Buying a Gas Station With or Without the Real Estate
When a gas station is listed for sale, one of the first questions is what exactly is being sold. In some deals, the buyer acquires the land, building, canopy, tanks and the operating business together. In others, the buyer acquires only the business, its equipment and inventory, and takes over a lease from a landlord or supplier who keeps the property. Buying a gas station with real estate is a fundamentally different transaction from buying the business alone, with different costs, risks, financing and long-term outcomes.
Owners who already operate and want to expand or acquire property may also review our page on gas station and c-store real estate expansion financing.
Buying the Real Estate and the Business
When real estate is included, the buyer owns the land and improvements and operates the business on its own property.
Potential advantages
- No rent and no landlord renewal risk
- Control over improvements, signage and long-term use
- Equity in a real asset that may appreciate
- Flexibility to choose fuel suppliers, subject to any existing agreements
- Options later, such as selling the business while keeping the property
Considerations
- A larger purchase price and down payment
- Responsibility for the property, including tanks and environmental conditions, which may carry significant liability depending on applicable law
- Property taxes, insurance and major repairs
Buying the Business Only (Leasehold)
In a business-only purchase, the buyer acquires the operating business and steps into a lease. The landlord may be an individual investor, a real estate company or a fuel supplier.
Potential advantages
- Lower purchase price and capital requirement
- Less exposure to major property costs, depending on the lease
- Faster entry into ownership
Considerations
- Rent and scheduled increases reduce cash flow
- The remaining lease term and renewal options limit how long the business can operate there
- Leases tied to a supplier may restrict fuel purchasing
- Responsibility for environmental conditions, tank compliance and repairs depends on the lease terms
- The landlord’s consent is usually needed to assign the lease
Environmental Responsibility
Environmental conditions matter in both structures, but responsibility is allocated differently. Property owners may bear responsibility under applicable law, while tenants’ obligations depend heavily on the lease. Buyers should complete environmental review in either case; see our guide to gas station environmental due diligence.
Ground Leases and Sale-Leasebacks
Some stations sit on ground leases, where the operator owns or controls the improvements but leases the land. Others have been through sale-leasebacks, in which a prior owner sold the property to an investor and leased it back. Each arrangement has its own terms and implications for value and financing, and should be reviewed with advisors.
How Structure Affects Value
With real estate, value combines property and business. Without it, value depends on the business’s cash flow after rent and on the lease term. See our guide to gas station valuation.
Financing Each Structure
With real estate
Purchases including real estate may be financed with SBA 7(a) or 504 loans or conventional commercial real estate loans. See our overviews of SBA 504 business real estate loans and conventional real estate loans.
Business only
Business-only purchases are commonly financed with SBA 7(a) or conventional business loans. Lenders generally want the remaining lease term, including renewals, to support the loan term, and may require the landlord’s consent and other lease provisions.
A conventional loan calculator can help compare payment scenarios for each structure. Actual terms depend on the lender, the borrower and the transaction.
Entity and Ownership Structure
Some owners hold the real estate in one entity and the operating business in another. This can separate property and operating liabilities and support future planning, but adds complexity. See our guide to asset vs stock purchases when buying a gas station. Structure decisions should be made with legal and tax advisors.
Choosing the Right Deal
- How much capital you can commit
- How long you plan to operate the station
- Your appetite for property and environmental responsibility
- The lease terms available in a business-only deal
- Your long-term goals for building equity
Know What You Are Buying
Whether you buy the property or only the business, understanding what is included and who is responsible for what is essential to pricing, financing and operating the station successfully.
US Professional Funding works with buyers and established operators on gas station acquisitions with and without real estate. Contact us to discuss your purchase.
