All Topics / Help Needed! / service station good & bad

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  • Profile photo of harpeauharpeau
    Member
    @harpeau
    Join Date: 2005
    Post Count: 10

    Hello all

    we are thinking of buying a service stattion in a large country town (population in excess of 70k). Annual return is about 9% and has lease in place for next 5 years to a national tennant. The facilities are 7 years old

    would appreciate any views regarding the pro’s and con’s of holding a service station as an investment property in these circumstances. aimis to hold for cash flow and long term.

    thanks all
    harp

    Profile photo of Fast LaneFast Lane
    Member
    @fast-lane
    Join Date: 2004
    Post Count: 527

    Hi,

    I’ve read that servos in country towns, even with 70 000 pop, can be a dicey affair, especially with Coles and Woolies aggressive petrol policies pushing out the smaller operators. But you said you’ve got a national tennant so I’d be happier with a BP, Shell, Ampol etc than Mum and Dad and Dave type operation.

    I’m not the cluest about these types of investments but I’d look out (among other things)for;

    – is 9% good enough for this type of investment,
    – will your tenant stay on after the lease, or
    – could you get a new tenant if they moved?
    – could you resell if need be
    – does the site have other value adding uses etc. etc. etc.

    Do your due dilligence and if the numbers stack up you could be sitting on a nice little earner.

    Good Luck…G7

    Profile photo of units4meunits4me
    Member
    @units4me
    Join Date: 2005
    Post Count: 90

    Dont huge amounts of money have to be spent to maintain, replace and/or ultimately remove underground tanks and replace soil?
    You should check this first.Good luck.

    Profile photo of ToolsTools
    Participant
    @tools
    Join Date: 2003
    Post Count: 363

    My concern would be what happens in five years time.Being a specialised type of property,your market is limited.All is well and good if the tenant wants to stay on,but if they don’t and you can’t find another operator then what do you do? The property won’t be worth as much for resale without a tenant,and the costs for redevelopment of the site could be huge.

    Tools

    Profile photo of blossomozblossomoz
    Participant
    @blossomoz
    Join Date: 2004
    Post Count: 9

    I know nothing of servos but would be concerned about the viability. The oil companies have a way of making tenants play ball & the money made is on extras eg milk, ice creams etc & car servicing.

    Can’t you go & ask some of the local servo owners. Make it clear you are looking elsewhere & will not be in competition. Caveat emptor.
    cheers
    blossomoz

    Profile photo of WylieWylie
    Member
    @wylie
    Join Date: 2004
    Post Count: 346

    Property Investor magazine did an in depth analysis on this within the last six months or so. Perhaps you could get hold of a back copy.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    There may also be problems getting finance. There are some special funders out there, but the majority are worried about site contamination etc and won’t touch these.

    9% yield does seem rather low for the risk.

    Terryw
    Discover Home Loans
    North Sydney
    [email protected]

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
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    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of Robbie BRobbie B
    Member
    @robbie-b
    Join Date: 2004
    Post Count: 2,493

    Service stations are a dying business since woolies and coles started discounting. Only a handful are surviving. These are the ones that are offering greater discounts by joining forces with local businesses or who focus on other things like groceries or operating the local post office.

    TMA


    http://www.email4money.info
    Investor Links
    First Home Buyer Website


    Profile photo of harpeauharpeau
    Member
    @harpeau
    Join Date: 2005
    Post Count: 10

    thank u all
    harp

    Profile photo of depreciatordepreciator
    Member
    @depreciator
    Join Date: 2003
    Post Count: 541

    units4me highlighted the issue of the underground tanks. They don’t last forever. Oil companies are keen to not own them because of the potential problems. When they need to be replaced (whether through age or failure), it will be an expensive exercise. I would research this issue pretty thoroughly.
    Scott

    Tax Depreciation Schedules
    Australia wide service
    1300 660033
    [email protected]
    http://www.depreciator.com.au

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