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Car Washes: A Hidden Commercial Real Estate Gem

Published: 10-07-21 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.

A car being washed in a car wash for sale.

This article was updated on 10/02/2023.

Savvy investors looking for new commercial real estate purchases should consider investing in a car wash for sale. An automatic car wash is popular for drivers and business owners alike: It's a fast way for the driver to ensure that the elements don't affect the car. Rust lowers a car's value, but regular car washes ensure that rust doesn't get a chance to creep in.

For business owners, it's a chance to own a business that does not require explanation to the public. Drivers know what a car wash is, and it's a concept they're very familiar with.

Washing a car might not sound like much, but it's as much of the car maintenance process as any other activity. These days, you probably don't have time to stand in your driveway with a sponge and bucket. Thankfully, you aren't alone. Car washes represent a billion-dollar industry year after year; California leads the nation with the revenue generated from car washes ($1.6 billion).

Since the driver just has to show up, it's considered a convenience with a premium attached to it. Buying an existing car wash for sale means you get to skip the construction phase and get a business that's already functional.

Let's take a closer look at some of the other benefits of owning and operating a car wash.

#1 – Low-Risk Triple Net Leases

One of the reasons why car washes become so profitable for investors is the way they're structured. The fee-simple triple net lease is the secret weapon behind why so many investors profit with ease from owning a car wash.

A fee-simple triple net lease sounds complicated, but it's straightforward: You own the property, but someone else takes care of the expenses. In this case, that other person is the tenant. The tenant is responsible for the property taxes and the expenses incurred to run the car wash. This separation is a powerful way for the investor to reap all the benefits of owning a car wash for sale without thinking about payroll or equipment costs.

Given the nature of car washes, tenants will rent the space from you for multiple years, not just a few months at a time. This means it's easy to forecast how much money to expect over the lease term.

#2 – Recession-Proof Fundamentals

Many industries are signals for the greater economy, such as the hotel and hospitality industries; however, this pattern isn't the case for the car wash business. Why? Even though some feel that washing their car is a luxury, most drivers will still bring their car out to an automatic car wash for cleaning.

They may not select the most expensive package if times are tight, but they still want to care for their cars as much as possible. A car symbolizes ownership and transportation; when we need to feel better, we turn to improving the parts of our lives that are visible to others. In other words, polishing the car to a high gloss will make you feel better, and others will compliment you. That feels pretty good, too!

When it comes to the financial fundamentals of car washes, there's a lot to signal that it's pretty recession-proof:

Twenty thousand cars visit the average car wash annually. That's only an average, but it's a signal that people are accustomed to getting their cars washed away from home.
Customers love loyalty programs, a great way to keep them coming back. Not every car wash has them, but they should. After all, customers spend more when they're attached to a brand through a loyalty program.
Solid cap rates between 4% and 7%, depending on how the car wash operates.
A small but dedicated market of investors perpetually looking to purchase new car wash properties.

Every investment has risks; that's just the nature of the animal. However, you can benefit from picking up a car wash for sale in many ways. When we're talking about a car wash for sale, we're talking about the complete package. This means the land that the car wash sits on and the actual business itself. You have flexibility and freedom without having to occupy the premises yourself.

#3 – Increasing Industry Revenues

A car wash can be as simple or elaborate as the owner wants to make it. Indeed, the basic car wash may be a simple soap and rinse operation, but a more luxurious car wash has far more options. For example, employees can offer additional on-site detailing services for a premium price.

People who drive luxury vehicles will regularly enjoy getting their vehicles detailed inside and out. Vacuums on the property will allow drivers to provide their car's interior with the final touch after the cleaning, waxing, and polishing is complete. Some car washes even offer fuel on the premises as a convenience, with a slightly higher price tag than other fueling stations, given the convenience factor.

Even if you don't want to stick to automatic car washes, you can still invest. Self-service car washes are also a profitable option. Sometimes, people want to have power sprayers and other equipment available to do the car wash themselves.

Multiple options are available for increasing revenues, allowing investors to get a killer ROI. When looking at car washes for sale, it's essential to consider a plan for expansion over time. Ultimately, every car wash investor wants to see the business grow.

#4 – No Car Wash Monopolies

In many industries, existing chains create roadblocks to profitability as far as incoming investors are concerned. The quick-service restaurant industry is an excellent example of this for potential franchise operators.

Thankfully, the car wash industry has no major chains across the United States. The lack of car wash monopolies means this arena is friendly towards new and experienced investors. Investors can decide to run the car wash in full or turn around and lease the operation to a tenant, falling back on the fee-simple triple-net lease structure.

Examining every aspect of a car wash for sale means getting a better investment, so take your time going through all the listings. Finding the best property may take longer than expected, but you'll get a commercial real estate investment that will add great value to your portfolio.

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