The Evolution of Automated Tunnel Car Washes: A Lucrative Investment Option

Since around 2012, Value-Add Multifamily investments have delivered blockbuster returns to investors. However, in recent years, the sector has faced challenges such as high costs of capital, compressed cap rates, and rising operating expenses.

As a result, Stryker has been seeking alternative investments that offer both cash flow and appreciation, leading us to the professionally managed Automated Tunnel Car Wash industry.

One company that caught our attention is Mister Car Wash, with an impressive 344 locations across 21 states. Their 2021 IPO at a valuation of $5 billion, approximately $15 million per location, has piqued our interest.

Interestingly, it only costs $8 million to build and operate a brand new car wash, presenting a unique opportunity for healthy margins and serious consideration.

Exploring the Potential of Car Wash Investments: Cash Flow and Appreciation

The emergence of Millennials and Gen Z, who are driving cars and embracing monthly subscription models for unlimited car washes, has transformed the industry. This shift has provided car wash companies with predictable revenues, making them attractive to private equity investors seeking cash flow and appreciation.

Here are some compelling reasons why investors should consider adding car wash development to their real estate diversification portfolio:

1. Quicker Development: It takes about 9 to 12 months to build the car wash and make it operational.
2. Driving Revenue with Subscriptions: Well-positioned and efficiently managed car washes have the capacity to generate substantial income, influenced by factors such as location, pricing structure, and customer volume.
3. Cash flow: Due to the ability to build a car wash at a higher car wash in a short development time frame, will result in a strong cash flow to the investors.
4. Recurring Business Engine: Once customers discover a car wash they like, they tend to become regular patrons, establishing a loyal customer base that ensures consistent revenue streams.
5. Streamlined Operations: Automated or semi-automated car washes offer a simplified operational framework, with straightforward maintenance and management requirements after the initial setup.
6. Labor Efficiency in the Fast Lane: Car washes, especially those with automated systems, benefit from lower labor costs compared to many other industries, contributing to their potential profitability.
7. Accelerating Growth Opportunities: A successful car wash business model can be replicated across multiple locations, opening doors to increased revenue and expansion possibilities.
8. Weatherproof Profits: While adverse weather conditions may temporarily impact business, the year-round need for car washing remains constant. In fact, certain weather events, such as winter road salt, can even boost demand for car wash services.
9. Community Engagement Drive: A well-managed local car wash becomes an integral part of the community, contributing positively and earning a stellar reputation. This community presence further strengthens its customer base.
10. Tax Benefits on the Horizon: Car wash investments offer potential tax advantages, including bonus depreciation and accelerated bonus depreciation, which can be advantageous for savvy investors.
11. Real Estate Acceleration: Car washes, when owned as property assets, have the potential to appreciate in value over time, presenting opportunities for increased future income. This real estate aspect adds another layer of to car wash ventures.

Investing in the development of car washes as part of a real estate diversification portfolio can provide investors with a unique combination of cash flow, scalability, and potential appreciation. With the evolving preferences of younger generations and the profitability of well-managed car wash businesses, this industry presents an exciting opportunity for investors seeking a new avenue for growth.

So, buckle up and consider adding automated tunnel car washes to your investment journey. It’s time to ride the wave of this evolving industry and enjoy the rewards it offers.

Meet the Author - Venkat Avasarala

Meet the Author - Venkat Avasarala

Founder of Stryker Properties

With over $800 million in assets under management and 2500 units in the development pipeline across Dallas, Austin, Phoenix, and Denver, Venkat specializes in multifamily investments, commercial real estate development, and joint ventures. Stryker Properties is focused on ground up development of multifamily (apartments) and land development providing consistent investment opportunities for investors to build passive income.

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