Like any business, a gasoline station can be a good investment. When stations are well located and well-run, they can generate healthy profits. However, the business is also labor intensive, and your ability to operate profitably depends largely on factors -- like road construction or the price of fuel -- that are out of your control.
Nature of the Business
From a financial perspective, gas doesn't matter much at most gas stations. Unless you enjoy a location that lets you charge an above market price for your fuel -- like being right across the street from airport car returns -- gasoline sales are only marginally profitable after credit card fees. As such, most stations make their money on the sales in their convenience stores or through add-ons of additional services, such as car washes.
Analyzing the Numbers
Gas station operations are typically valued relative to their sales. However, when looking at a station's sales, it's important to break them out by category. Some items, like gasoline and lottery tickets, generate lots of sales but very little profit, while other items are the opposite. Furthermore, it can be hard to analyze a station's performance since the large quantity of cash transactions can lead to inaccuracies in the financial records.
Gas Station Risks
Gas station investing carries some real risks. Since most stations are dependent on vehicular traffic to drive their business, any change in traffic patterns can have a disastrous effect on their performance. As such, it's important to gauge what road construction could be coming. In addition, gas stations are exposed to environmental risks. While having double-walled tanks can go a long way to mitigating these issues, it's still important to understand what you're buying. Finally, gas stations are complicated businesses that require hands-on investment. If you aren't in a position to actively manage your investment, you could end up losing some or all of your investment.
Gas Station Real Estate
Instead of buying the actual gas station business, you could also buy the real estate underlying a gas station and become a landlord to an operating business. Doing this makes the investment much more passive for you since you're just the landlord. At the same time, you still have the benefit of owning what should be a good piece of land located on a busy corner. In addition, you may get special depreciation from the Internal Revenue Service and could get growth through increasing rents.
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