I don’t know about you, but I think about passive income opportunities every day. No matter where I am or what I’m doing, I think, “How passive is the income that’s generated in this business?” Sometimes, it’s not at all, and other times, it’s nearly 100% passive. The concept just fascinates me – I think that I’m obsessed with creating a passive income. That’s why I thought of passive income with a car wash.
Cleaning That Car of Yours
I live in Michigan and it usually gets pretty chilly here in the winter. The snow starts flying in November and doesn’t go away completely until March or April (this year is an exception, but I’m sure we’ll get loaded up with snow pretty soon). And, since it is so cold, the only way to get rid of the snow and ice is with salt.
The salt typically does a great job melting away the snow, but it’s absolutely terrible for your automobile. If you avoid getting your car washed, that salt will start to break down the structure of your metallic frame and body. Then before you know it, your car starts turning into a rust-bucket! Then you step on that salt and bring it onto your floorboard. Without the proper floor mats, your floorboard will start to rip apart. Needless to say, where I’m from, car washes are pretty important.
Benefits of a Car Wash
Car washes are typically very passive. Once the machine is set up, all you need is a single employee to receive the payments and begin the wash (and actually, I can see this step getting automated soon as well). If your machines are built properly, there won’t be a huge amount of repairs, and your expenses are pretty low (water, electricity, soap, and…that’s about it)! This sounds like a money-making machine!
Initial Cost of a Car Wash
Initially, I started researching what it took to build a brand new car wash, and honestly, I don’t think it’s worth it. You’ll first need to find that perfect plot of land, then check the zoning, then you need to get a building permit, hire an engineer to make some drawings, contract a company to build the car wash, and then there’s absolutely no guarantee that it will make money because no one has tried to run a car wash in that location before!
The typical initial expense of a new wash can be anywhere from $400,000 to 2,000,000, depending on the number of automatic washes, and the number of bays if you’re running a self-serve wash.
If I were to invest in making a passive income from a car wash, I would start looking at the existing washes that are for sale. Then I know that the zoning is correct, I don’t need to hire an engineer or a contractor, and the best part is, I can look at the history of the business! The owner can show me the average washes per day, week, month, and the year. And, I can get a good look at the expenses! Be weary of the previous owners income and reporting however, this is a cash heavy business and it would be very easy to skew your numbers. You need to hire a CPA and sit down and go through all of the financials piece by piece so you can make an informed decision and also to start your business on the correct foot.
I looked into the average initial cost of the washes in my area and they ranged between $259,000 and $1,200,000.
Recurring Costs of a Car Wash
After a little research, I have found that the average reoccurring expense is provided per car that goes through the wash – it’s typically $0.55 per car. This includes things like the water, soap, and electricity like I mentioned above, but it also takes into consideration the air compressors, the bay cleaning, and preventative maintenance.
If you really want to know how to start a car wash from the ground up here is a book on amazon which would be perfect:Car Wash Business 101: The #1 Car Wash Start-up Guide
How Many Cars For a Profit?
In order to create a profitable passive income with a car wash, about how many cars do you think you’ll need to pass through your wash per day?
Let’s say you have a $500,000 loan on your business which costs $4,683 per month and you run the business by yourself. For each wash, you charge $7, how many cars do you need to run through your wash to make it profitable passive income with a car wash (wow, feels like we’re in algebra all over again huh??)?
To break even in the car-wash business, you would need to have 727 cars go through your wash each month. That sounds like a lot at first, but when you break it down, that’s only one car per hour!
What if you could run an average of 4 cars through your wash per hour? You’d bring in a profit of $18,576 per month! That’s $223,000 per year! If you find the right location, this venture could easily be one of the best passive income sources out there!
This may sound great and all but there are pitfalls to the business as well:
- You are at the mercy of the water company. Remember water companies don’t look at individual businesses when they create their rates, they look at an entire city. If the water company passes a bill to raise their rates over the next 3 years, your operating expenses will immediately raise and your passive income from a car wash will lower
- Repairs and replacements of equipment can put a huge dent in the net profit for the business for the year. Think if you only have one car wash creating a passive income. You’re business is closed until you can get it repaired or worst case scenario which could close your business for one to two months.
- Who and how is going to manage your passive income from the car wash? Are you going to go to the business every day and pick up the coins or dollar bills, count them, and deposit them? Will you hire someone to actually pick everything up for you? Think about how long you would have to count money every single day you had to make a deposit? $5,000 doesn’t seem like a lot until you are counting it in quarters. Will you start a system which accepts credit cards and then you now have a service charge every time a card is used.