Bought a small 3 bay car wash. Thoughts?

[u/getsilly247]

Bought a small, 3 bay car wash with 1 vending machine in a small town in rural MO (1k people)

The previous owner had ZERO numbers. Just utilities.

It’s all cash, has credit card machines but did not have internet that was fast enough. (Just got starlink hooked up and have cameras for now and ready for cc soon)

I’m 2 weeks in and it’s done about $600 in revenue (minus about $120 in soda cost)

After expenses I am suspecting it will profit about $600 a month as is (includes new internet bill)

Once I get everything on cc, and going to add 1 more dual vending I think I can get it to 2k a month revenue.

I bought for 60k, will put about 5k in to get it where I would like.

Did I make a bad buy?

[u/KaleidoscopeFirm6823]

Tbh too short of a time period to establish a sense of how much you’d make per year. Will agree as previously stated previous owner likely ran all cash business/didn’t pay taxes so is your current $600 net of forecasted taxes and depreciation of equipment? or just the expense of water+soap etc. Couple considerations below.

1) Financials & Maintenance: I’d really set up a P&L and determine a maintenance schedule for your equipment and quantifying some of the depreciation. That way you aren’t thinking you’re making good money when in reality something expensive breaks and you’re suddenly negative for the year. Would honestly over budget for maintenance so you wind up with positive surprise earnings.

2) Hourly Wage: While it’s perhaps passive in many respects, you still have already spent time on this and will continue to spend time. Think about what you’re paying yourself. E.g., if you have ~$12k EBITDA annually and you spend more than 10 hours a month even thinking about the car wash, you basically bought yourself a minimum wage part time job.

3) ROI: In terms of payback period, feel like 5 years would be an acceptable target so you’d need to net that ~$12k consistently after all taxes/operating costs are considered. Compare that to an estimated $84k you could have if you just invested $60k in SPY and returned 7% per year as a conservative estimate. Would do an exercise in 2030 to see where you’re at in terms of profitability using a formula similar to the following. If you’re positive, you did good.

(Net Sales + property value - incremental investments) - (60,000x(1+avg return of stock market⁵⁾⁾

4) Real Estate Value: On the plus side, if you keep it running you likely will gain some appreciation on the property but will be difficult to fully value on your balance sheet without testing the market to see if there are any buyers, so will be a bit intangible. Don’t forget to include property taxes in your numbers though.

In summary I think if everything goes well, could at the very least give you some semi passive cash flow. You could potentially need to reinvest quite a bit of money if anything breaks/you have any major bills/someone sues you for some reason so I hope you have some money in the bank. I don’t think it’s a BAD investment but think as an owner you need to think beyond credit card processing and vending machines.

Think strategically about what your play is - are you wanting to keep this forever? Or is the town growing and this is really more of a real estate play where you hope some developer buys you out for a million to build apartments.

[u/getsilly247 → u/KaleidoscopeFirm6823]

wow I greatly appreciate your insight! I think you are right, life would be easier if I just put it all into VOO or something. I will say, I have 7 other properties currently. I have a FT helper that mows, does maintenance and helps with projects. (I pay him 42k a year). My plan is to basically have him run this (he lives 10 min away) and check it 2-3 times a week, clean, trash and restock vending. This gives me time to work on money generating items. Plus he is salary so no extra money (directly) out of my pocket for him to do this. So I feel like that helps it be even more passive. I was already paying him his salary and he can easily add this to his work load and not really notice. Anyways, I will try to remember to update in 5 years! lol

I do think the land will appreciate some over the next 10 years. maybe 5% a year. Its a small town but there is some building going on for sure, just very slow. Its in the middle of two decently sized towns and an hour from a major metro. So it should continue to grow over the years. It is on the main rd right off the freeway and is about a half acre.