First Commercial Real Estate Investing - Gas Station

[Sumit Verma]

I have many friends worked in convivences stores and gas stations by running the finances of the business I'm interested in purchasing a gas station. Hypothetically here is the situation. Let me know if it is possible or not, and in both cases what would be the requirements? 

Business cost - $1M Net Assessed Value - $700k (land + building) Looking for 900k, with 30 years of financing, no balloon payment.

This would be my first CRE, I would run and manage the business by myself.

Thank you for your time!

[Henry Clark]

Steps:

1.  Get with a local banker and have them walk you through the process of getting a loan from them.  This will get you up to speed on how the finances will work.

2.  Unless it is seller financing, you will have a hard time getting a loan of $900k on a $1mm deal.  Maybe 10% SBA loan.  Check on that.

3.  Figure out $900k loan and interest payments per month.  Then compare against the cash flow after taxes from the business.  Is there enough for you to live on?

4.  Due Diligence- Probably need to do a Phase 1/2/3 epa study or you will be taking on the cleanup risk.

5.  Do you know how to contract the petroleum and store products?  Do you need to front any money for that?

[Sumit Verma]

Thank you Henry for your response. 

The business is not for sale yet, I just know owner would not deny the offer if I put it on the table but I want to be sure. It could me my life changing path.

2. I will check on 10% SBA. Just curios would that be possible to find someone on BiggerPockets?

3. How can I get the business cash flow, revenue, expenses without business being on market. I do not need much to live on, I want growth and I'd would put most back in the business if there is profit.

4. 1/2/3 epa study I will definitely look into it.

5. That cost I have already added in the $1M, if I needed more I will go as out of pocket expense.

[Henry Clark]

You have to do the math or no one will loan to you.  And you shouldn’t invest without th numbers. 

[Kristi Kandel]

Quote from @Sumit Verma:

I have many friends worked in convivences stores and gas stations by running the finances of the business I'm interested in purchasing a gas station. Hypothetically here is the situation. Let me know if it is possible or not, and in both cases what would be the requirements? 

Business cost - $1M Net Assessed Value - $700k (land + building) Looking for 900k, with 30 years of financing, no balloon payment.

This would be my first CRE, I would run and manage the business by myself.

Thank you for your time!

 What state are you buying in? I work with hundreds of gas station owners and operators each year. We are building Hydrogen Fueling stations in CA and we lease land from the gas station owners. 

Some are the operators of the business only, Some own the dirt only and ground lease to the operators, and some are both. Your systems and processes will make or break you. Most operators end up living at the store and working long days and weeks UNLESS they have multiple gas stations and can leverage that scale for operations. 

When it comes to environmental check to see if the property has a NFA (no further action) letter. That means that the prior leaks and soil/groundwater contamination have already been taken care of. 

Check to see where the owner is at on updating / replacing old UG tanks that need to be replaced with current standards. Those costs to both shut down the biz to upgrade/replace and the cost of doing the work are huge capital costs. 

Separately, lots of AHJs in CA are banning the building of new gas stations. CA is going to be extreme and the rest of the states are likely 10-15 years behind those initiatives. That being said, what is your long game and how would you handle gas being phase out and how would your business pivot? 

[Sumit Verma]

Quote from @Kristi Kandel:

Quote from @Sumit Verma:

I have many friends worked in convivences stores and gas stations by running the finances of the business I'm interested in purchasing a gas station. Hypothetically here is the situation. Let me know if it is possible or not, and in both cases what would be the requirements? 

Business cost - $1M Net Assessed Value - $700k (land + building) Looking for 900k, with 30 years of financing, no balloon payment.

This would be my first CRE, I would run and manage the business by myself.

Thank you for your time!

 What state are you buying in? I work with hundreds of gas station owners and operators each year. We are building Hydrogen Fueling stations in CA and we lease land from the gas station owners. 

Some are the operators of the business only, Some own the dirt only and ground lease to the operators, and some are both. Your systems and processes will make or break you. Most operators end up living at the store and working long days and weeks UNLESS they have multiple gas stations and can leverage that scale for operations. 

When it comes to environmental check to see if the property has a NFA (no further action) letter. That means that the prior leaks and soil/groundwater contamination have already been taken care of. 

Check to see where the owner is at on updating / replacing old UG tanks that need to be replaced with current standards. Those costs to both shut down the biz to upgrade/replace and the cost of doing the work are huge capital costs. 

Separately, lots of AHJs in CA are banning the building of new gas stations. CA is going to be extreme and the rest of the states are likely 10-15 years behind those initiatives. That being said, what is your long game and how would you handle gas being phase out and how would your business pivot? 

Thank you for your response Kristi!

Currently I am only looking into midwest. You are right CA is way ahead comparing to other states. I will take a look into NFA for sure. Its not being too long since the tanks are being replaced.

I believe most gas stations profit comes from the inside sales. When you say long term game, I will keep the gas stations (it will take long to completely wipe out gas phase) with a potential to stream into multiple different source of income. But that's all subjective to how much capital I can build upon.

[Kristi Kandel]

Quote from @Sumit Verma:

Quote from @Kristi Kandel:

Quote from @Sumit Verma:

I have many friends worked in convivences stores and gas stations by running the finances of the business I'm interested in purchasing a gas station. Hypothetically here is the situation. Let me know if it is possible or not, and in both cases what would be the requirements? 

Business cost - $1M Net Assessed Value - $700k (land + building) Looking for 900k, with 30 years of financing, no balloon payment.

This would be my first CRE, I would run and manage the business by myself.

Thank you for your time!

 What state are you buying in? I work with hundreds of gas station owners and operators each year. We are building Hydrogen Fueling stations in CA and we lease land from the gas station owners. 

Some are the operators of the business only, Some own the dirt only and ground lease to the operators, and some are both. Your systems and processes will make or break you. Most operators end up living at the store and working long days and weeks UNLESS they have multiple gas stations and can leverage that scale for operations. 

When it comes to environmental check to see if the property has a NFA (no further action) letter. That means that the prior leaks and soil/groundwater contamination have already been taken care of. 

Check to see where the owner is at on updating / replacing old UG tanks that need to be replaced with current standards. Those costs to both shut down the biz to upgrade/replace and the cost of doing the work are huge capital costs. 

Separately, lots of AHJs in CA are banning the building of new gas stations. CA is going to be extreme and the rest of the states are likely 10-15 years behind those initiatives. That being said, what is your long game and how would you handle gas being phase out and how would your business pivot? 

Thank you for your response Kristi!

Currently I am only looking into midwest. You are right CA is way ahead comparing to other states. I will take a look into NFA for sure. Its not being too long since the tanks are being replaced.

I believe most gas stations profit comes from the inside sales. When you say long term game, I will keep the gas stations (it will take long to completely wipe out gas phase) with a potential to stream into multiple different source of income. But that's all subjective to how much capital I can build upon.

 I would agree the Midwest will take the longest to change types of energy. Depending on the operator the inside sales can drastically beat out gas sales. I’ve seen many people get creative offering many projects like car washes, propane, u haul rentals, food, etc. It’s very hands on for most owners (high turnover employees  and employees stealing bc of cash sales) so as long as that’s something you’re willing to do it’s likely a great option for you. 

[Sumit Verma]

Quote from @Kristi Kandel:

Quote from @Sumit Verma:

Quote from @Kristi Kandel:

Quote from @Sumit Verma:

I have many friends worked in convivences stores and gas stations by running the finances of the business I'm interested in purchasing a gas station. Hypothetically here is the situation. Let me know if it is possible or not, and in both cases what would be the requirements? 

Business cost - $1M Net Assessed Value - $700k (land + building) Looking for 900k, with 30 years of financing, no balloon payment.

This would be my first CRE, I would run and manage the business by myself.

Thank you for your time!

 What state are you buying in? I work with hundreds of gas station owners and operators each year. We are building Hydrogen Fueling stations in CA and we lease land from the gas station owners. 

Some are the operators of the business only, Some own the dirt only and ground lease to the operators, and some are both. Your systems and processes will make or break you. Most operators end up living at the store and working long days and weeks UNLESS they have multiple gas stations and can leverage that scale for operations. 

When it comes to environmental check to see if the property has a NFA (no further action) letter. That means that the prior leaks and soil/groundwater contamination have already been taken care of. 

Check to see where the owner is at on updating / replacing old UG tanks that need to be replaced with current standards. Those costs to both shut down the biz to upgrade/replace and the cost of doing the work are huge capital costs. 

Separately, lots of AHJs in CA are banning the building of new gas stations. CA is going to be extreme and the rest of the states are likely 10-15 years behind those initiatives. That being said, what is your long game and how would you handle gas being phase out and how would your business pivot? 

Thank you for your response Kristi!

Currently I am only looking into midwest. You are right CA is way ahead comparing to other states. I will take a look into NFA for sure. Its not being too long since the tanks are being replaced.

I believe most gas stations profit comes from the inside sales. When you say long term game, I will keep the gas stations (it will take long to completely wipe out gas phase) with a potential to stream into multiple different source of income. But that's all subjective to how much capital I can build upon.

 I would agree the Midwest will take the longest to change types of energy. Depending on the operator the inside sales can drastically beat out gas sales. I’ve seen many people get creative offering many projects like car washes, propane, u haul rentals, food, etc. It’s very hands on for most owners (high turnover employees  and employees stealing bc of cash sales) so as long as that’s something you’re willing to do it’s likely a great option for you. 

I do have a great plan to move forward with, it's the execution of the initial plan that's taking me long but, it is giving me more time. I have 2 more friends with me, we recently graduated from university and after seen the current market for the jobs we have decided to move forward with this and we have plans to be low cost creative by our food, offers and social media.

Currently I have no plan for the employees as I will be running and managing the store by myself. With only exception being allowing my friends to work couple days.

I am visiting banks to get some more information for how much investment I can secure with my situation once that is done I will actively engage in find the right business to acquire. Should you know of any lender please let me know.

Thank you!

[Kristi Kandel]

Quote from @Sumit Verma:

Quote from @Kristi Kandel:

Quote from @Sumit Verma:

Quote from @Kristi Kandel:

Quote from @Sumit Verma:

I have many friends worked in convivences stores and gas stations by running the finances of the business I'm interested in purchasing a gas station. Hypothetically here is the situation. Let me know if it is possible or not, and in both cases what would be the requirements? 

Business cost - $1M Net Assessed Value - $700k (land + building) Looking for 900k, with 30 years of financing, no balloon payment.

This would be my first CRE, I would run and manage the business by myself.

Thank you for your time!

 What state are you buying in? I work with hundreds of gas station owners and operators each year. We are building Hydrogen Fueling stations in CA and we lease land from the gas station owners. 

Some are the operators of the business only, Some own the dirt only and ground lease to the operators, and some are both. Your systems and processes will make or break you. Most operators end up living at the store and working long days and weeks UNLESS they have multiple gas stations and can leverage that scale for operations. 

When it comes to environmental check to see if the property has a NFA (no further action) letter. That means that the prior leaks and soil/groundwater contamination have already been taken care of. 

Check to see where the owner is at on updating / replacing old UG tanks that need to be replaced with current standards. Those costs to both shut down the biz to upgrade/replace and the cost of doing the work are huge capital costs. 

Separately, lots of AHJs in CA are banning the building of new gas stations. CA is going to be extreme and the rest of the states are likely 10-15 years behind those initiatives. That being said, what is your long game and how would you handle gas being phase out and how would your business pivot? 

Thank you for your response Kristi!

Currently I am only looking into midwest. You are right CA is way ahead comparing to other states. I will take a look into NFA for sure. Its not being too long since the tanks are being replaced.

I believe most gas stations profit comes from the inside sales. When you say long term game, I will keep the gas stations (it will take long to completely wipe out gas phase) with a potential to stream into multiple different source of income. But that's all subjective to how much capital I can build upon.

 I would agree the Midwest will take the longest to change types of energy. Depending on the operator the inside sales can drastically beat out gas sales. I’ve seen many people get creative offering many projects like car washes, propane, u haul rentals, food, etc. It’s very hands on for most owners (high turnover employees  and employees stealing bc of cash sales) so as long as that’s something you’re willing to do it’s likely a great option for you. 

I do have a great plan to move forward with, it's the execution of the initial plan that's taking me long but, it is giving me more time. I have 2 more friends with me, we recently graduated from university and after seen the current market for the jobs we have decided to move forward with this and we have plans to be low cost creative by our food, offers and social media.

Currently I have no plan for the employees as I will be running and managing the store by myself. With only exception being allowing my friends to work couple days.

I am visiting banks to get some more information for how much investment I can secure with my situation once that is done I will actively engage in find the right business to acquire. Should you know of any lender please let me know.

Thank you!

 That sounds like a great plan to get started out of school. Your lenders will be very helpful in helping you underwrite the deal and develop a biz plan. That will be key to operational success.

You might consider asking the owner to seller finance part of the deal and also stay on for a transition period to help show you the ropes. Even if you’re going to change up operations getting those lessons learned from the current operator will help you a lot. 

[Sumit Verma]

Quote from @Kristi Kandel:

Quote from @Sumit Verma:

Quote from @Kristi Kandel:

Quote from @Sumit Verma:

Quote from @Kristi Kandel:

Quote from @Sumit Verma:

I have many friends worked in convivences stores and gas stations by running the finances of the business I'm interested in purchasing a gas station. Hypothetically here is the situation. Let me know if it is possible or not, and in both cases what would be the requirements? 

Business cost - $1M Net Assessed Value - $700k (land + building) Looking for 900k, with 30 years of financing, no balloon payment.

This would be my first CRE, I would run and manage the business by myself.

Thank you for your time!

 What state are you buying in? I work with hundreds of gas station owners and operators each year. We are building Hydrogen Fueling stations in CA and we lease land from the gas station owners. 

Some are the operators of the business only, Some own the dirt only and ground lease to the operators, and some are both. Your systems and processes will make or break you. Most operators end up living at the store and working long days and weeks UNLESS they have multiple gas stations and can leverage that scale for operations. 

When it comes to environmental check to see if the property has a NFA (no further action) letter. That means that the prior leaks and soil/groundwater contamination have already been taken care of. 

Check to see where the owner is at on updating / replacing old UG tanks that need to be replaced with current standards. Those costs to both shut down the biz to upgrade/replace and the cost of doing the work are huge capital costs. 

Separately, lots of AHJs in CA are banning the building of new gas stations. CA is going to be extreme and the rest of the states are likely 10-15 years behind those initiatives. That being said, what is your long game and how would you handle gas being phase out and how would your business pivot? 

Thank you for your response Kristi!

Currently I am only looking into midwest. You are right CA is way ahead comparing to other states. I will take a look into NFA for sure. Its not being too long since the tanks are being replaced.

I believe most gas stations profit comes from the inside sales. When you say long term game, I will keep the gas stations (it will take long to completely wipe out gas phase) with a potential to stream into multiple different source of income. But that's all subjective to how much capital I can build upon.

 I would agree the Midwest will take the longest to change types of energy. Depending on the operator the inside sales can drastically beat out gas sales. I’ve seen many people get creative offering many projects like car washes, propane, u haul rentals, food, etc. It’s very hands on for most owners (high turnover employees  and employees stealing bc of cash sales) so as long as that’s something you’re willing to do it’s likely a great option for you. 

I do have a great plan to move forward with, it's the execution of the initial plan that's taking me long but, it is giving me more time. I have 2 more friends with me, we recently graduated from university and after seen the current market for the jobs we have decided to move forward with this and we have plans to be low cost creative by our food, offers and social media.

Currently I have no plan for the employees as I will be running and managing the store by myself. With only exception being allowing my friends to work couple days.

I am visiting banks to get some more information for how much investment I can secure with my situation once that is done I will actively engage in find the right business to acquire. Should you know of any lender please let me know.

Thank you!

 That sounds like a great plan to get started out of school. Your lenders will be very helpful in helping you underwrite the deal and develop a biz plan. That will be key to operational success.

You might consider asking the owner to seller finance part of the deal and also stay on for a transition period to help show you the ropes. Even if you’re going to change up operations getting those lessons learned from the current operator will help you a lot. 

Thank you!

I am having hard time trusting the business that are already on the market for sell. Just because you never know the actual reason of the sell of the business. The business I am interested is not in the market and I strongly believe that if I make the owner an offer he would most likely accept it (based on the previous business he sold) 
 
My plan is to do enough research on the location that I am actually interested in. I have contacted and spoken to the operators already regarding the current business conditions. I would send an mail to the owner's address to invite him to make the deal.

Owner's finance probably won't be an option in this case. Is there any thing you would suggest about where to find lenders or any information I should know before talking to banks?

[Kristi Kandel]

Quote from @Sumit Verma:

Quote from @Kristi Kandel:

Quote from @Sumit Verma:

Quote from @Kristi Kandel:

Quote from @Sumit Verma:

Quote from @Kristi Kandel:

Quote from @Sumit Verma:

I have many friends worked in convivences stores and gas stations by running the finances of the business I'm interested in purchasing a gas station. Hypothetically here is the situation. Let me know if it is possible or not, and in both cases what would be the requirements? 

Business cost - $1M Net Assessed Value - $700k (land + building) Looking for 900k, with 30 years of financing, no balloon payment.

This would be my first CRE, I would run and manage the business by myself.

Thank you for your time!

 What state are you buying in? I work with hundreds of gas station owners and operators each year. We are building Hydrogen Fueling stations in CA and we lease land from the gas station owners. 

Some are the operators of the business only, Some own the dirt only and ground lease to the operators, and some are both. Your systems and processes will make or break you. Most operators end up living at the store and working long days and weeks UNLESS they have multiple gas stations and can leverage that scale for operations. 

When it comes to environmental check to see if the property has a NFA (no further action) letter. That means that the prior leaks and soil/groundwater contamination have already been taken care of. 

Check to see where the owner is at on updating / replacing old UG tanks that need to be replaced with current standards. Those costs to both shut down the biz to upgrade/replace and the cost of doing the work are huge capital costs. 

Separately, lots of AHJs in CA are banning the building of new gas stations. CA is going to be extreme and the rest of the states are likely 10-15 years behind those initiatives. That being said, what is your long game and how would you handle gas being phase out and how would your business pivot? 

Thank you for your response Kristi!

Currently I am only looking into midwest. You are right CA is way ahead comparing to other states. I will take a look into NFA for sure. Its not being too long since the tanks are being replaced.

I believe most gas stations profit comes from the inside sales. When you say long term game, I will keep the gas stations (it will take long to completely wipe out gas phase) with a potential to stream into multiple different source of income. But that's all subjective to how much capital I can build upon.

 I would agree the Midwest will take the longest to change types of energy. Depending on the operator the inside sales can drastically beat out gas sales. I’ve seen many people get creative offering many projects like car washes, propane, u haul rentals, food, etc. It’s very hands on for most owners (high turnover employees  and employees stealing bc of cash sales) so as long as that’s something you’re willing to do it’s likely a great option for you. 

I do have a great plan to move forward with, it's the execution of the initial plan that's taking me long but, it is giving me more time. I have 2 more friends with me, we recently graduated from university and after seen the current market for the jobs we have decided to move forward with this and we have plans to be low cost creative by our food, offers and social media.

Currently I have no plan for the employees as I will be running and managing the store by myself. With only exception being allowing my friends to work couple days.

I am visiting banks to get some more information for how much investment I can secure with my situation once that is done I will actively engage in find the right business to acquire. Should you know of any lender please let me know.

Thank you!

 That sounds like a great plan to get started out of school. Your lenders will be very helpful in helping you underwrite the deal and develop a biz plan. That will be key to operational success.

You might consider asking the owner to seller finance part of the deal and also stay on for a transition period to help show you the ropes. Even if you’re going to change up operations getting those lessons learned from the current operator will help you a lot. 

Thank you!

I am having hard time trusting the business that are already on the market for sell. Just because you never know the actual reason of the sell of the business. The business I am interested is not in the market and I strongly believe that if I make the owner an offer he would most likely accept it (based on the previous business he sold) 
 
My plan is to do enough research on the location that I am actually interested in. I have contacted and spoken to the operators already regarding the current business conditions. I would send an mail to the owner's address to invite him to make the deal.

Owner's finance probably won't be an option in this case. Is there any thing you would suggest about where to find lenders or any information I should know before talking to banks?

@Sumit Verma ASK all the questions. The lenders can be your best friend and shop it around to a lot of lenders. This is a more risky asset for many lenders and this being your first biz? Learn as much as you can and don’t discount this process as education for the future  even if you don’t close 

[Simmy Ahluwalia]

@Sumit Verma - we provide SBA loans for gas stations.  Happy to chat.