Commercial Real Estate News / Investing / The Investor Guide to Gas Stations

The Investor Guide to Gas Stations

Published: 10-03-21 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.

This article was updated on 9/21/23.

Gas stations host a necessary commodity for cars around the world as gasoline continues to grow in demand. This increase usually prompts investors to look into owning a gas station for sale, the ROI for which is great if the station has the right qualities to garner profit.

Location, operations, and brand names are just a few aspects of investing in your own gas station. A gas station for sale near you may be a perfect gateway into a lucrative project; however, your due diligence in starting up a station will determine its success.

Gasoline sales, by itself, don't usually create a large amount of revenue for stations. This is why owners must ensure that the other services their station offers are up to par in quality.

Let's take a closer look at how investors and business owners can profit from owning a gas station.

#1 – Margins on Gas Itself Are Low

An average gas station makes $100 a day from fuel purchases. With such small earnings, how can gas stations possibly be a profitable investment?

About ¾ of revenue from a gas station comes from non-gasoline purchases. Gas station owners rely on drivers buying from attached services, like the convenience store and/or a car wash.

Restaurants can accommodate stations, too. Food products are desirable for travelers who do not wish to drive so far into town to eat. Gas stations can also implement a rewards system for regular customers.

Other Ways Gas Stations Can Generate Revenue

Large stores, like Costco and Safeway, implement gas stations to bring more traffic to their stores. This is how big-name stores offering gas are able to sell gas for much less than the average prices in the area.

Business owners can look at the businesses they already own and consider adding a gas station. The gas itself may not create much profit, but offering fuel will draw more customers to use their other primary services.

Investors will have to consider what will draw customers from the streets so that they will buy additional services from the gas station. On top of the right location and branding, a clean station will attract drivers.

There's also the alternative of purchasing the property instead of the station, charging rent for usage instead of worrying about generating cash through sales.

Some gas stations are in states or counties where they advertise higher-than-average prices for their gas. This can be due to high rent or taxes in the location. Additionally, gas stations in remote areas whose majority of visitors are long-distance travelers will hike prices to make up for the slower traffic.

Costs of Operation

The cost to start your gas station may range from $300,000 to $500,000. These include fees, employee salaries, and other operation necessities. The price does range based on where you plan to set up your gas station.

Here are some estimates on how much it may cost to buy and operate a gas station for sale:

Buying or Leasing the Property: $150,000 to $250,000;
Business Registration and Licensing: $20,000;
Insurance and Workers Compensation: $30,000;
Employee Salary and Bills: $20,000 per month;
Gasoline Tanker and Gas Deposit: $75,000; and
Inventory: $60,000.

Gasoline stations with attached stores need to leave room for restocking. The majority of store products in a gas station are food, which can go bad. You will have to calculate how often you will restock and how much that will cost you.

There are other unnamed costs to starting and running your gas station; however, the decisions you make for your business will eventually give you a large return on investment. Making the right choices for hiring and offering high-quality services takes more time and money.

#2 – Brand Name Matters

Unless you're franchising from a gas station chain, you will have to come up with a name for your station that will represent your brand well.

Brand names have to create trust and desire in customers. This is a challenge for every company. A name also fairs better if it gives familiarity to those who drive by.

The name does not have to be creative and unique. It needs to be simple and recognizable. Often, independent gas stations name their business after the street or city name, followed by "gas station and store."

If you are franchising, then make sure to look for a brand that is reputable with a stellar track record.

#3 – Location Is Even More Important

Convenience will usually always trump low gas prices. Busy people fly out of their driveway, already late, just to see that their gas gauge needle is right on "E." As a result, they'll likely speed to the closest station en-route to their destination.

People do not want to spend too much time filling up on gas, much less using up more time looking for a station. This is why gas stations flank main roads and streets headed downtown. Drivers can fill up on their way to work without skipping a beat.

However, multiple gas stations may already populate desirable locations. Your search should then move to areas where construction or other developments are less likely to block cars.

Additionally, an environmental site assessment can save you money in the long run. These assessments catch any contamination that a previous owner may have caused. You will also need to ensure that your gas station is set up in a way that you do not accidentally cause environmental damage.

#4 – But Do Not Forget About the Real Estate

The labor required and price estimates of running a gas station for sale are not minimal. The project will take up time, money, and resources. Gas station owners need to run every aspect of a station when they start. Then, there is maintenance to keep up with as time goes on. You would also be in charge of paying rent.

However, buying a gas station for sale can still be a fruitful investment. Some investors decide to buy the land under the gas station rather than the operation itself. That way, they are not in charge of the ins and outs of running a retail business.

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