Buying a Gas Station – Location is Everything!

In the real estate market, we’re usually told that location is everything when it comes to business. When considering buying this kind of business, you have to understand the factors that make a location profitable for a gas station or convenience store. Is this adjacent to a busy highway, next to a mall or somewhere else?

When assessing the best location for you, remember that you already have part of the answer before you even start. Unless you are relocating, you will need to find the best station close to your existing home or within a short commuting distance. Don’t be tempted to think that you can be an “absentee owner,” as gas stations and convenience stores are not ideally suited for this approach.

To make sure that you have a successful business on your hands, you need to be near to the premises to keep a good eye on what is happening. Profits are likely to fall if the business does not have a good manager and you need to be a hands on operator to multiply your odds of success. If your station is not operating under top conditions don’t be surprised if you do not get the results that you desire.

Important considerations when scouting for a location:

Everybody’s definition of the perfect location for a gas station would be along side a major interstate with quick on and off ramp access. Such a location could only be a cash cow for its owners. While this is largely true, bear in mind that the major oil companies are aware of this as well and either own or lease the majority of prime locations already. It’s not impossible, but it will be very difficult to find and buy an independent station here.

While a mall or a shopping center is theoretically a prime location, there are drawbacks. A large volume of business is certainly possible, but by and large the land adjacent to the mall belongs to the company that owns the mall and is leased under strict conditions. Plus, 24/7 access may not be convenient. The company will undoubtedly have a clause within the contract that allows them to expand and replace your station with a different kind of tenant, such as a chain restaurant. Note also that if a big box super store arrives, they may well have their own gasoline station and this can really hurt your profits. If you think that this location is just right, it’s likely that other motivated entrepreneurs think so too, and they may try to move their station into the location as well.

If you’re willing to exploit the “convenience store” nature of the business, you might want to look at inner-city or other “diamond in the rough” locations. In suburban neighborhoods you can establish a great business by tapping into the need for people to pop in and buy items on their way home from work, for example. A smaller gas station and convenience store in such a location can be an excellent choice as this type of business almost never happens in a station next to a major highway or at a mall. The chances are that a station in one of these neighborhoods will be priced more competitively, if you are starting out on a tight budget.

When selecting the location consider whether the general area is growing. If you can see new hospitals or new businesses opening up, it is a positive sign.

Be sure that you’re buying into the best area possible, as your gas station or convenience store will only be profitable if you’ve chosen the right location.