Buying a gas station?

[turbo6bar]

It would appear there are several mines in the gas station industry.

1) Gas being sold as a loss leader to drive traffic.
2) Environmental liabilities.
3) Labor intensive.

I have seen three stations for lease. The rent is between $1750 and $5900 NNN. Back of the envelope calculations suggest monthly net income is between $8000-12000/month and does account for employees and less actual management. The owners want $35000-100000 + value of inventory.

The selling price of the business is anywhere from 3-6 times monthly income. It seems like a very low multiplier. The stations are actually in good parts of town, with low/moderate competition. In all cases, the gas sales produce tiny profits. Inside sales are THE profit.

I am not keen on buying commercial industrial or commercial for a few reasons. CAP rates are pretty low (a few points over borrowing rates). Light commercial is overbuilt in the more desirable parts of Memphis. Governments were eager to zone commercial for the property taxes, investors were looking for stable income, and the area became overbuilt, IMO.

I need to do more research. I already do very well on rental properties. I'm not interested in going into a convenience store unless the numbers are really, really good.

stomachmonkey, thanks for the link. Good info in that article.

KC911, I have definitely heard of Sheetz. I plan to make thousands of pennies before they expand to West TN. :-)

Jurgen

[MRM]

They are selling the business for three times monthly income, not profit. The reason they are willing to sell for such a low price, is because they aren't making any money. Buying a gas station in this economy is a bad idea. Do a little research and you will see that the number of gas stations/convenience stores has declined greatly over the past several years. It's just not a good business to get into. Can someone make money with a gas station/convenience store? Yes, but the odds are against it.

If you want to get into an auto – related service industry, a tire battery accessory store is a much much better idea. Check into that type of commercial property instead. I think you'll find it compares very favorably to a gas station and convenience store.

[turbo6bar]

Well, it appears the jury is definitely negative on convenience stores. I will talk to one owner to satisfy my curiosity, but will steer efforts elsewhere.

I recently began looking for commercial RE on loopnet. Seems they want you to upgrade to get access to more information and listings. Is that even worth the bucks? I feel casting a wide net and keeping an open mind is the best way to find worthwhile investments.

How are you guys finding quality properties at reasonable prices?

Thanks for the advice, MRM. I will definitely look into tire/battery shops. Locally, tire shops have gravitated towards being one-stop automotive centers (tune ups, repairs, tires, brakes, etc).

Cheers,
Jurgen

[scottmandue]

Originally Posted by Hugh R

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

This! My dad bought an old gas station (that he rents out to a automobile painter) and spent ten years cleaning up the mess. Good new is the crafty devil (my dad that is) got the guberment to pay for most of the cleanup. Still, was a huge PITA.
Good news is I swept in and harvested all the old Dayton metal signs. Kinda bummed I didn't have the room to store the old gas pumps, they are now probably worth some money as art objects.

[MBAtarga]

A previous friend of mine has owned several over the years - perhaps dozens. He was losing about $10k/month at one - and he realized when he fired the manager and stepped behind the register for a month or so. His inside sales skyrocketed. Previous manager was collecting money from purchases, but not ringing it up.

[MRM]

I once represented a guy who had founded and then sold a national TBA chain several years earlier. I learned a bit about the industry from him. I think you'd be much happier looking at that type of property. There's a good markup on tires and you can deal directly with the manufacturers. If you keep a neat store in a good location you're likely to do well. The secret is to do just the easy repairs - tires, spark plugs, oil, brakes, etc. That way your overhead is lower and the customer turnover is faster.

The best way to buy an existing business is to go through a broker. Any business you find for sale in some internet posting is not likely to be a good prospect. Location is almost always the key once you settle on your concept. Hire a business consultant to write a business plan for you. It's like hiring an architect to design a building - the extra expertise more than makes up for any initial expense.