Tunnel car wash

[Mark K]

...and they would look at things like water usage

A local laundromat owner got nailed by the IRS this way. Seems his 5-gallon buckets of quarters didn't correlate well with the income he reported. The IRS checked his water usage.

 

[JTip]

The IRS checked his water usage.

Sold a self serve years ago, they are tracking this. lol

 

[Michael S]

When I appraised some tunnel car washes a few years ago they were selling at 3-4x multiple on profit for the business and real estate. However, the industry trend has moved away from low/no-employees on a lot of these to having several employees present for pre-wash, drying/detailing, checking on vacuums, etc.

Ultimately it's a business that's real estate dependent and the value of the real estate alone is going to be an allocation of the overall enterprise value and/or based on cost.

Here in Albuquerque I've seen what feels like dozens of new tunnel car washes get built in the last 5-10 years. Many of them have prime locations and have replaced bank branches, fast food restaurants, etc. A big trend is monthly subscriptions $20-30/month for unlimited car washes instead of $8-12 for a single wash. This further accrues business value as opposed to real estate value. Cash is rare outside of the cheapest self-serve car washes. Everything is debit/credit card now.

Finally, car washes have become very popular for investors as a tax shelter due to the accelerated depreciation of all that equipment. A tunnel car wash might have $750k in equipment housed in a building that cost $500k to build (plus site improvements and land cost). That $750k can be depreciated much faster (7-15 years typically) which allows an investor to shield far more income than if they bought a normal building that cost $1.25 million and has to be depreciated over 39 years. So the tax return may show minimal profit due to the accelerated depreciation but it could still be cash flowing a very healthy amount (while building equity from paying down any debt used to build/acquire).

 

[Terrel L. Shields]

A big trend is monthly subscriptions $20-30/month for unlimited car washes instead of $8-12 for a single wash. This further accrues business value as opposed to real estate value. Cash is rare outside of the cheapest self-serve car washes. Everything is debit/credit card now.

Yep. Same trend here. Carwashes 20 years ago were mostly coin and cash. They collapsed during the Great Recession... every single one I know except one and its auto wash was down for months. The one I used was 20 miles away and one day I drove to it to find it closed behind the busiest Murphy's you ever saw. Even they couldn't stay open. Now the new ones are tunnel and subscription only.

Personally I have a power washer and wash my own, but use a old guy that does detail work at $150 a pop.

 

[Artemis Fowl]

Timely thread. Just had one of these pop up on my desk for appeal. Good location 28 yrs old with a paybooth. Just sold in 22 for 1million n change. He's claiming RE is worth 400kish.

 

[DTB]

Finally, car washes have become very popular for investors as a tax shelter due to the accelerated depreciation of all that equipment

They also are pretty good at cleaning money too.