Buying a gas station?

turbo6bar · 08-13-2014, 10:09 AM

One thing on my bucket list is owning profitable commercial RE. Yeah, I have a crazy bucket list....

Saw a listing on craigslist for a gas station. Seller was offering to sell outright or lease. It has been some time since I ran the numbers. I believe inside sales are at least 30-50% profit. Gasoline profit is at least 10 cents/gallon. TN lottery is 6.5% commission.

What kind of pitfalls or expenses should I expect?

I know getting reliable, honest employees is important. I expect to expend some energy managing the property and exploring potential income streams. Two stations I reviewed have full kitchens that are not being used.

Also, the lease are triple net. I pay everything then, correct? Seems like a great deal for the owner.

I have a lot of experience with residential rental properties. I realize commercial RE is a bit different flavor. I want to go into this with eyes wide open.

Regards,
Jurgen

Hugh R · 08-13-2014, 10:14 AM

Lease, if you don't know the soil contamination issue.

turbo6bar · 08-13-2014, 10:27 AM

Leasing certainly seems like the easier way to get in and out. The environmental issues seems like huge liabilities.

Outside of potential issues with investing too much time, it seems like a high cash flow business.

stomachmonkey · 08-13-2014, 10:29 AM

How To Buy A Gas Station That Pumps Out Profits - Tips For Buyers Of Gas Stations | BizBen.com

berettafan · 08-13-2014, 10:57 AM

Most businesses worth owning never make it to any sort of listing.

sammyg2 · 08-13-2014, 11:10 AM

Think you're missing the best part:
Selling gasoline and snickers bars and gatoraide are things you do to pay the bills, until the real estate price goes up enough to sell and get the heck out at a profit.

I've known three friends with gas stations. it is a very tough business to be in.
I watch the wholesale marketsc closely and unless you have a very, very lucrative and stable supply contract you will struggle to make it two years.
The wholesale and retail markets DO NOT always follow each other.

One month the retail price will be high and the wholesale price will fall out, and you'll make a killing.
Then the retail price will fall too far and have to eventually correct two weeks late, and you'll lose most of what you made the week before.
Then the wholesale price will start climbing but you won't be able to raise your retail price and still move the volume you're committed to, and you'll take it in the shorts and lose a grand a day.

It's all in the franchise commitment or wholesale supplier commitment if you're independant.
And the people who write these contracts are better at it than you are, be careful and get a really good contract lawyer.

dyount · dyount's Garage

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Do your homework and all should be well

SiberianDVM · SiberianDVM's Garage

Remember us here, and sell ethanol free premium. We will come.

MRM · 08-13-2014, 11:57 AM

Gas stations/convenience stores are a very low margin, high capital and highly labor intensive businesses. In my opinion they do not make nearly the profit to justify the risk of the capital investment and they are even farther from justifying the labor it takes to run the profitably. At the expected profit margins you're a sneeze away from going into the red. I think it's a bad idea.

If you want commercial property you're far better off buying an office building or light commercial/industrial.

recycled sixtie · recycled sixtie's Garage

Quote:

Originally Posted by berettafan

Most businesses worth owning never make it to any sort of listing.

This makes a lot of sense above. If you can get hold of the financial statements for the past few years that would be a useful indication if it made money or not. I would think that if it is a borderline profit maker then they would not be willing to provide this info.

Why is he selling? Probably wants a big selling price I would think. Do your due diligence....Guy.

techweenie · techweenie's Garage

Be aware that if there are any 'big guys' nearby, they can get permission from the oil company to cut prices to be competitive with you - or virtually kill your margins. It's a well documented tactic, but you can also see it just by driving around.

My bucket list includes owning a strip joint. Some things are better imagined than done.

j8tg · 08-13-2014, 12:46 PM

I have owned a fuel equipment distributorship out west for 25 years and have seen a sea change in our geographic market that is either already in your back yard or will soon be. Big box retailers have discovered it is a great loss leader to drive traffic into their stores and their pricing policies will typically crush a small retailer--even if he is flying a major oil flag. Our independent market is down to "new Americans" who typically survive only because they have no labor costs--all staffing is family. If there is any chance a Wally Mart, Costco,Kroger,Sam's Club retail operation is or could be located nearby I would only build a cash flow projection based on inside sales but still including all of the regulatory and equipment costs of having fueling out front.

TG
1986 930--Sold
1981 R100S

McLovin · 08-13-2014, 01:27 PM

Quote:

Originally Posted by MRM

Gas stations/convenience stores are a very low margin, high capital and highly labor intensive businesses. In my opinion they do not make nearly the profit to justify the risk of the capital investment and they are even farther from justifying the labor it takes to run the profitably. At the expected profit margins you're a sneeze away from going into the red. I think it's a bad idea.

If you want commercial property you're far better off buying an office building or light commercial/industrial.

That was my conclusion after looking at gas stations 10 or so years ago.

I ended up buying a commercial property that has a good, long term operating business on it. There's risks with everything, but it works very well. Triple net lease so the tenant takes car of everything, sends me a check every month like clockwork, no complaints.

McLovin · 08-13-2014, 01:30 PM

Also, the ones that I looked at did not seem like high cash flow businesses.

They were fairly high revenue businesses, but not so great with cash flow.

Many at the time were being sold because historically they had made a lot of money on their auto repair business, but for whatever reason gas station auto repair is a dying business model. At least in my locale.

lane912 · 08-13-2014, 01:39 PM

there is a independent gas station near my house that is making it-
things they do that draw the customers
they offer better service
they sell premium gas with out ethanol (one of a very few in this market)
full service auto mechanic three bays all day-

Rot 911 · 08-13-2014, 01:49 PM

The only thing I would add is know the environmental laws in your state regarding liability for leaking tanks prior to your ownership. Federal law generally makes even the new owner liable for leaks that may have occurred years ago. Personally I think there are much better investments.

stomachmonkey · 08-13-2014, 01:58 PM

Quote:

Originally Posted by j8tg

I have owned a fuel equipment distributorship out west for 25 years and have seen a sea change in our geographic market that is either already in your back yard or will soon be. Big box retailers have discovered it is a great loss leader to drive traffic into their stores and their pricing policies will typically crush a small retailer--even if he is flying a major oil flag. Our independent market is down to "new Americans" who typically survive only because they have no labor costs--all staffing is family. If there is any chance a Wally Mart, Costco,Kroger,Sam's Club retail operation is or could be located nearby I would only build a cash flow projection based on inside sales but still including all of the regulatory and equipment costs of having fueling out front.

TG
1986 930--Sold
1981 R100S

Around here it's Kroger. Paid $2.99 the other day (with customer rewards card) for regular when everyone else is charging $0.30 more per gallon.

id10t · 08-13-2014, 03:01 PM

EPA issues and old possibly leaky tanks. Doesnt matter when it happens etc if you own it when the problem is discovered.

Find something with less government oversight.

strupgolf · 08-13-2014, 03:48 PM

You have to be Indian, named Singh, Patel, etc, otherwise you won't make it.

KFC911 · 08-14-2014, 01:18 AM

Quote:

Originally Posted by turbo6bar

One thing on my bucket list is owning profitable commercial RE. Yeah, I have a crazy bucket list....
....

A gas station

??? Yep, that is one CRAZY bucket....
Who stole Jurgen's logon ID btw...he's knows better

ps: Don't know if "Sheetz" has made it to your neck of the woods...they're popping up like weeds around here (plus they're building a large distribution center too for foods, etc.). They're the ones that put a "hurtin'" on the little guys buy undercutting gas prices + food (I've never been inside one though). I do buy ethanol gas there for my F150...my other vehicles only get non-E 93 or 87)....thankfully sober gas IS getting easier to locate here...that's a GREAT idea if you go that route.