If you’re longing to own your own gas station and convenience store, there are several factors to examine before committing to a purchase or lease.
When you want to buy a business, you need “key money” or “good will money” to do so. You might need, say, $100,000. But the seller may also require a security deposit. You might be buying the business, but someone else may still own the property, complicating matters.
Also factor in the cost of the inventory. If a store has $20,000 in groceries, you’ll need to be prepared to pay for that, too. Also don’t forget the inventory below the ground — the fuel. That must be included in the final purchase price.
Often, as a buyer, you’re inheriting another deal or working with a jobber and leasing out one of its stores. Look at the terms of the fuel deal and the lease. If it’s a triple net lease, which is often seen in the fuel business, the lessee taking over the business is responsible for the property as if they owned it. In other words, if there’s an issue with hardware underground, like leaky pipes, the person leasing the business would have to fix it.
In addition to maintenance, under a triple net lease, the tenant would also be required to pay real estate taxes and building insurance.
Determine if the property is free of a fuel supply contract, or find out if you have to assume it. It may be if you’re just buying the business and not the property, you will assume the rights and obligations of the fuel supply agreement while the property owner remains the guarantor to the contract. Sometimes, before a deal is made with the prospective business owner, the consent of the landlord may be sought.
One of the most important questions, of course, is whether you, as a buyer, can get financing. Consider what the mortgage payment will be and whether you want to run the business yourself — a surer path to success — or turn around and lease it. Understand what other properties are selling for, and don’t overpay in your marketplace.
Pair up with an experienced jobber or petroleum marketer like Southeast Petro to land the best deal.
