Doing Due Diligence on an old Gas Station?

Question

Hi everyone,

I'm evaluating the viability of a property that is an old gas station and I want to make sure I know everything related to it. It's been sitting vacant for up to 8 years and it's owned by the county because of unpaid taxes. I know the purchase price, but I have no idea what else I would need to spend to get this sell ready.

I've looked at the county records and can find various liens for weeds, rubbish, and nuisance, but I believe (not confirmed) there are environmental issues that is keeping everyone away from it.

How do I go about finding out if there are environmental issues to take care of and anything else that I would have to plan for in terms of rehab and outstanding issues?

As a bonus, any suggestions on how to go about finding buyers for a property like this? It's in a high traffic area on a corner lot in an increasing metro area.

Thank you!

Andrew Syrios · Answer

Gas stations and laundry mats definitely have added environmental risks so a Phase 1 is absolutely necessary and Michael is right, a bank will require it. With gas stations/laundrys, you'll probably want a Phase 2 as well (or be required to get one) and they are pricey.

Michael Brattelli · Answer

@Zachary Gilula As @Andrew Syrios said Phase 1 environmental is the first and major step, last time I had one it was similar to his $2,500 quote but that was a few years back in 2020, then a Phase 2 was bid out and the lowest bid was $8500. If you’re using a traditional bank they will require a Phase 1 and if there’s a hint of any issue they require a phase 2. The bank bid the job out to the environmental companies in my clients case. Note this wasn’t for a gas station but a huge auto shop. There’s other due diligence as well but I’m not well versed with gas stations.

I also like what @Chris Seveney said. There are a lot of intricacies to a gas station or laundromat type property that you could lose your shirt on. Not sure your state but I would either find a commercial broker or very good RE attorney to guide you through the process and do a ton of research.

Chris Seveney · Answer

@Zachary Gilula

What is your real estate experience? If it’s not extensive former gas stations should be avoided like the plague

You can go broke very quickly just by the time remediation can take

Michael Brattelli · Answer

@Jim Reynante 30k dosn’t seem too bad for removal and remediation. I’m surprised because gas station tanks are typically under concrete and are much larger I would think remediation would be astronomical for that. I deal with a lot of underground oil tanks in my area and I’ve seen much higher costs with some of those.

Andrew Syrios · Answer

The best way to determine if there are any environmental issues is to get a phase one (usually around $2500 I believe, although it's been a while since I had one price out). Sometimes, if the Phase One can't determine everything it needs to, you would need a Phase Two where they actually take soil samples and the like. I don't know how much those cost but it's considerably more.

The big thing with old gas stations from my understanding at least, is underground storage tanks. You want to know if there is one and make sure it hasn't been leaking if there is. But I'm sure there's plenty else to look for which a company that specializes in Phase One's can help with.

Jim Reynante · Answer

@Zachary Gilula - A few years ago I was in a situation to acquire a property that was an abandoned gas station. After much due diligence and related research of the local county environmental regulations, I discovered that I would’ve had to remove/dispose of the underground storage tanks, perform soils testing, perform leakage cleanup, etc.

It added an extra $30K to my costs and dropped my potential profit so much that it fell below my acceptance. Needless to say, I backed out of the deal.

Taylor L. · Answer

I'd hit up @gasbizguy on Twitter too.

Doing Due Diligence on an old Gas Station?

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