Buying a Distressed Carwash – Some Thoughts

Buying commercial real estate is not the same as buying residential real estate. There are so many other things involved, and if you are buying a business with real estate it gets even more complicated. Take buying a Carwash for instance, there is so much involved, and so much to think about. Let’s go ahead and talk about this for a moment, because the other day someone had contacted me and asked if I believe this was a good time to buy a carwash which was a distressed sale in their city.

Now then, what are some of the things that we need to be concerned about? First, we need to make sure that if the carwash was selling fuel, or is selling fuel that there are no underground tank leaks, because that can become an environmental disaster. Even if the conditional sales contract for the real estate takes that into consideration, and the previous owner is hit with the bill and environmental cleanup, or rather his insurance company, your carwash might still be out of commission for a good 4-6 months. In that case it will be hard to make the payments to the bank on your carwash purchase.

Another issue you have to be concerned about is the potential that there is a regional drought, and that it hits “Level II” or God forbid “Level III” – if your local city, county, or state rations the water in your area it will severely hurt sales. Plus often consumers feel it is more environmentally friendly to leave their car dirty to show solidarity that they are doing something about the drought, by not washing their car. You may think this is funny, and a psychological conundrum of no consequence, but I big to differ, because it will hurt business.

Another issue about buying a distressed carwash is the future of the economy, and the increased regulations in the industry, or the overall labor market. Consider if you will that it will cost an additional $4600 a year per employee due to ObamaCare, which may or may not be repealed by the Supreme Court, we just don’t know, so there is some uncertainty there. Next, you have to be worried about energy costs.

Consider if you will that the EPA is going after coal-fired plants, and we are subsidizing alternative energy, and some point our energy costs will triple in price. That’s really bad news for a robotic tunnel carwash because they use a ton of electricity. Indeed, I hope you will please consider all these factors and think on it.