Re: FI through self service car wash
« Reply #9 on: December 01, 2016, 01:29:33 PM »
My impression is that if you can get a tunnel self-serve wash in a decent area you could reliably profit $60-70k a year. That's not great for entrepreneur looking to make a lot of money, but for someone pursuing FIRE it might be the perfect job.

I've looked into this recently because there is a car wash for sale in my neighborhood. Location is the biggest success factor as others have mentioned.  Of the three main car wash types, the self-serve tunnel option (which is what I think you're describing here) seems the best: more revenue than self-clean bays for only slightly more effort, less revenue than full-service but with significantly less management effort.


Mtngrl

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Re: FI through self service car wash
« Reply #10 on: December 01, 2016, 02:25:09 PM »
The one car wash in our small town does a booming business (lots of dirt roads) but seems to break down and be out of commission at least a few days every month, so I would suggest looking at the history of maintenance and maintenance costs before buying a business.

JAYSLOL

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Re: FI through self service car wash
« Reply #11 on: December 01, 2016, 02:47:15 PM »
The one car wash in our small town does a booming business (lots of dirt roads) but seems to break down and be out of commission at least a few days every month, so I would suggest looking at the history of maintenance and maintenance costs before buying a business.

THIS.  I would NOT buy an automatic car wash, they are very very expensive to maintain.  Several have closed in my area, in favour of the coin operated wand-wash type.

 
2 more things you MUST look into before buying something like this -

#1 if there are any water-restrictions that might harm the business that are in the works for your area for when you have drought problems.  It would really harm business if the city decided to only allow car washes to operate 2 days a week (or not at all) during the summer or when water tables are low.  Or if water rates are about to go through the roof.  It's happened in some areas. 

#2 if there are any environmental fee (or similar) hikes planned for your area.  Say that right now your city allows a car wash to let the used water/soap/dirt run down the city drain, but plans to soon introduce a law that you have to have a holding tank and you pay to have it cleaned out by a hazardous waste truck every couple weeks.  Or if car washes pay environmental fees and they are going up. 

Not saying this is why the business is up for sale, but do some more research and be sure before you take it on. 

 


Capsu78

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Re: FI through self service car wash
« Reply #12 on: December 01, 2016, 04:52:38 PM »
I believe there is a trade association specific to car washes which might offer you some perspective and maybe even a forum you could research.  I only know this because they once had their convention next to mine in a major convention center. 

Metric Mouse

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Re: FI through self service car wash
« Reply #13 on: December 03, 2016, 07:41:42 AM »
I believe there is a trade association specific to car washes which might offer you some perspective and maybe even a forum you could research.  I only know this because they once had their convention next to mine in a major convention center.

There's truly a group for everyone!

$160K to net $60k/year is pretty good. I've heard of people doing very well with self-storage as well; a  mix of income streams from properties like this would be an interesting way to FIRE.

Late_Bloomer

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Re: FI through self service car wash
« Reply #14 on: December 03, 2016, 07:51:36 AM »
I've thought about this as well, but with a coin op laundry facility.

TheDeclutterer

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Re: FI through self service car wash
« Reply #15 on: December 03, 2016, 11:03:40 AM »
Looked at them in my city and they did not net anywhere near that amount, get into those numbers hard if considering, camp out on various days and count cars from across the street, or pay someone else to do it. While the market is inflated now however, for about your downpayment you can get into an apartment building that would net similar. On site managed, so while would not deem it passive, sure is close once you get one rolling and stabilized. Either way you are on the right track, work smarter, not harder.

waltworks

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Re: FI through self service car wash
« Reply #16 on: December 03, 2016, 08:02:18 PM »
TANSTAAFL. Why on earth would the owner sell his cash cow?

-W

iluvzbeach

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Re: FI through self service car wash
« Reply #17 on: December 03, 2016, 09:29:11 PM »
In addition to car washes and mini-storage facilities, I've often thought owning a parking lot in a downtown area could be a huge moneymaker with little overhead.

arebelspy

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Re: FI through self service car wash
« Reply #18 on: December 04, 2016, 02:46:50 AM »
TANSTAAFL. Why on earth would the owner sell his cash cow?

Absolutely this.

It will net less than you think, and be way more work than you think.

I would not consider this FIRE, but switching careers.

There are easier/more fun ways to make 60k/yr if you're willing to spend 160k and 730 hours a year (2 hours/day, every day, which is roughly equivalent time-wise to a part time job that's 3 hours per day without weekends and two weeks of vacation a year, neither of which this job will have).

YMMV.  :)
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Icecreamarsenal

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Re: FI through self service car wash
« Reply #19 on: December 06, 2016, 09:09:19 PM »
TANSTAAFL. Why on earth would the owner sell his cash cow?

-W

Small business owner here.  I can think of many.  I will sell when I reach my FIRE #.  He may be selling because he sees a better opportunity, or he's done with the constant headache, or other more nefarious reasons.

However, 160k is obviously an ask, just a starting #.  There are rules of thumb for purchasing businesses: liquor stores get 3x on the books net, restaurants 1x.  It's a multiple of volatility.

Metric Mouse

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Re: FI through self service car wash
« Reply #20 on: December 07, 2016, 02:07:41 AM »
TANSTAAFL. Why on earth would the owner sell his cash cow?

-W

Small business owner here.  I can think of many.  I will sell when I reach my FIRE #.  He may be selling because he sees a better opportunity, or he's done with the constant headache, or other more nefarious reasons.

However, 160k is obviously an ask, just a starting #.  There are rules of thumb for purchasing businesses: liquor stores get 3x on the books net, restaurants 1x.  It's a multiple of volatility.

And that was a down payment; if the full value iis 3-5 times that, thats 3-5 times more property thw current owner could buy with leverage.  Just oneone of many, many reasons to sell.

Smokystache

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Re: FI through self service car wash
« Reply #21 on: December 07, 2016, 07:25:30 AM »

And that was a down payment ....

Wow. I missed that. So what is the full asking price? When you say that you can "net $60k", does that include payments toward the purchase/loan? Of is that just net of business expenses (water, soap, property taxes, repairs, etc. but NOT the loan)?


Rufus.T.Firefly

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Re: FI through self service car wash
« Reply #22 on: December 07, 2016, 07:41:25 AM »
Car washes can be a great investment in my opinion. They should have an ROI of roughly 10%-12% of the total purchase price if they include real estate.

Assuming a standard commercial loan of 20% down payment, I would estimate the total price is $800K. 60K net/800K price = 7.5% ROI

This price is a bit steep to me. I would be thinking closer to 600K is right, depending on other qualitative factors. However, I don't know if the 60K net has already factored in the mortgage payment, which it should. If 60K is prior to mortgage, then all the math has to be blown up and you start over at a lower price than 600K.

Also one thing to keep in mind: make sure you know the area very, very well. I would not ever think of buying a car wash in an area that I wasn't very familiar with traffic flow, road construction plans, and customer habits.

Because this is a leveraged investment, you should be prepared to lose your shirt and not have all your personal security tied to this one property. Don't be fooled into thinking that you can simply plop down 160K and retire permanently. Business prospects change sometimes.

Guizmo

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Re: FI through self service car wash
« Reply #23 on: December 08, 2016, 04:22:50 PM »

This price is a bit steep to me. I would be thinking closer to 600K is right, depending on other qualitative factors. However, I don't know if the 60K net has already factored in the mortgage payment, which it should. If 60K is prior to mortgage, then all the math has to be blown up and you start over at a lower price than 600K.


It's actually 450k. So with some rough calculations I was looking at a 14% ROI.

Guizmo

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Re: FI through self service car wash
« Reply #24 on: December 08, 2016, 04:23:39 PM »
TANSTAAFL. Why on earth would the owner sell his cash cow?

-W

He is old and his kids don't want to run it. I guess we all gotta die some day.

Guizmo

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Re: FI through self service car wash
« Reply #25 on: December 08, 2016, 04:27:35 PM »
TANSTAAFL. Why on earth would the owner sell his cash cow?

Absolutely this.

It will net less than you think, and be way more work than you think.

I would not consider this FIRE, but switching careers.

There are easier/more fun ways to make 60k/yr if you're willing to spend 160k and 730 hours a year (2 hours/day, every day, which is roughly equivalent time-wise to a part time job that's 3 hours per day without weekends and two weeks of vacation a year, neither of which this job will have).

YMMV.  :)

Good points Rebel Spy. I do suspect it might be more money since it is a cash business, the owner might not be reporting all his income. I do agree that it will be a job, but at least it will be a part time job. I reckon I currently spend at least 2000 hours at my current job and make a little over 70k pa.

ChpBstrd

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Re: FI through self service car wash
« Reply #26 on: December 09, 2016, 09:53:07 AM »
Bear in mind that there are REITs you can buy right now with a click of a button that yield near 9% and require zero hours labor, no permits, no vandalism cleanup, no personal lawsuits, no special tax forms, etc. (CCP, GOV, OHI).

Estimate the number of hours to run the thing and multiply that by your best alternative to sell your labor. Then, subtract this from the "net" reported by the owner. That way you're truly comparing apples to apples for labor and passive investment. If you and the seller are serious, you should be looking at 3 years of tax forms and the owner's labor log by now. Not talking heresay. (Small business owners are notorious for bragging)

Also plan for the baseline expenses. Is a truck required? Tools? Liability insurance? Tax prep? Dumpster fees?

Novik

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Re: FI through self service car wash
« Reply #27 on: December 09, 2016, 10:46:14 AM »
Different industry but the people behind the site below have a PF blog and have since started bought several laundromats. Lots of good content about how to evaluate a business etc that might be relevant!

http://laundromats101.com/2015/03/we-bought-a-laundromat-and-its-all-about-the-numbers/

Icecreamarsenal

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Re: FI through self service car wash
« Reply #28 on: December 10, 2016, 10:49:03 AM »
Rough calcs won't cut it.  Keep in mind, most people are stuck in a position and do not want to move.  Heck, some MMM forum members espouse suffering now to play later.  I get it, and have done it most of my adult life.
This is related to your situation because there is a big unknown when it comes to buying a business, or starting a business.  When I started my small business 18 months ago, all I heard from family and friends is no, no, no.  I started cash-flowing day one and it has accelerated my FIRE plans tremendously.
Don't look without for yeas or nays, look within.  But most importantly, make sure your #s are right, and make you understand that the buck stops with you.  I spend less than 2 hours/week on my small business, but it makes me more than your salary currently.  HOWEVER, when I started the small business, I was quite easily working 120 hours/week between my day job and setting up the small business.  That's 18 hours/day, 7 days/week, for months, with a new baby at home waiting for me at the end of the work day.
Best of luck on your future endeavors.

BuzzFire

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Re: FI through self service car wash
« Reply #29 on: December 10, 2016, 08:20:10 PM »
This is all very interesting, as I have been daydreaming about a cash flow investment. I don't really want to buy rental properties, but a carwash, mini-storage, or laundromat could be just the thing. Can't find any reasonably priced carwashes, gas stations, or mini-storage in my area, but I found a few laundromats. I read the laundromat101 blog, and think it might suit me. I don't want another job after just retiring, but as a low maintenance absentee owner type gig... Maybe someone could offer their opinion on this listing:

Icecreamarsenal

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Re: FI through self service car wash
« Reply #30 on: December 11, 2016, 09:11:10 AM »
This is all very interesting, as I have been daydreaming about a cash flow investment. I don't really want to buy rental properties, but a carwash, mini-storage, or laundromat could be just the thing. Can't find any reasonably priced carwashes, gas stations, or mini-storage in my area, but I found a few laundromats. I read the laundromat101 blog, and think it might suit me. I don't want another job after just retiring, but as a low maintenance absentee owner type gig... Maybe someone could offer their opinion on this listing:

Pro forma numbers look good, they're at >2.5x net ask.  You can ask them to bring down to 2.5. 
Also, pro forma numbers ALWAYS look good.  You'll have to ask for their K1 tax form to see what they're actually making, 75k is too round of a number isn't it?
Budget time or have a partner you can trust (read: life partner, close family, not random family or friends) for the initial transition.

BuzzFire

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Re: FI through self service car wash
« Reply #31 on: December 11, 2016, 11:41:43 AM »
Thanks. I think I will take a look at the site. Check the condition of the store and machines. The strip mall and neighborhood. Maybe talk to whomever is managing the place.

Proud Foot

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Re: FI through self service car wash
« Reply #32 on: December 12, 2016, 02:47:31 PM »
I have looked at these on the surface level and have not not dug in too deep.  I agree with what everyone has already said.  I didn't see it mentioned but if you do the purchase will you be purchasing the property or just the business?

BFGirl

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Re: FI through self service car wash
« Reply #33 on: December 12, 2016, 03:04:01 PM »
You need to be able to see several years of financials.  Make sure you do your due diligence and have an accountant and an attorney with you along the way.  I used to do a lot of sales and acquisitions of businesses and you want to make sure that you know exactly what you are buying.  If you are buying the real estate then you may want to get a basic environmental study done to make sure there are no hidden problems.  Better to ask for all the information you need and have the deal fall through than to buy something that has problems you are not aware of.

Nothing in this post constitutes legal advice.

Cpa Cat

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Re: FI through self service car wash
« Reply #34 on: December 12, 2016, 03:19:05 PM »
With a business like this, I'd want to see the actual bank statements that show the most recent 12 months of deposits so that I could confirm the gross revenue number, at least.

Expenses are a little harder to "confirm" - but I'd probably dig in if I looked at their Quickbooks/Whatever file and noticed that accounts weren't reconciled. I'd ask to see their Schedule C/1120-S for the business to see if what they told the IRS was different from what they're telling me.

You could also hire someone to do a formal appraisal for you. I'd think with the purchase price being what it is, it would be worthwhile.

My FIL owns one. He often has to go out on holidays to babysit it - especially Christmastime. I guess people get a day off and go wash their cars. Keep in mind that you're "on call" all the time. If something breaks down while you're on vacation, make sure you'd have someone to call to go take care of it.
« Last Edit: December 12, 2016, 03:21:22 PM by Cpa Cat »

fredbear

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Re: FI through self service car wash
« Reply #35 on: December 12, 2016, 09:14:24 PM »
...I do suspect it might be more money since it is a cash business, the owner might not be reporting all his income. I do agree that it will be a job, but at least it will be a part time job. ...

The only car wash I have looked into has a great deal of unreported cash flowing out of it.  The part that may cause that deal to come unglued, though, is that one partner is a screw-off and the other gets stuck with all the maintenance and errand-running.   You might want to run this for a while before quitting your regular job.