What is the deal with owning a petrol station?
I have no idea at all and i’m strugling to find any information about owning one???
Someone was telling me about having to change the tanks (big under ground suckers) every 6 years or so??? does the owner foot this bill??? or what?
Does anyone have a clue?
PS sorry if it’s come up before.
cheersSteve McKnightKeymaster@stevemcknightJoin Date: 2001Post Count: 1,729
All I know is that cleaning up an old site can be very expensive and time consuming. The petrol seeps from the tanks and contaminates the soil and ground water… very costly to fix.
Also, in recent times there has been very little margin in petrol. I suspect that there is much higher margin selling the chips and coke than there is in selling fuel.
So… the question is, what are you buying? The business (leasehold) or the freehold (property)?
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Success comes from doing things differentlydepreciatorMember@depreciatorJoin Date: 2003Post Count: 541
I think those tanks have an effective life of around 10 years. Some would last longer, some less.
And as Steve mentioned, if there is a problem with a tank it can cost a fortune to rectify.
That’s why nobody wants to own them. In many cases the tanks are paid for by the oil companies. I’m just speculating here, but I’d say the arrangement would similar to that in many pubs where the beer lines etc are paid for by the breweries. Or in some cafes where the coffee supplier provides the machine.
ScottMortgage HunterParticipant@mortgage-hunterJoin Date: 2003Post Count: 3,781
Some lenders wont touch ex petrol tank sites because of the environmental bill associated with them.
0425 228 985
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No it’s the freehold, i wouldn’t go near it otherwise…
Returns are good, and lease is long… but i fear that a “clean up” is imminent. (maybe the reason for sale…)
If the tanks “only” had to be replaced to prevent problems, what do you think this would cost? I still can not find any information on the net about this sort of thing…
CheersdepreciatorMember@depreciatorJoin Date: 2003Post Count: 541
No idea what the cost would be to replace underground tanks. Obviously much would depend on their size and position. I guess first thing to find out would be who owns them. I’m sure with that sort of thing there would have to be records kept of when they were installed, too. I wonder whether there would also had to have been regular inspections? I’d be surprised if the EPA (or somebody) didn’t require that.
There’s a QS I know in Melbourne who helps us out with some of our commercial depreciation work (we specialise in residential). He knows a fair bit about petrol stations and tanks. He would be worth talking to – Harry Hird 03 9598 9111. Harry might even have the name of a company that replaces tanks.
yeah…. more research [wacko]
depreciator – Thanks for that number, will try and figure this one out. I’ll let you all know how i get on..
I own a few petrol stations in NZ and have worked for Caltex Oil in Australia.
The steel underground tanks can leak over a period of time but there lifespan is dependent on the water tables in the area.
These days the u/g tanks are fibreglass strapped to a concrete slab and with an indefinite lifespan.
In the good old days the oil companies were responsible for the tanks, and any environmental problems. It is usually “the polluter” who carries the burden and invariably the oil company. Times have changed though.
Tanks are monitored on a daily basis. Operators must do fuel reconciliations to ensure there is no loss. Any leaks would immediately be detected. If a leak is suspected they may do a pressure test and soil tests. The commercial viability of the site will determine whether or not the tanks will get replaced or not.
If you check out the lease it will probably mention who owns the tanks. Importantly you need to know the litreage of fuel the site is doing. This will give you an indication if the oil companies will support the site or not.
Fuel is a commodity and is often sold as a “loss leader”, that is they don’t expect to make a lot of money purely from the fuel sales, they attempt drag you in off the street and sell you a good old Aussie pie and a can of coke instead.
Hope this information is of some help. If you don’t have any luck give me a yell I might be able to sell you one of mine.
(thanks Jeff for your input)
This is what i have found out from the agent.
“The tanks and bousers belong to the Caltex Distributors (Purtills) and are only seven years old.”
the owners of the freehold are responceable for all the usual, structure of buildings etc,
“the The signage is a joint responsibility of the lessee, distributor and Caltex”
So… this being the case, why are people stearing away from petrol stations? Tanks don’t seem to be a problem which was the main consern, so buy buy buy??? i think?
How are your stations working for you? What can i expect if going ahead on this track? any info will be great.
All my sites have been fine except one. The tanks were lifted by Mobil but I managed to keep the mechanic on as a tenant and still get a reasonable income from it. The failure of this site was largely due to future roading changes and Mobil could not determine if they would have enough time to get a return on their investment.
Generally service stations are good long term leases because of the substantial investment under the ground. You don’t spend a few hundred thousand dollars and expect to move in a couple of years.
Most people do not understand the fuel game so are hesitant about petrol stations. Also talk of the supermarkets selling fuel etc etc.
Check out the competition in the area and see if you can find out if there are any major developments on the cards. Local knowledge will help you here.
You can email me on [email protected]
Catch you later
Thanks Jeff some handy info
I’m not in a spot where i can purchase this property at this moment. However I know that the vendors are super keen to sell, and have dropped the price. making in VERY +ive.
Would any one like to know where it is?
CheersmelbearMember@melbearJoin Date: 2003Post Count: 2,429
Steve, what’s the asking price and return?
Of course I’m interested. Even just for the sake of viewing figures and making comparisons.
OK guys here it is… from the addvert;
“This incredible investment property with residence is securely leased on a 5 year + 10 year lease returning 12.5% gross and 9.67% net. Positively geared property is rare indeed .. “
Asking price is $200 000 but in my last contact with the agent it was made clear that the vendors have told him to accept below the asking price!!![biggrin]
What do you think?BalliezParticipant@balliezJoin Date: 2003Post Count: 21
As I work at a Petrol Station atm as a casual job i can tell you, if your buying it thinking your going to get some money out of fuel..well your wrong..as most others have been saying selling Pies and coke is the way to go..also having to manage a bussiness that is going to be robbed weekly and maybe 24/7 (if that is your trading hours) i would also think about these things before venturing that way…They look like a good investment as long as you don’t mind a phone call now and then that either a drunk/normal¿ person has run into your fuel pump because they ” misjudged” the turn…(we have had this happen 3 times in the last 4 months…[withstupid]
The weak will feed off of the strong until they are strong enough to be fed off of…melbearMember@melbearJoin Date: 2003Post Count: 2,429
Balliez, the property for sale is the freehold, rather than the business – so the landlord doesn’t really have to worry about the operating costs of the petrol station.
Steve, $200K to me sounds like a really cheap price – especially for petrol station and residence!!! What’s the population?
MelGrregMember@grregJoin Date: 2003Post Count: 121
As mentioned the margins on fuel are pretty skinny so much so that a friend of mine worked on a report for Shell back in 2002. They were looking at viability of continuing in the retail fuel market, and even considering exiting the Australian market if they could not make it work.
Since then they have made some big moves rather than exit this market. They have moved staff from their signature building in Spring St to Glenferrie Rd in Hawthorn, teamed up with Coles and started opening Shell Select Convenience stores which do not sell petrol at all.
Useless info but maybe a little surprising. [suave2]kay henryMember@kay-henryJoin Date: 2003Post Count: 2,737
Yep, 200k for PS plus residence… sounds like the kind of price of a bypass place. steve, check out plans for the town. Think about places like bookham- tiny little place on the princes highway that got a bypass, everything closed down- including the servo/mixed business. Now it’s lucky to get a “stop revive survive” event at the local town hall on major public holidays. I am sure you can get 10% pozz geared places there too…
kay henryFFCommMember@ffcommJoin Date: 2004Post Count: 627
I know when Shell signed the Coles deal the Shell execs were popping champange corks all over the place. Apparently Coles is losing something like a 1c per litre and is paying $20,000 a month as a lease payment (I don’t know though if Shell Servos have to buy product from Coles or if Coles actully runs the business, or takes nearly all of the profit.
I think Shell would be happy with their decisiion to stay in Aust.!
Check out: http://www.brw.com.au/Edition.aspx?ediid=1074
Or the Business Review Weekly, 1st of July Edition.
Req Reading if your a coles shareholder! Ouch!
Don’t base all your opinions of the fuel industry on retail margins alone. Remember that most of the major oil companies are involved in exploration, wholesale and retail. Each area commands its own margin. With oil prices at a high most of these companies are prepared to suffer losses in the retail area because they’re creaming it on the value of their reserves. (Except maybe Shell who have been overstating their reserves)
Aside from this a petrol station needs to do a certain number of litres throughput to be viable. These days 2 million litres per annum is a small site but it does depend on what other profit centres are available at the site. eg workshop, diner, liquor etc etc.
Regarding the move into Supermarkets such as Coles. In most cases you find the discount being offered on fuel is only if you spend so much on your grocery bill. As I explained in an earlier post, the fuel is a commodity and is often used as a “loss leader” to attract customers in the door. Profits are made in other areas, they look at the $$$ profit per customer for all the goods purchased rather than $$$ profit per item purchased.
A site for $200k sounds extraordinarily small. Check out litreage, land size (for possible development), local population, roading and town planning – better still, ask the agent to.
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