Is buying Gas station in Phoenix (Glendale) area advisable?

4 Replies

Hello all, 

very new member to this forum.

I am middle of a deal to acquire a gas station in Glendale, AZ (Phoenix area). The deal is with real estate and an auto repair shop. Owner financing is available with 20% down.

However, I have seen many gas station shutting their door recently. Now my question is (I will appreciate any advise.)

Is buying Gas station in Phoenix (Glendale) area advisable?

Hi Pravin,

I am not a pro on advising, but just my 2 cents.

Run your numbers, is that profitable today as is?

What are your plans to increase the NOI?

Is the place developing? look at the surrounding developments and future plans?

All the best.

Are you buying the business, the real estate, or both? Any environmental issues with the building or land? Do they have the new double wall insulated tanks or the single wall? 

For land you need to assess a current value and then a dark value with building vacant and the dirt. The smaller the parcel size is the harder it can be to redevelop as you limit the tenants who would go there.

@Pravin Kumar Assuming that you're buying both the business and the real estate, you need to look at a lot of different aspects.

Sales - is there a gas delivery contract?  If so, are you paying rack rate?  I've seen prices as high as rack + $0.03 and as low as rack -$0.02.  How many gallons/month are you pumping?  Are the pumps self-serve?  In decent condition?  Do you have diesel?

Services - Is there a convenience store?  With beer & wine?  Tobacco?  Lottery?  Groceries?  If not, can you add them?

In the several stations I've listed, gas sales are not a huge profit center.  It's the gas that brings the customers in for all of those ancillary items.  Gas is typically sold at a profit of $0.10 - $0.20 profit per gallon.

Auto repair - Around here, the state restricts availability of inspection sticker machines - and these drive a lot of auto repair.  They sell anywhere from $75,000 to $200,000 in these parts.  How about a mechanic?  Will he stay with the business?  What's your Plan B is not?

Used car sales - this goes hand in hand with the repair business.  Does this station have or need a license to sell used cars?

Environmental - I don't know anything about AZ laws, but here in MA, all single-wall steel tanks had to be replaced by 8/2017.  There's no requirement to replace double wall steel - yet.  You need to know what AZ says about the topic.  Your lender will also require an environmental survey.  If there's existing contamination, cleanups can be catastrophically expensive.  Is there a Veeder-Root or similar gas sale / leak detection system?

Facilities - what condition is the building in?  How about the canopy?  Paving?

Reputation - I have seen one gas station owner destroy his business by letting a tenant sell gas at $1.50/gallon above all of the area competition.  I stood there for over an hour on multiple occasions while showing the property and saw a total of 3 cars.  The business ultimately failed and he leased the land to a used car dealer.  Don't buy a business that needs to be rebuilt.

Traffic - does AZ DOT have traffic surveys available? MA DOT does and I can always find a nearby count. If the road only gets 5,000 vehicles/day, it's nowhere near as attractive as one that's getting 40,000/day.

Competition - How many competitors are within a mile?  You mentioned that several closed.  Why?  They could either re-open and come back to hurt you, or be converted to another use.

Good luck!

@Pravin Kumar , you should probably check bizbuysell dot com or bizben dot com for much better advise. I am not affiliated to either of those companies but they seem to have better info than what you can find on BP.