Car Wash a good investment?

28 Replies

Hey BP members!   I was toying with the idea (loosely) of investing in a car wash.  There are two for sale in my vicinity.  One has 5 bays, one of which is full service.

Question:  does anyone have experience with a car wash?  If so, what can you tell me about one - some detailed questions below:

-what constitutes a good deal? (number of bays, cost per bay) (location, obviously)

- how do you analyze one?

- what kind of monthly cashflow is considered "good" (net)?

- how much hassle is maintaining the equipment?

Thanks for any feedback you can provide!

While I don’t have any experience investing in car washes, I would have to say they wouldn’t be TOO much different; instead of rent you want to know how many customers they average a month. I don’t think a self-wash unit would be much upkeep; the ones around me are all just concrete with metal siding. You’re obviously going to have to take into consideration cost of supplies and water, but since you are SC I doubt there’s a ‘down season’ like there is here in the mountains of Pa. Call some other places maybe not so close to you, ask them how many washes they average in a month, find a $ you can associate with each wash, then you can come up with an estimated gross income. Hope this helps, it seems like it could be a solid investment if the numbers add up!

Dave, lots of good questions! I bought a pair of automatic car washes a little over a year ago. A few things to keep in mind:

There are lots of different types of car washes. Self serve, automatic, full service, etc. Each is in some ways a different business, so consider the type of work you are willing to do.

In my experience with buying my car washes I also bought a part time job. It would be a different job for each type of wash, but it does require at least weekly upkeep. 

I would also consider the existing business in terms of cars washes per year. Is that a number that is increasing, decreasing or something that you could influence with marketing or better visibility. 

I’d look up chemical/soap suppliers in the area, especially if you can figure out who the supplier is for those car washes. That rep likely could give you some insight into the business. 

For me the analysis was on comparison to the type of cash flow I could get with a similarly priced apartment building. I found that the cap rate was better for the car washes that it was for the apartments I was looking at here in WI. I’m guessing that’s common, but partially because no matter what wash you are buying there is likely more regular work that with an apartment building. For me with automatic washes I’m emptying garbage every other day and checking on the washes to make sure things are working. 

Maintaining the equipment is a real part of owning washes. Like with rental properties, you could “self manage” or choose to have all the work done by others. I have found that many things I am able to do myself pretty easily, and for some of the more complex tasks I have a service guy that had serviced the car washes for years. I’d ask about if there is an existing service guy and talk with him too. He may give you an idea if the washes have been well maintained or not. 

Because car washes are somewhat of a unique business you may have a better shot at seller financing too. That’s what I was able to do and allowed my cash to go further. You can also consider an SBA loan as well. 

Good luck and reach out with more specifics about the deal if you would like!

I don't touch any business that requires owner operator which is about 80% of them. Hard to scale those investments without BEING the business.

I like higher cash flow businesses with great systems and management in place where an absentee owner can do well with minimal oversight and check in. In that situation you are creating another cash flow stream for the portfolio.

Anything under 100k profit after expenses it is hard to be absentee owner as not enough to layer in extra management to be more hands off.

Originally posted by @Adam Burns :

While I don’t have any experience investing in car washes, I would have to say they wouldn’t be TOO much different; instead of rent you want to know how many customers they average a month. I don’t think a self-wash unit would be much upkeep; the ones around me are all just concrete with metal siding. You’re obviously going to have to take into consideration cost of supplies and water, but since you are SC I doubt there’s a ‘down season’ like there is here in the mountains of Pa. Call some other places maybe not so close to you, ask them how many washes they average in a month, find a $ you can associate with each wash, then you can come up with an estimated gross income. Hope this helps, it seems like it could be a solid investment if the numbers add up!

 Thank you.  Some good pointers, especially the one about seasons.  Yes, we are in the South, however there is likely a slow-down during the cooler months of late Nov-February. 

@Dave Carpenter @Carol Bloom @Joel Owens

Thank you all for the information.  Dave, thank you for all the details as I have truly no clue what this business entails.  I just liked the fact that, in the case of the self-service wash, no significant number of employees is needed (in some ways, partially mimics the self storage business - would LOVE to get my hands on one of those).  The picture you and Joel painted is that there is a degree of "checking in" required.  This has me thinking of all that may be involved.  

As of now, no deal in the works.  Just browsing.  Thanks guys!

Originally posted by @Adam Burns :

While I don’t have any experience investing in car washes, I would have to say they wouldn’t be TOO much different; instead of rent you want to know how many customers they average a month. I don’t think a self-wash unit would be much upkeep; the ones around me are all just concrete with metal siding. You’re obviously going to have to take into consideration cost of supplies and water, but since you are SC I doubt there’s a ‘down season’ like there is here in the mountains of Pa. Call some other places maybe not so close to you, ask them how many washes they average in a month, find a $ you can associate with each wash, then you can come up with an estimated gross income. Hope this helps, it seems like it could be a solid investment if the numbers add up!

 I think maybe in the down season they are washing road and snow and salt slime off of their cars ???  so no real down time. I could see summer being slower with no weather.. but I think you guys get rain pretty much year round at some point in a week. with thunderstorms etc.. I think I read that somewhere.. 

Originally posted by @Dave Rav :

Hey BP members!   I was toying with the idea (loosely) of investing in a car wash.  There are two for sale in my vicinity.  One has 5 bays, one of which is full service.

Question:  does anyone have experience with a car wash?  If so, what can you tell me about one - some detailed questions below:

-what constitutes a good deal? (number of bays, cost per bay) (location, obviously)

- how do you analyze one?

- what kind of monthly cashflow is considered "good" (net)?

- how much hassle is maintaining the equipment?

Thanks for any feedback you can provide!

It all boils down to how much cash flow you want to generate out of this business. 

@Joel Owens  might not want to touch anything below 100K income (for obvious reasons). But a ton of people don't want to scale their business. They want consistent, quality earning with the ability to expand their business slowly over time. 

You will have minimal seasonality where you live. Don't just look at the cap (or yield) rate. Look at the quality of earnings as well i.e. is a car wash business earning more consistent than your other options. Quality of earnings is often more important than the amount of earning because it can better help you plan for the future.

Originally posted by @Dave Rav :

@Dave Carpenter @Carol Bloom @Joel Owens

Thank you all for the information.  Dave, thank you for all the details as I have truly no clue what this business entails.  I just liked the fact that, in the case of the self-service wash, no significant number of employees is needed (in some ways, partially mimics the self storage business - would LOVE to get my hands on one of those).  The picture you and Joel painted is that there is a degree of "checking in" required.  This has me thinking of all that may be involved.  

As of now, no deal in the works.  Just browsing.  Thanks guys!

 If Storage is where your interest lies ... Go straight for it. I often see investors wanting to "work towards" a certain type of investing for one reason or another. They cite things like, I need to gain experience, or I need to raise funds or something along those lines. Most often that reason is in their head rather than anywhere else and going straight at what they want is the quickest and best route! In other words, go straight for wherever your interest lies, whatever that may be!

I never owned a car wash, @Dave Rav , but I profitably built and sold a multi-location retail business in a prior life and have substantial experience. Your two options are like night and day.

Self-service car washes have always intrigued me and appear to be an almost perfect business. Unlike a laundromat, they can use recycled water and are therefore very difficult to audit. There are no to few employees(!!!) and almost no customer interaction. They can be all cash, which is captured securely, not thru the hands of an employee.  Inventory control, if any, would be brain-dead simple. The machinery associated with these is relatively unsophisticated. If well located, self-service car washes are also land banks – which is why it's appropriate to discuss them on a real estate board. I've always been intrigued.

A full-service car wash is another animal. This will involve dozens of uneducated employees, whom I can guarantee with certainty will drive you crazy and become your biggest problem. No other business issue will come close. The facility will be bigger and the equipment substantially more sophisticated than self-service. Maintenance will cost more.  I don't like that if a part breaks, it can shut you.

Full-service is a real business with employees, maintenance, marketing, finance, advertising, inventory, compliance, customer care, utilities, vendors, supplies, etc., etc., etc. It's hard to develop a competitive advantage here and competition is normally fierce in these businesses. I wouldn't own one unless I could own several and control a local market. No thanks.

You pay for cash flow when you buy a going business, Dave, and it's important to know what you're buying and why the owner is selling, among a thousand other questions you must learn to ask. (How do you buy a business that's tough to audit?). Either way, you are buying yourself a job and it will be more than full-time if you have employees. Would that be a lifestyle change you are willing to accept?

One of many strategies is to buy a well-run profitable enterprise and pay fairly for the verified cash flow. If I were to do it again, that's what I would do (I'd prefer you shoot me first, however). Another is to buy and rebuild a failing business from a don't wanna. Middle ground is to buy from a retiree who's ready to get out. FYI, I sold fairly to another owner, who knew me well.

Retail is tough. Don't do this until you've done a lot of research. @Carol Bloom  gave some great advice. Find a car-wash trade group and speak to other owners and perhaps some brokers. Subscribe to the trade magazines. Make sure your eyes are wide open.

Jeff S.  Private Lender from Los Angeles

@Dave Rav one word of caution for self serve is that because you have no employees people do all kinds of dumb stuff when they think no one is looking. People will dump mattresses, old tires, oil, and anything else you can think of in the bays. It’s not necessarily a deal breaker, but put those things somewhere in the consideration of a self serve.

I’d look at the financials of the business and really find out where the owner is not maximizing the potential of the business. If you can make peace with all the responsibility of running the business (or delegating the business operation which would be best, depending on your local employment laws) then if there is a potential to increase profit through changes to the way the current owner operates the business, then by all means go for it. Apply the same steps you would to real estate. If you can reposition the business to do considerably better then you will do well.

I assume water and electricity and cleaning supplies will be your biggest expenses. All areas that can be made more affordable if you make each one more efficient. Alot of businesses are run like it’s still the 80’s or 90’s and technology has come a long way. In upfront investment to lower energy cost can pay off in the long run.

Oh and like any other investment, once you improve it and can show proof it’s making more profits.... you can sell it to pocket some cash. Just make sure you buy it at the rite price.

The Real Estate Investing for Cash Flow podcast hosted by Kevin Bupp is another great resource. He recently interviewed the head of a national car wash association who also owns 5 car washes. It was a fascinating interview.

Bottom line: you can make money anywhere in real estate if you take time to understand your particular niche/market and find great deals.

@Jay Hinrichs We definitely would have a longer "wash" season here I would suspect.  As for winter, they dont salt the roads down here very often (the SCDOT doesnt even own a large fleet of trucks; last time we had snow we had to "borrow" trucks from hours away).  But other locales, yes, I could see salt/slime being a driver for washes.  Disagree that summer would actually be slower... the sun and the nice weather no doubt has folks thinking "let me wash my car"

@Michael Wagner great point!  No, the car wash thing wouldnt be an opportunity to gain experience sort of thing.  It would just be another hustle.  But great point, go precisely after the type of biz interests you want.  

@Jeff S. I've thought about laundromats too.  But the maint on the machines scares me.  Plus, a disgruntled or non-caring customer could do too much damage if they really wanted to...and unlike a home/dwelling rental all I would have gotten from them is a few measly bucks.  

@EVERYONE else... thank you thank you thank you!

I know this one couple who bought a full service car wash, down in Albuquerque NM a few years ago. Seemed to go really well for them, at least for a few years....Always had tons of cash, although not many customers.... I think the husband was a chemist or something... lol
Originally posted by @Donald S. :
I know this one couple who bought a full service car wash, down in Albuquerque NM a few years ago. Seemed to go really well for them, at least for a few years....Always had tons of cash, although not many customers.... I think the husband was a chemist or something...

lol

full service car wash's in the right location are cash COWs but also a 2 million plus investment 

Originally posted by @Donald S. :
I know this one couple who bought a full service car wash, down in Albuquerque NM a few years ago. Seemed to go really well for them, at least for a few years....Always had tons of cash, although not many customers.... I think the husband was a chemist or something...

lol

 Haha

@Jay Hinrichs this one was like $400k.  Actually there were two I found.. the other was was $500k.  I’m sure they needed some work, likely no more than a few hundred thousand.  Hard to figure what cap expenditures or improvements would cost more, but of course I wouldn’t know until full due diligence.  

At any rate, this idea is on-hold at the moment.

@Sergio Alvarez one CF investment I can think of would be self storage.  SS in the right location and within a desaturated market would yield excellent returns, and ultra-low overhead.  And operational hassle would be a minimum as well.