Purchase a car wash? Advice needed

[Sara Peak]

I am looking at purchasing a car wash. I am overwhelmed a bit with the thought considering it would be a new investment for me (currently one SFH rental and 1 mulit family 6 unit apartment). However, I am very interested in the car wash and am trying to obtain any info/advice/consideration regarding the potential investment.

Has anyone purchased a car wash?

Is it typical to assume about 50% of gross income in expenses? This currently has two employees.

What is a "good" cap rate for a car wash?

Is this still considered passive for tax purposes as long as I don't manage the day to day operations of the wash?

What do others think of the future of car washing? While it varies seasonably, I also assume it varies during economic cycles.

Any thoughts welcome.

Sara

[Antoine Martel]

Super interesting Sara. 

I would assume that expenses would be more than 50%. Your water bill and employees are going to eat up a lot of that, in addition to the taxes and insurance I would believe it would be over 50%. You probably need to have a special insurance to protect against the additional things that could happen on your lot.

I think that instead of CAP rate you should look at the cash on cash return that the business would generate for you.

Look at the previous owners books and analyze them. See what their expenses and incomes were.