Anyone own a gas station, or know someone who does?

Loc R., Individual/Private Note Buyer
E-Mail: locatelli.rao@gmail.com
Website: http://www.lrprivatenotebuyer.com
I buy individual notes - all states, shapes & sizes.

Jake Kucheck

Residential Real Estate Agent · Newport Beach, California

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Jul 22 '11, 07:11 AM

My answer to the question in your subject line is "Yes, I know someone who owns a gas station."

My answer to the question in the body of your post is "Yes, I agree that sounds too good to be true".

Not sure how these two answers are related, but I'll help out if I can...

Steve L.

SFR Investor · Rancho Cucamonga, California

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Jul 22 '11, 03:48 PM

Hi Loc -

My dad runs a commercial brokerage specializing in brokering gas stations (GasStationExchange.com). There are some opportunities where you will see 25% cash-on-cash return, if you are experienced and operate it.

The industry has some challenges:
1. All the major brands require training and approval. 1-3 weeks at their corporate office.
2. The prices do not include working capital/inventory. Which can easily be over 100k.
3. Employee theft in the industry is a huge problem.
4. Gas prices and the industry have been volatile.

We know some extremely successful owners and some struggling to survive.

In California, it is common for business only to trade at 4-6x earnings. Business with reel estate deals usually are 8%-10% returns.

Joel Owens

Commercial Real Estate Broker · Canton, Georgia

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Jul 22 '11, 04:13 PM

A lot will depend on if you will be an absentee owner or an owner/operator.

You will see businesses push returns but then if you are absentee you have to hire a manager to replace you.

That will push returns down.So you have to pay close attention to the add backs.

Would you be looking to fund the mortgage on the business?? or

Buy just the assets of the business??

Buy the assets and the building of the business??

Buy the lease on the building that the business is in??

You have to look at owning Mom and Pop versus a Franchise concept.Franchise will want certain liquidity demands to qualify.

You also have to look at for the are the performance of the gas station and it's location.

For instance is traffic starting to decline in that area which is an becoming an old part of town??

Also you could have a gas station in a great location but it is not a hard pin corner.Race Trac comes in or QT and buys a corner which is easier to get out of.Now many of the people coming into your store will go to the easier access location.I have seen this happen to a Shell station that closed down when a RaceTrac went in.

The gas you don't make the money on it is the items in the store.You have to be really careful of selling the Lottery and the Liquor and robberies.Have to pay special attention that the camera is up to date to watch for stealing or outside loitering.Many have the solid plexiglass windows that are bulletproof depending on the area.

I know some gas station owners who have 8 to 10 locations but I don't specialize in that.

The dumbest thing I have seen is putting a huge commercial for sale sign in front of the gas station.You are telling all your customers who go there that things are changing and they speculate as to why you are selling.

Customers are creatures of habit and they do not like change and uncertainty.

So in many cases when selling commercial property you do not stick a sign upfront if it is an operating business.