Note that the exact cost of leasing a gas station in the United States will most definitely vary and will depend on factors such as the location of the station, the size of the station, and the terms of the lease.
Most often, the lease will be for a term of 3-5 years and the rent will be dependent on the square footage of the station. Owing to that, it is believed that the average cost to lease a gas station in the United States will fall around $2,500 per month.
Gas station businesses are a very vital component of our modern society, howbeit, note that Gasoline is only one of the numerous items that gas stations offer to travelers. You will find stations that offer food, drinks, and convenience store items.
These businesses tend to cumulatively generate around $89 billion annually through selling products like these. It is now an option to lease a gas station.
The lessee will relish the steady stream of income it brings, and the lessor only works for a limited amount of time. This ensures that the lessee can continue to run the business with minimal initial expenses. Gas station owners in particular jurisdictions are not mandated to obtain a leasing permit, while others are.
Is It Profitable to Lease a Gas Station?
A wide range of factors comes to play when analyzing if it is profitable to lease a gas station. You will want to consider the cost of the agreement, the cost of the gas, the expense that comes with employees, as well as the amount of customer traffic.
Also, note that the location of the gas station will also factor. Have in mind that a gas station in a high-traffic area will most definitely be profitable when put in comparison with those in a low-traffic area.
Owing to that, it is imperative you verify that the gas station is in good condition prior to leasing it. By going through the business’s monthly and yearly financial records, you will get full insight into how profitable it is. As the price of gasoline has risen, so has gas station owners’ profits.
The higher the price of gas, the more money the station can make from gasoline sales. The idea is to offer very competitive gas prices and make money when people buy gas in the store.
Steps to Lease a Gas Station
Table of Content
- Evaluate the current value of your gas station
- Set a Leasing Price
- Reach out to your state or local Department of Revenue
- Verify whether you need a leasing permit to lease your gas station
- Pick a payment option
- Post your leasing ad.
- Put together a leasing contract
- 1. Identify Potential Opportunities
- 2. Negotiate Lease Terms
- 3. Understand the Financial Obligations
- 4. Obtain Licenses and Permits
- 5. Equipment and Inventory
- 6. Marketing and Operations
- 7. Lease Renewal or Exit Strategy
- Is the Gas Station Branded or Unbranded?
- What Will You Inherit?
- Is the Location Ideal?
- Who are the Competitors in the Area?
- What It Includes?
- Are any Restorations or Upgrades Needed?
Evaluate the current value of your gas station
One very important thing is to learn how to charge for the lease. You need to understand your total initial investment, your average annual investments as well as your average annual profit. Have it in mind that your initial investments will encompass the capital used to purchase the land, put up the amenities, and acquire the necessary equipment.
Your annual profit will encompass the revenue you have every month when you subtract your expenses. Also, take into account the location of your gas station. This will give the renter proper insight into how to manage expenses and produce a profit.
Set a Leasing Price
Once it comes to making this decision, it is recommended you extensively consider the value of your business. You have to ensure that the price will be adequate enough to cover any expenses you might still have, and this might be property tax, coupled with a small profit margin.
Note any profit margin is good, even if only 5 percent of the total price. Nevertheless, evaluate the market in your area to decide on the appropriate price to charge. Too much pricing might lower the probability of getting clients.
Reach out to your state or local Department of Revenue
You will find that a good number of states or local governments tend to levy a commercial lease tax on business owners who hand over their property and businesses to other people. For instance, the Grand Canyon State levies this tax on a person leasing business property.
If your gas station will also feature a convenience store, then you will be expected to pay this tax in Arizona. Meanwhile, in the Empire States, persons or businesses that get at least $250,000 in rent per year will have to pay commercial rent tax.
Verify whether you need a leasing permit to lease your gas station
Have it in mind that a good number of states may not mandate gas station owners to obtain a leasing permit, whereas there are states that do. For instance, in the city of Berea, Ohio, business owners are mandated to complete a leasing permit application.
To ensure you understand the requirements, it is recommended you reach out to your state Department of Licensing and Regulation.
Pick a payment option
This is a decision you have to be very careful and considerate when making. You might choose to work with direct deposit, automatic payments, or in person. In-person payments can offer that extra excuse you need to evaluate the status of your gas station and witness whether the renter is doing the right thing or not.
Post your leasing ad.
There are many ways to get the general public informed on your plans to lease out a gas station. Note that you can choose to leverage the expertise of a leasing company, a leasing agent, or independently.
Howbeit, if you intend to post an ad without professional help, you will have to do so by utilizing online services coupled with posting ads in your local and state newspapers. You can as well pay a fee for any of these options. Pick the one that guarantees the most viewers for the lowest price.
Put together a leasing contract
It is very important that you leverage the expertise of a contract attorney to help you with the legal aspects of the leasing process. Also, understand if you need a deposit for closing the deal with your client.
Deposits, according to experts, serve as a failsafe for risks in a situation where the client chooses not to pay what he owes or in case he, in any way, causes damage to the property. Also decide on the length of the contract, coupled with the terms and conditions under which the contract will have to be terminated.
How Does Leasing a Gas Station Work?
While the processes might differ, below is a detailed explanation of how leasing a Gas station works in the United States;
1. Identify Potential Opportunities
This is the very first step in the process. You can choose to leverage the expertise of a leasing company, a leasing agent, or independently.
2. Negotiate Lease Terms
After you must have located the ideal gas station, you need to negotiate the terms of the lease. You have to get a comprehensive view of the lease duration, rental price, the tasks expected from both parties, as well as every other extra terms or conditions.
3. Understand the Financial Obligations
As long as it has to do with leasing a gas station, it is imperative to note that there are various financial obligations expected from both parties. For the leaser, this might encompass paying monthly rent, utility bills, taxes, and insurance, coupled with maybe a portion of the gas station profits.
4. Obtain Licenses and Permits
There are necessary authorizations and licenses you need to start and operate a Gas station regardless of your location in the United States. As such, it is imperative you take your time to make the necessary research. You might be expected to obtain a business license, permits for fuel sales, environmental permits, health and safety certifications, and more.
5. Equipment and Inventory
Although this will vary, but note that in most situations you will have to obtain the necessary equipment and supplies needed to operate a gas station. This might most often include fuel pumps, payment systems, safety equipment, convenience store items, and just about any products or services provided at the station.
6. Marketing and Operations
The primary job of a lessee is to coordinate the everyday activities or operations of the gas station. This will most often encompass the management of fuel deliveries, coordinating inventory, recruiting and training staff (if necessary), and promoting the business, coupled with ensuring that clients will always return.
7. Lease Renewal or Exit Strategy
Most often, the lease will be for a term of 3-5 years. However, note that toward the end of the lease term, you will have to reach out to the landlord or owner especially if you are looking to continue operating the gas station. If you are not looking to continue, you can as well choose to exit the business and hand back the property to the owner.
Best Questions to Ask When Leasing a Gas Station
Truth be told, buying or leasing a gas station can be a lucrative investment. Nevertheless, there are questions you might want to ask to ensure that you are making the right decisions.
Is the Gas Station Branded or Unbranded?
This is without doubt the very first question to ask. A branded station will come with relationship and corporate benefits.
Most often, the benefits include training, support, and brand recognition. You will also be expected to adhere to their rules to maintain their brand standards. Meanwhile, an unbranded station is meant to let you have complete control and make a name for your station.
What Will You Inherit?
Is the station profitable? It is recommended you leverage the expertise of an accountant who would go through the accounts and records. Don’t also forget to verify the customer count. In addition, see if the supply contract is transferable.
Peruse through the terms of the contract as well as the facilities and equipment, construction, and look for any other issues.
Is the Location Ideal?
Gas station businesses are all about the location just as it is with most businesses. As such, ask if it is in a well-trafficked location.
Who are the Competitors in the Area?
You have to understand that too much competition will in many ways impact your business, but no competition might entail that the location is not a viable one.
What It Includes?
It is also pertinent to understand all the details of what it includes. Are you leasing the station only or the land as well? Does it contains a car wash or do they have food shops?
Are any Restorations or Upgrades Needed?
This is another important question to ask. There are numerous considerations and components to analyze when looking to buy or lease a gas station. Although a good number of these considerations will be non-negotiable, have it in mind that it is possible to restore or upgrade a gas station without spending the entire budget.
Gas station businesses are a very vital component of our modern society. Howbeit, note that Gasoline is only one of the numerous items that gas stations tend to offer to travelers. Note that the exact cost of leasing a gas station in the United States will most definitely vary and will depend on factors such as the location of the station, the size of the station, and the terms of the lease.