Gas station a good investment?

[BMW F22]

Family is talking about purchasing a quik stop gas station. They're asking $250k. Are gas stations good investment? From what I know most of the money is earned through sales of food and convenient items, not so much gas. Thoughts?

[protecon]

Look at their books?

[UncleWede]

Do you have enough "family" to run it all the time without hired help? Then probably.

Last time I talked to a local, he said he was grossing $50K/month on his station. When Cali made him fix the tanks, he sold it to imminent domain and bought a new market a few block away. Don't see him even working there any more.

[bimmer456]

I would buy and income property, rental housing is easy to manage and you get a steady and substantial income every month while doing next to nothing. Also investing in stock market is a good thing, do even less and makes lots of $$

[BMW F22]

Originally Posted by protecon

Look at their books?

Doing that later today. Wanted to see if the experts on here could warn of any pitfalls.

[BEM-S4]

Ok take this for what it's worth I buy and sell companies for a living but not gas stations. I'd seek out a professional to consult with. With underground storage tanks and whatnot depending on how the deal is structured asset versus stock and what the seller is willing to rep to, you could be inheriting problems. Big expensive problems to fix.

Sorry I don't know who to even tell you to speak with maybe try asking your lawyer about local business brokers and try to find one who has dealt with gas stations in the past.

[capo180]

Tanks and condition of equipment, location, reliably of fuel source are a few of the main things. Definitely need to do your DD on this type of thing. I've done light research on this type of investment. It wasn't for us though.

[Joekerr]

Originally Posted by BEM-S4

Ok take this for what it's worth I buy and sell companies for a living but not gas stations. I'd seek out a professional to consult with. With underground storage tanks and whatnot depending on how the deal is structured asset versus stock and what the seller is willing to rep to, you could be inheriting problems. Big expensive problems to fix.

Sorry I don't know who to even tell you to speak with maybe try asking your lawyer about local business brokers and try to find one who has dealt with gas stations in the past.

Yeah, but you need to do you due diligence on the seller's personal finances then too, because if he doesn't have the financials to back it up, any written representations aren't worth the paper they are printed on.

[BEM-S4]

Originally Posted by Joekerr

Yeah, but you need to do you due diligence on the seller's personal finances then too, because if he doesn't have the financials to back it up, any written representations aren't worth the paper they are printed on.

Yes but looking at it another way, and I am making this up to illustrate a point, but doomsday scenario some sort of environmental disaster if seller would cover any preexisting problems and buyer only in charge of new problems, plaintiff (state I guess) would go after seller not buyer. Again I am purely speculating based on general business experience but nothing specific to gas stations.

Similar would be warranty work where you'd adopt a "your watch / my watch" approach so assuming they work on cars and don't just sell gas, say there's an accident due to malpractice in a brake job that was done for a customer 1 month before deal. There are a variety of structural ways to deal with this sort of thing, just pointing out to OP that there's a lot of crap to think about and best to get a professional involved.

[BMW F22]

Don't think we have enough family members to watch it. Hence I watned that we would have to hire people which is more expenses.

[UncleWede]

Originally Posted by BMW F22

Don't think we have enough family members to watch it. Hence I watned that we would have to hire people which is more expenses.

So, then you aren't related to Aatish ???

[Aatish]

My market is probably not the same as your market...but gas stations and retail haven't been the best things to invest in, lately. My bank guys are always talking about them, not in positive ways.


That said, if the books, price, and location are nice, it's defiantly worth looking into.

[Joekerr]

Originally Posted by Aatish

My market is probably not the same as your market...but gas stations and retail haven't been the best things to invest in, lately. My bank guys are always talking about them, not in positive ways.


That said, if the books, price, and location are nice, it's defiantly worth looking into.

bimmette - I love the bolded spelling error. At least I suspect it is an error. The reason I love it so much is because it could also be taken another way wherein it is not an error. As in you are defiantly bucking what the bankers predict will happen.

Thanks Aatish - this was the highlight of the past hour for me.

@BEM-S4 - Yes, fair, the government *might* come after the seller. But having seen enough of said purchases in my previous life, I'd want a legal opinion so I could go after their insurance if they're wrong. Especially if someone other than the government is involved. But you still have a headache from having to prove it came from neglect prior to your ownership, good luck with that I figure.

Environmental ARO's scare me. Especially buried ones. Remediation is not always what you think and costs can skyrocket. I'd be wary of gas stations personally, but I am more of a risk-averse person by nature too, so I can see my bias in my recommendations.

[Aatish]

Damn autocorrect

[BEM-S4]

Yeah like I said no real experience here just offering a few of the sorts of questions I'd look into having answered. That along with audited financials, pending or threatened litigation, employee history with background checks etc etc etc. Also no idea on supply, contractual or otherwise, change of control outs for prenegotiated cost plus structure.

None of these are deal killers just important to understand exactly what you're doing. Since OP is seeking message board advice I assume this isn't exactly I his wheelhouse.

[smoosh]

Depends...

Parents have owned 13 gas stations over the past 15 years, and brother is now delving into the gas station business and just purchased his first two.

You are correct that most of the money is gained through the convenience store. Also, the property itself will be a huge investment (assuming you're purchasing and not leasing). Profit from gas can range anywhere from 3-6 cents/gallon with credit card purchase (due to credit card fees) and 4-8 cents/gallon with cash purchase). However, profit from convenience store is much higher (of course, depends on what product). The property itself may also increase in value over time, so you'll get some ROI (return on investment) if you sale/lease out down the road.

This is my best advice when purchasing gas stations:

If you want to make the maximum amount of profit from your investment: find a gas station that needs work (i.e., convenience store is small, only two pumping stations, decent property size) BUT is located very close to a busy highway. You can buy these stations for little, invest in expanding convenience store, get a contract from your oil supplier to increase the number of pumps, etc., and get a really great ROI. The very first gas station my parents purchased was bought near a highway for roughly $150K back in 2003. Small place, two pumps, relatively large property size. They invested about $100K into it over 4-5 years, got the traffic up, sold for $2.5M in 2015. Reason being, the station was located on a busy highway. There was tremendous potential for growth. There was another gas station across the street but it was difficult to access. They were getting the local town traffic as well as highway traffic.

Stay away from gas stations located in cities/middle of town that don't have potential for growth (physically, for the most part). These places sell for more and give little, if any, ROI when re-selling/leasing. Profit might be good, but you'll be paying much more to obtain it.

Gas stations can be a tricky business. Best bet is to invest on location, not on the actual business itself. You can restructure the convenience store, increase pumps, change the brand, but you cannot fix/change the location.

EDIT: I must add, my parents frequently worked 15-16 hour days, every day of the week, especially the gas station I mentioned above. Gas station purchased for the purpose of investment isn't a part-time job; it's a full time job that's usually stressful, from dealing with suppliers to the local government in meeting their standards. But it is a very rewarding business, especially monetarily.

[NorCal f80]

from what ive heard, no ... unless you have multiple .. and the poster above me probably has best advice . ha

[BMW F22]

@smoosh - wow! Thank you for your advice and info!

Everyone brought up good points. We'll take a look at the place, location, books later today and see where it goes. Wanted to have some ideas what to look for before going in.

[Aatish]

Look into suppliers too. Gas prices are determined by the supplier, and they're what bring (or scare) traffic.

[Biorin]

Originally Posted by smoosh

But it is a very rewarding business, especially monetarily.

Is it rewarding in other senses?

Gas stations. Do it for the kids.

[Aatish]

Originally Posted by smoosh

Depends...

Parents have owned 13 gas stations over the past 15 years, and brother is now delving into the gas station business and just purchased his first two.

You are correct that most of the money is gained through the convenience store. Also, the property itself will be a huge investment (assuming you're purchasing and not leasing). Profit from gas can range anywhere from 3-6 cents/gallon with credit card purchase (due to credit card fees) and 4-8 cents/gallon with cash purchase). However, profit from convenience store is much higher (of course, depends on what product). The property itself may also increase in value over time, so you'll get some ROI (return on investment) if you sale/lease out down the road.

This is my best advice when purchasing gas stations:

If you want to make the maximum amount of profit from your investment: find a gas station that needs work (i.e., convenience store is small, only two pumping stations, decent property size) BUT is located very close to a busy highway. You can buy these stations for little, invest in expanding convenience store, get a contract from your oil supplier to increase the number of pumps, etc., and get a really great ROI. The very first gas station my parents purchased was bought near a highway for roughly $150K back in 2003. Small place, two pumps, relatively large property size. They invested about $100K into it over 4-5 years, got the traffic up, sold for $2.5M in 2015. Reason being, the station was located on a busy highway. There was tremendous potential for growth. There was another gas station across the street but it was difficult to access. They were getting the local town traffic as well as highway traffic.

Stay away from gas stations located in cities/middle of town that don't have potential for growth (physically, for the most part). These places sell for more and give little, if any, ROI when re-selling/leasing. Profit might be good, but you'll be paying much more to obtain it.

Gas stations can be a tricky business. Best bet is to invest on location, not on the actual business itself. You can restructure the convenience store, increase pumps, change the brand, but you cannot fix/change the location.

EDIT: I must add, my parents frequently worked 15-16 hour days, every day of the week, especially the gas station I mentioned above. Gas station purchased for the purpose of investment isn't a part-time job; it's a full time job that's usually stressful, from dealing with suppliers to the local government in meeting their standards. But it is a very rewarding business, especially monetarily.

[IMG]http://www.reactiongifs.com/wp-conte.../impressed.gif[/IMG]

[smoosh]

Originally Posted by Biorin

Is it rewarding in other senses?

Gas stations. Do it for the kids.

Brand recognition (if you go private brand route), building a large social circle with other successful business owners, references, etc.