Car Wash

[H.B. Userman]

This is my first car wash assignment. I have 20 comps.

I was told by a guy who owns 40 car washes that "Cap Rates are a joke" when it comes to valuing car washes. He said the GIM is more important.

He also said "you appraisers and your stupid prices per square foot!" This guys knows what he is talking about, but I also want your opinions. Whoever has experience in this market, please comment on your personal findings.

 

[PL1957]

This is my first car wash assignment. I have 20 comps.

I was told by a guy who owns 40 car washes that "Cap Rates are a joke" when it comes to valuing car washes. He said the GIM is more important.

He also said "you appraisers and your stupid prices per square foot!" This guys knows what he is talking about, but I also want your opinions. Whoever has experience in this market, please comment on your personal findings.

Just like valuing a gas station, valuing a car wash almost always involves the valuation of the Total Assets of the Business (TAB), also known an "going concern". With small businesses, various gross multipliers are key, because each operator bases his decisions on how HE can operate. Sales revenues are sales revenues, but each operator's expenses are his own.

There are publications that can give you income/expenses for typical operations.

 

[Mountain Man]

I've found valuing on a per bay basis works better. Also, auto vs self serve and traffic count makes a BIG difference.

 

[Steve Owen]

The key to these things is location (as with most real estate). However, the best way to determine a good location is by income. GIM can be used, but I prefer using a cap rate extracted directly from the market. If you have 20 comps with sufficient information, that should be pretty easy.

I would want at least three years of income and expense data from the subject property. However, with 20 comps, you should be able to value it even if you can't get that... and, keep in mind that even if he gives it to you, the books are easy to cook with these kinds of cash operations.

With that much sales data, the sales comparison approach should be viable, and may be your best approach to value. The trick is to determine which ones are most like the subject. I also prefer using the per bay/per automatic bay unit of comparison.

 

[moe cohen]

You will find this site helpful. http://www.wagnercarwash.com/investmentopp...stry_links.html
Also check with Stephen Vertin.
Moe

 

[BigBlueGA]

Here's a link that may or may not be helpful to you:

http://www.carwashmag.com/pdf/jan_2004/7.cfm

 

[Joe Christensen]

Cap rates and square feet are both are a joke. I base value on Gross Income and Gross Profit multipliers. Gross Income is generally more reliable. You should get someone who is experienced to assist in this appraisal. Comparable income data for carwashes can only be obtained from your own records of past carwash appraisals. Since this is primarily a cash business, no-one will give you income and expense data. Professional Carwashing and Detailing Magazine does an annual survey which is helpful. Good Luck. Joe Christensen, Arpegio Appraisal, Los Angeles

 

[Penelope May]

Car Wash - Multipliers

Hi Gatlin...I am also doing my first car wash ...however, I don't have the abundance of comps you had (I wish). I hope the other experts out there will also comment on my quandary.

I have looked at various publications on valuing a carwash and using the Income Multipliers and get quite different values, depending on how the structure and equipment is handled.

1. Excess Earnings Method
If I take the NOI (about $300,000) and deduct return on, and of, BOTH the equipment and the structures, and then deduct the rentable value (land at 10%) to isolate the business Final NOI and capitalize, I get negligible business value. Total of the rest comes to $2,600,000, which is mostly land value (increasing in this market).

2. Small Business Valuation Formulas, by Desmond
If I multiply the Monthly Gross-Net by 20-25 and then add the "real estate"
Gross-Net is about $1,000,000/12 =$83,000 X 22 = $1,833,333 + Land at, say, $25/SF ($2,178,000) = $4,011,333.

3. Traditional Income Approach
If I capitalize the NOI at 10%, the result is $3,000,000. You would have to have a cap rate of 7.5% to reach $4,000,000, which seems too low compared to other property types in this location.

4. Broker's Approach
Multiply the Gross by 1.5 = $1,000,000 x 1.5 = $1,500,000
Add the "appertunances" $1,200,000
Add the land $2,600,000
$5,300,000

The issue seems to be whether the Income Multipliers account for the structures and equipment or whether their value should be added to the calculation.

Please, you car wash experts, give me some advice! Thanks in advance, Penelope May, MAI

 

[Smokey Bear]

Oops, not what I thought. I thought someone saw my filthy car yesterday at the NorCal lunch, and was blabbing on me.

I'll get it washed, maybe even today, but I don't want to increase my chances for rain. ​