Commercial Real Estate News / Investing / Tips for Buying a Bar for Sale in Phoenix, AZ

Tips for Buying a Bar for Sale in Phoenix, AZ

Published: 09-29-21 Category: Investing

Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.

Inside a bar for sale in Phoenix, Arizona.

This article was updated on 9/12/2023.

The COVID-19 pandemic affected bars and restaurants in an especially damaging way. Simply put, when people are staying home to avoid a highly contagious virus (and all of its variants), bars and restaurants simply can't count on the same level of revenue. With less money coming in, many owners had no choice but to close down and list their bar for sale.

Despite feeling the effects of the pandemic, Phoenix, AZ is still a lively city with a nightlife scene that just won't quit. With a strong arts district in the heart of downtown, Phoenix still attracts not just tourists but locals who are devoted to keeping the spirit of Phoenix nightlife alive and well.

Here, we'll explore the in's and out's of buying a bar for sale in Phoenix, AZ. We'll discuss profitability, costs, commercial property valuation, and some other pitfalls you should be on the lookout for.

Let's get started.

Is Buying a Bar for Sale in Phoenix a Good Investment?

It might not be the world's oldest profession, but owning a bar sure feels close enough. The truth is that the need to socialize is one of our most human characteristics. We want to connect with people in a place that's neither our home nor the office. This "third place" desire is well documented, and gives us somewhere to belong.

Buying a bar for sale in or near Phoenix, AZ gives you a chance to be that third place for an audience who will reward you with regularity: The pandemic never completely stopped the demand for concerts, for libraries, for sporting events, and for bars.

Once you purchase a bar for sale, there's a tried-and-true foundation to expand upon. This makes buying a bar for sale a good investment on several levels: You aren't buying a business that has to be explained in great detail to a local population, nor are you buying something that has to "catch on" in popularity.

People crave new experiences, and buying a bar gives you an opportunity to give people something new. Sure, purchasing an existing bar means getting a theme to work with, but there's nothing keeping you from changing things to make it feel fresh and lively again.

A benefit of getting an existing bar for sale is that you often pick up existing customers who are going to be extremely happy that "their bar" is open again.

Bar & Restaurant Profitability

It's important to ensure that, before you break out the proverbial checkbook, you look at profitability. After all, you don't want to sink money into a bar and find that you can't get that money back.

Thankfully, there's good news in terms of whether or not bars are profitable. They are indeed very profitable, given that people go knowing upfront that the alcohol available is purchased at a premium. Since going to a bar is about socializing and getting away from home, bar customers are aware that they have to pay a premium price to get those benefits.

But Don't Buy a Bar for Sale if…

There are plenty of upsides to owning a bar, including the feeling of accomplishment. You're building something that's highly visible in the community. Phoenix, AZ is a place that values entrepreneurship and small businesses, rewarding those that go the extra mile with strong loyalty and word-of-mouth referrals; however, there are also strong reasons not to buy a bar for sale, which are listed below:

Disorganization is practically your middle name. If you are going to run a successful bar, you have to be able to juggle all of the different moving parts well. Hiring good people also requires being aware of all laws involving the sale of alcohol, as well as general employment laws.
You lack strong boundaries and are easily tempted by alcohol. It seems like a given that if you have issues with alcohol, owning a bar would be the last thing you should do. But plenty of bar owners get themselves in trouble with alcohol, which ends up eating away at their profit margins.
You can't stand the idea of working with people. Some bar owners think that they can be the wizard behind the curtain, but those days are over. In the social media era, people want to know the owners. You have to be visible.

While these aren't the only red flags to consider, they're a good starting place. Buying any business is an investment, but no investment is without its own set of risks. Take your time, do your due diligence, and don't be afraid to walk away from a deal that isn't worthwhile.

Properly Valuing Bar Property

Profitability is only one piece of the puzzle; you also need to ensure that you are properly valuing bar property. This is what can turn a great deal into a nightmare if you aren't looking at all of the facts. Sometimes the excitement of owning a business can crowd out real concerns.

In order to ensure that you are valuing bar property the right way, you have to look at multiple aspects. One of the first areas is current profits or the margins before the business closed. Don't just take someone's word for it. Looking at their books is essential to avoiding disappointment and costly mistakes.

The value of the commercial property is separate from the value of the bar business. Be sure that, when you're crunching the numbers, you keep them separate. Thinking in terms of commercial property means looking at the location. Is the bar somewhere that's easy to access for Phoenix residents and visitors alike? The more you understand the location, the more you understand the value of the bar as well as its commercial real estate.

Other components to include within the bar's valuation would be the current payroll margins, the ongoing expenses, and historical earnings.

Other Things to Consider Before Buying

So you've looked at the location, you've poured over the financials, and you like the idea of becoming a bar owner. That means you are in the clear to go ahead and buy, right?

Not at all. There are other things to consider before buying a bar for sale in Phoenix, AZ. One of the biggest things to consider before buying is looking at the repairs that will need to be done in order to truly bring your vision to life. If you aren't saving money after purchase to make changes, you're in for a bad time. It does cost money upfront to both buy a bar and fix it up.

The process of buying a bar for sale in Phoenix, AZ has multiple steps, but following each step sets you up for the future success that you deserve.