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Buying a Car wash

6 replies created about 1 month ago
posted by VJPat about 1 month ago

I am a new investor wanting to purchase a car wash business. I have done a lot of research on line for the past 6 months and have attended a convention as well. I have identified two express car wash businesses for sale that look promising, but the seller is asking a premium price. How do I know whether I am overpaying or not? Is it true that the lender's appraisal is the true indicator? Before I spend all that money to get into one, I would like to connect with someone going through the same process or an owner who is willing to share his experience with me? I have tried contacting carwash brokers, but so far i have been asked to sign exclusivity contracts which I do not wish to sign. Any help will be appreciated.

Replies

reply by Robert Roman about 1 month ago

“Is it true that the lender's appraisal is the true indicator?”

Appraisal helps assure a lender of likelihood loan will be paid back and new wash is at least worth what it cost to build whereas opinion of value is attempt to calculate a price that will result in a sales transaction.

“How do I know whether I am overpaying or not?”

reply by VJPat about 1 month ago

Thank you for your response. To clarify my second question, if the appraised value is higher, but the sales approach valuation determined by using the multiplier of 4 comes to a lower figure and the machinery and equipment is old, how do I determine the fair price?

reply by Robert Roman about 1 month ago

Fair is a price that results in exchange of property.

Common approach used to determine price of going concern is a multiple of earnings (inverse of capitalization rate).

First step is to determine potentially available cash flow to the new owner (current net earnings).

reply by VJPat about 1 month ago

Thank you, Robert , i will keep working .. Many thanks regards vj

reply by Earl Weiss about 1 month ago

"omes to a lower figure and the machinery and equipment is old," "Old" can mean little or it could mean a lot. With stainless and aluminum equipment so long as you replace the wearable components the stuff will last indefinitely. Conveyors are an exception to that. (The structure seems to give out over time). On the other hand if replacement of worn parts has been lax there could be a substantial amount of money needed to keep stuff working. However this is still less than the cost of new if "The Bones' are good.

reply by VJPat 24 days ago

Hi Earl, that was quite insightful. I know that the car wash I am interested in has been operational since 2005 and the owner has replaced some stuff, but need to know more details as you have suggested. I see that you are an existing operator, do you have any contacts in Houston? It would be a great help to meet in person an existing operator here in Houston.

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