Is buying Gas station in Phoenix (Glendale) area advisable?

[Pravin Kumar]

Hello all, 

very new member to this forum.

I am middle of a deal to acquire a gas station in Glendale, AZ (Phoenix area). The deal is with real estate and an auto repair shop. Owner financing is available with 20% down.

However, I have seen many gas station shutting their door recently. Now my question is (I will appreciate any advise.)

Is buying Gas station in Phoenix (Glendale) area advisable?

[Charlie MacPherson]

@Pravin Kumar Assuming that you're buying both the business and the real estate, you need to look at a lot of different aspects.

Sales - is there a gas delivery contract?  If so, are you paying rack rate?  I've seen prices as high as rack + $0.03 and as low as rack -$0.02.  How many gallons/month are you pumping?  Are the pumps self-serve?  In decent condition?  Do you have diesel?

Services - Is there a convenience store?  With beer & wine?  Tobacco?  Lottery?  Groceries?  If not, can you add them?

In the several stations I've listed, gas sales are not a huge profit center.  It's the gas that brings the customers in for all of those ancillary items.  Gas is typically sold at a profit of $0.10 - $0.20 profit per gallon.

Auto repair - Around here, the state restricts availability of inspection sticker machines - and these drive a lot of auto repair.  They sell anywhere from $75,000 to $200,000 in these parts.  How about a mechanic?  Will he stay with the business?  What's your Plan B is not?

Used car sales - this goes hand in hand with the repair business.  Does this station have or need a license to sell used cars?

Environmental - I don't know anything about AZ laws, but here in MA, all single-wall steel tanks had to be replaced by 8/2017.  There's no requirement to replace double wall steel - yet.  You need to know what AZ says about the topic.  Your lender will also require an environmental survey.  If there's existing contamination, cleanups can be catastrophically expensive.  Is there a Veeder-Root or similar gas sale / leak detection system?

Facilities - what condition is the building in?  How about the canopy?  Paving?

Reputation - I have seen one gas station owner destroy his business by letting a tenant sell gas at $1.50/gallon above all of the area competition.  I stood there for over an hour on multiple occasions while showing the property and saw a total of 3 cars.  The business ultimately failed and he leased the land to a used car dealer.  Don't buy a business that needs to be rebuilt.

Traffic - does AZ DOT have traffic surveys available? MA DOT does and I can always find a nearby count. If the road only gets 5,000 vehicles/day, it's nowhere near as attractive as one that's getting 40,000/day.

Competition - How many competitors are within a mile?  You mentioned that several closed.  Why?  They could either re-open and come back to hurt you, or be converted to another use.

Good luck!