Gas station investment?

Question

Hopefully this post won't get deleted since the last 5 I posted regarding pretty much anything got deleted with a "you can't ask for advice" email.

So... Anybody here invest in gas stations in the East Coast? If so... Any experiences you can share with different brands/distributors? More particularly, average fuel margins?

Joel Owens · Answer

I don't own gas station businesses. I have known some owners. Most make a few cents per gallon and the real profit is selling the in store convenience  goods.

Most flag type gas stations make minimal money as owner operators. They work in the business full time not as an absentee owner. Additionally the gas stations sit on .5 acre lots typically and might have 4 to 8 pumps max. There are exceptions but not that often.

Usually the gas station owner gets crushed when a big brand like a Racetrac, 7 -Eleven, Quick Trip, Wawa, etc. comes in to the area. The small gas station owner simply can't compete with a gas station sitting on close to 2 acres with about 20 or more pumps and an inside that rivals a full restaurant and grocery store. I see it happen all the time.

Gagan P. · Answer

@Tim Delaney That's exactly what I'm wondering. I've reached out to a wholesaler to get an MPSI (convenience/retail/gas analytics) on the address.

As far as successful, I do have some gas station experience, though the site only had a traffic of under 10,000 vehicles a day but fuel volumes of 925k gallons annually (from about 600k when taking it over). This site is 40k+ vehicle traffic. 70k gallons a month (840k a year) seems on the high end compared to lots I've seen for sale, but given the traffic difference is lower than I'd say I'm probably used to. The store is where I think the difference can be made.

You're right about the equipment. Tanks were installed in '15 (there was contamination in 2014 and it was fixed by removing/replacing tanks, and State website shows it was cleaned up). There's no dispensers, but the rest of the equipment most definitely needs a full check. And of course pressure test on all lines/tanks.

You bring up a good point on electric vehicles. The thought there is twofold. There's lots of parking that I don't think is necessary, nor are there many electric car charging locations nearby. The nearest Tesla supercharger is 10+miles away as well. So if it's possible to get them in for 4-6 spots, and then another 2-3 spots for fast charging for normal vehicles, it could be a bit of added revenue (from the fast charging fees plus ideally Tesla customers purchasing goods in the store).

Eric James · Answer

"You can't ask for advice"??? That's what 90% of BP posts are

Gagan P. · Answer

Good points. I don't have the numbers in front of me but if I recall correctly, I believe the 40 was just on the station side. As far as HBU, I'd need to check again. It's the entire property not just business, so some future value.

According to one of the suppliers they project about 60k gallons a month, though apparently margins (if I'm reading the rack rates right) currently in the area are only about 15 cents/gallon, which is nothing if it's a $1.2mil property that also needs $200-300k on top for pumps (tanks are from 2015 but dispensers have been removed), inventory, and startup costs. Store sale according to seller was $45k/mo, which again I think is on the low side of what it should be, though I also don't have actual possible C Store projections for the area.

Joel Owens · Answer

Long term does the dirt and air rights have value compared to the price paid today? Long term value is in the land and location. The improvement that sits on the land is just one aspect of value. The existing building might not even be the dirt's highest and best use. Even then the highest and best use may not be allowed by current or future zoning.

A road can have 40k cars a day but actually on 10k pass on your side and 30k on the other. Gas stations can have a going home side and a going to work side which makes a difference. If your just buying the business with a lease on the building make sure to get a ROFR option so you can have some control over the dirt your business sits on.

Tim Delaney · Answer

@Gagan P. I would be concerned with why it closed. Successful businesses rarely just decide to close up shop before selling. What would you do that would make this successful? Also If the equipment has been sitting idle for awhile so you need to do extra safety checks?

One other thing that I’ve been contemplating recently is what happens to gas stations in 15-20 years when electric vehicles are way more prevalent on the roads? I know the money is in the stores at gas stations, but the gas is often the incentive to get people to stop.

Gagan P. · Answer

The one in question was formerly branded but has been closed for a while, and has 8 dispensers (16 nozzles). Owner claims to have been doing 60k gallons/mo which from most stations I've seen seems low but comparing to other stations in FL seems high.

And I agree, the store is where the money is, but the gas usually covers the rent/utilities. Average I've been finding since my post has been 20-30cents/gallon (before credit card costs). The site is over an acre, so that's not an issue either.

Store building is around 4k sqft, and has a food counter inside (probably about 2-2.5k of the building is the retail portion, rest is kitchen/office/coolers)

The idea is purchase then lease out, but of course while running there should be enough money because if it isn't profitable for an owner it definitely wouldn't be profitable for a tenant.

Gas station investment?

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