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Am I Paying Too Much Rent For My Auto Repair Shop I am About To Buy?

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Comments & Replies: 3     Views: 5267     Posted By: Business Broker  



Topics: Buying A Business     Tags: buying a business, landlords


Contributor: Business Broker: LA County Area

I get the question all the time from automotive business owners and potential buyers of auto related businesses.

Am I paying too much on rent for my shop? Successful operators wonder if they’d be better off buying the property rather than renting. So here’s a number to consider. It’s the latest “rent factor” for automotive repair shops. The nationwide average rent factor is currently 12-13%. This is for full-service, multi-bay repair shops, not smog, lube, brake and specialties.

That means the typical shop spends 12-13% of annual gross revenues on rent. So an enterprise that grosses $500K annually is averaging $60,000-$65,000 on rent, or $5,000 to $5,416 per month. That includes base rent plus any common area maintenance (CAM) charges and other markups. Automotive owners engaging in a rent vs. own analysis need to consider many different tax and risk factors in order to reach a conclusion that fits their needs. So if you’re spending substantially less than 12-13% on rent, enjoy.


Craig makes a very good point. One easy-to-use metric in determining the relative value of "drive-by" exposure is to calculate how closely the building graphics compare to a similarly sized and positioned billboard in the same vicinity. And, the building exposure is significantly more valuable than a billboard--the building concretely displays the business substance behind the advertising.

So, simply determine the comparable monthly cost of that theoretical billboard and deduct it from the monthly rent for the building. THEN compare that resulting net rent with other potential locations that may not have the same exposure.

Obviously, you can use this process in reverse and evaluate a new business location in terms of the increased "drive by" exposure it may provide the business.


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