another Mat for Sale Question?

[pheedog]

Hi,
and thanks for everyone's help, this board has been great! I'm looking at a Small(probably 1000-1200 sqft) mat (with new 3yr old equipment and business). Here are some monthly specs:
rent $1660
water 700
PGe 1025
open close cleaning 350
soap 30
insurance 245
garbage 58
property tax 234
repairs 85
telephone 35
Miscl 50
total $4,496/month
avg monthly income $13,668.00
avg Net $9,172
sale price $552,000

Question is can this be possible having such a low utility bill(with new energy saving equipment?) and small store(vend prices are higher at $3 load versus $2.50 at rundown store a few blocks away) and if so, would this be an exceptable buy for say $450k, 20% down and a SBA loan?
Thanks,
Phil

[MSKLAUNDRY.]

Everything looked good until I got to the price. They have got to be smoking something.
You didn't mention the type of equipment and how many there are. No employees? The utilities don't add up, way too low especially for California. Rents is fair. It sounds like from your post that it is unattended. So you are telling me that the small place makes that amount of money, coin with no dropoff, and with that small of a utility bill. Something doesn't add up. Either the utilities are higher, much higher or the gross income is lower, much lower. Either way 500+k is insane. You could build 2 stores that size for that price. Really

But lets say that all the #'s are good then perhaps 250 to 300k maybe.

[ajay]

a quick rough estimate without calculators is


1) water and sewer should be at 10% of gross.
2) electric and gas should be at 15%

total combined at 25%.


$700 monthly water bill should have $7000 monthly gross.

PGE?? if this is electric and gas $1025 - gross should be at $6833

or

1025+700 = 1725 * 4 = 6900.

Either way you look at it the gross should be around $7000. The Gross income is definately overstated.

The sale price is way of the charts as well. For the square footage, they might've spent at best $120k to $180k dollars to build the store.

The sale price should be around $100K for the volume calculated above.

[pheedog]

I was thinking all the same comments! But if does add up(not sure if possible, that's why I'm asking people here). What would it be worth? I was thinking of offering $400k, contingent upon revenue/expense verification etc. Coin op's seem to sell for at least 5x's net in California.
P

[mike]

Did you read MSKlaundry's (Marc) answer ?

Why would you buy something that you can build for half the price ?

[TotoMongo]

Pheedog, I am finding there are no concrete rules in this business. When I first started looking for a mat in NYC, I was told that they sold for a multiple of 3 to 3.5 x earnings. I was told that by business brokers.

Based on the advice given to me at this forum, I decided to dump the brokers and look on my own. Surprise, surprise! What did I find? A large percentage of stores I entered were for sale (that should tell you something about this business). And, they were for sale for less than 3x net.

There is a reason the store is for sale. You will rarely know what that reason is. Keep in mind that the longer a store goes without selling at a certain price the more it isnt worth that price.

MSK said it best: you could build two very nice stores for that price.

Toto

[Jim]

You would be nuts to offer that much money....

Another question arises....Why after 3 years is it being sold...most likely they are not making money....If they were making money and it is unattended life would be grand...

One thing I do is reverse the situation...If I owned it and it was doing that well would I sell it ?......of course not...would you?

Something is wrong here...do your due diligence and find out..

[Fred50]

Originally posted by Jim
You would be nuts to offer that much money....

Another question arises....Why after 3 years is it being sold...most likely they are not making money....If they were making money and it is unattended life would be grand...

One thing I do is reverse the situation...If I owned it and it was doing that well would I sell it ?......of course not...would you?

Something is wrong here...do your due diligence and find out..

Right on Jim, except for one thing. If it sounds fishy, just walk. Don't waste your time with the due diligence. Save your time and energy for a better sounding deal!

[pete f]

This is why commenting on mats for sale does not work. I agree, you could probably build one, not 2, for that kind of money. This assumes high impact fee. We hear of 75 cent top loads, so we know water/sewer is cheap in CA. Not knowing your area, what comp or possible places to try and duplicate this mat, or the possiblility of not being able to put another in, impact fees, population density, etc, makes a guestimate hard. This appears to near 5 times net, a ratio which is not that bad with newer equipment. $400-500k for a used l'mat? I think way to much, but then I think the waterfront house down the street from me was to high a couple years ago for $325k, now it is $625k. You need to search out the local market and try to find the best deal.

About 20% SBA... no way, unless you are putting up your house AND the purchase price includes real estate. Other than that, you are looking at a 7 year note around 7%..do the math. I like 50% down gives some breathing room.