Car wash businesses

8 Replies

Recently I have been looking at commercial properties as well as 16+ multi-unit apartment buildings as an investment possibility. As I was looking on loopnet for pure commercial I have been noticing that there seem to be a much larger number of car washes for sale than any other type of commercial property in most cities I'm looking. Is there a reason for this? Is there something bad or undesirable I should know about that type of commercial property. If not why are so many more of those for sale than any other type (and at significantly higher cap rates I might add)? Maybe its just the cities I'm looking in, but the skeptical side of my brain is whispering that it must be something else. I'm trying to do my due diligence here however not having any knowledge of that business makes it kinda hard. I have no desire to own the business itself just the land and maybe the building with a tenant renting from me (preferably on a triple or absolute net lease).

One more question, I have heard that triple net leases are pretty hands off. Is this also generally true of gross, net and double net leases. Or will I need to get property management for those kinds of commercial leases? I ask because this will be a long distance investment and I don't have the time or inclination to do anything but the most basic and sporadic management (calling a plummer once a month is not a problem, but "toilet and tenant" issues that plague most residential real estate is not something I want to deal with in a commercial investment, I want a tenant that will govern themselves as much as possible).

Any advice for a commercial newbie?

I can offer some thoughts on your question about car washes...

1. Car washes are everywhere. Attached gas stations, standalone franchise types, etc.
2. Car washes are easy to finance. As long as the cash flow, you can get up to 90%.


Scott Miller

All the ones I am looking at are stand alone. By easy to finance are you saying that banks and lenders recognize that they are highly profitable and therefore will finance up to 90% or is there another reason why they finance easily up to 90%?

As long as the properties cash flow, there are owner occupied commercial loan programs that offer up to 90% financing.

This might not be the case with every lender you speak to but is the case in my practice.


Scott Miller

Originally posted by "SoBeREI":
All the ones I am looking at are stand alone. By easy to finance are you saying that banks and lenders recognize that they are highly profitable and therefore will finance up to 90% or is there another reason why they finance easily up to 90%?

I've often considered in researching carwashes with the objective similar to yours - not run the business, but still have the benefits. Having no prior experience nor specific technical knowledge, consider my message as sheer analytical observation. So here goes:

Taking into account the basic function of a car wash, manned or un-manned, you have a considerable amount of moving parts and tremendous amounts of water and chemical treatments. With these elements I imagine a considerable amount of deterioration to go along with that. This would probably lead to an accelerated depreciation of fixed assets and machinery and short life span for expensive equipment. In addition, I suspect the revenue generated by the business is predominately a cash basis, which may make it difficult to track and/or identify skimming from the register. Perhaps not of major concern, but a possible element none the less. In addition, the type of labor involved in operation of such a business is certainly not highly skilled, so I would imagine high turn over which could be detrimental to productivity and customer satisfaction. Lastly, but most importantly, the environmental impact of such a business I'm guessing will almost certainly depreciate the land value if the usage were to change as it would require clean up and perhaps remediation. In addition, with environmental impact becoming a greater concern you may be seeing this effect happen and evidenced by the increased inventory of such business on the market as owners are realizing larger and larger impact fees levied by state, county or federal entities.

Most of what I've previously described relates to the operations component, I'd like to shed a little light on the financials as well. In most municipalities, the water and sewer services are provided by public works. Water being the most consumed element in the operation, it's usage can be tracked on a per gallon basis. In addition, the consumption of water by the machinery can be calculated and is usually indicated in the the design specs from the manufacturer. By combining these factors you can calculate with fair accuracy the expected sales revenue (gallons used/#gallons per wash = # washes * cost per wash = total sales). From there work down your expenses, cost of water, other utilities, salaries, etc.

Finally, as I understand, triple net leases means the tenant is responsible for all maintenance, repairs and utilities. Even tax increases are passed through. Beyond that I don't know anything more about lease structures.
Good Luck


Thanks for your input on the operations side of things... some of the stuff mentioned were things I hadn't thought of. I guess even if those operational components wouldn't affect me directly as the passive owner, if they caused tenants to go out of business too quickly or often then they could affect me in a hurry.

Anyway, thanks for your insight.

A lot of car washed are up for sale due to lots of competition and bad locations. I've researched car washes in the past for a while and decided to opt out of it or hold off until I see better ROI. This is the site I was a part of and it has TONS of info I believe this site is best suited for anything car wash related.

Oh and just to add. In the past few years the business has almost completely gone to automation and Touch free. The days of roller and brush are almost gone. In many cases the owners can't or will not spend the money to upgrade which is in the 100K rage to new equipment. Being on a car wash line for more then 5 mins is unacceptable in some peoples eyes. It's got to be in and out with a clean car. It cost lots of money to pump 100+ cars through per hour. This is another reason you see so many up for sale.

About 5 years ago when I was still working part time in the c-store industry, car washes cost the owner about 5% of the retail price, but I'm not sure what that number is now. You may not need a property manager, but you'll need someone to give a lot of attention to the car washes as they all break down and need maintenance from time to time. You also need someone you can trust to collect the cash and stock the change machine on a stand alone car wash. The sales are very cyclical producing greater revenue in the winter when there are nice days. Now, I've only worked around spray type touchless and the newer foambrite touchless system. The wash time was no more than 3 minutes when choosing the best wash.