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I bought a car wash at 22 years old. It basically runs itself — and I make $5,500 in passive income each month.

Arial view of a carwashHannah Ingram’s Tennessee car wash was already profitable before she purchased it.

Hannah Ingram

  • Hannah Ingram purchased a coin-operated car wash in 2021 to create passive income. 
  • She made a profit in her very first month after purchasing it; the customer base was already built.
  • She has since put in thousands of dollars to improve the facility but says the investments are paying off. 

This as-told-to essay is based on a conversation with Hannah  Ingram, a 23-year-old car wash owner based in Tennessee. It has been edited for length and clarity.

In high school, I read a book by Robert Kiyosaki called “Rich Dad Poor Dad,” and it talked about how real estate created millionaires in the US. At just 17, I knew that I wanted to invest in real estate after finishing that book. I’ve been involved with real estate ever since.

I decided to buy a coin-operated  car wash in Tennessee years later because I was looking for a passive income stream. My goal is to have 10 streams of passive income before I turn 25 so that I can make money while I’m sleeping, at the gym, or with my friends. The car wash is my first stream.

I bought it in April 2021 after I saw a listing for $140,000. Now makes me about $5,500 a month in profit, and it mostly runs itself.

Here’s how I did it.

First, find an opportunity

I have three strategies I use to find properties that could be potential sources of passive income.

  1. Use a commercial search engine like loopnet.com to find a commercial property. 
  2. Cold-call business owners and see if they’re interested in selling, or even write a letter and slide it under their door. 
  3. Drive around and take notice of properties that may seem a little rundown. You may even find one that recently closed down, and you can call the owners and see if they’ll sell. 

The car wash I bought was already running and profitable when I bought it. Before I made the purchase, I asked the owners to send over their financial reports, and I looked at their expenses and tried to see what I could cut out. For example, they were paying a few hundred dollars a month for a radio advertisement that I knew I could lose and replace with social media marketing. Doing those calculations, I could see a clear way forward where I’d be able to stay in the green, and that gave me confidence in the investment. 

Hannah IngramIngram plans to find more passive income streams — at least 10 before she is 25 years old.

Hannah Ingram

To finance my car wash, I had to get creative

To pay for the purchase, I used what I call creative financing — or what is known in real estate as “owner financing” or “seller financing.”

Things get complicated when you’re trying to get a commercial loan at my age. The bank lenders wanted to see a very long credit history and wanted me to put 25% down. I didn’t have that much saved or any credit built up.

The people I bought it from had already gone to their bank, gotten a loan, put the down payment down, and taken the subsequent credit hit — in other words, they’d already done all the hard work.

But usually an owner doesn’t want to hold onto a commercial property forever. I offered to take over the loan that the owners already had with their bank. Banks like to see several months of steady income coming in before they’ll give a loan, so by taking over their loan payment for maybe two years, I’m able to show the bank, “Hey, my car wash is making $5,500 a month.” Then the bank will look at that, in addition to the income I already have in real estate, and from there, I’ll be able to move the loan into my name and actually get it financed myself. 

To arrange a purchase this way, you need an attorney to work on the agreement and you can either pay the owners directly or pay the bank. Most owners prefer to be paid directly so they can make sure you don’t default on the payments. 

My number one tip when negotiating with an owner is to make sure the deal you’re offering them feels like a win-win. In this case, I did some calculations and was able to show them that their capital gains tax would be a lot less if I bought it from them. I could also take the car wash off their hands in less than a month, so it was an easy and quick process for them to sell. 

Because I’m a realtor and see agreements like this all the time, I wasn’t nervous about the arrangement. 

I had to put a lot of money into the car wash at the start

First, I had to upgrade a bunch of equipment — I replaced the foam brushes, the vacuum hoses, the stickers that indicate the soap levels, and a few other items. I also put up new signs and made the car wash look better overall. 

In the beginning, I put around $500 into the business. As of today, I’ve put in another $7,000 total on things like machines that accept credit cards — which have been a total game changer, because many other coin-operated car washes don’t have those. I also added lights and fixed some cosmetic things. 

My water bill usually costs between $350 and $500 a month. But I’m happy when it’s high — it means I’ve had a lot of business. Water used to cost me a lot more, but I’ve made efforts to become more efficient with water usage. I also pay for grass-cutting in the months I need it, and I pay a friend to manage some of the smaller daily duties I used to take on.

Hannah IngramIngram recommends “driving for dollars.”

Hannah Ingram

I made a profit the very first month

Before I bought this car wash, I made sure it was already profitable by looking through the owners’ financial records. I tell people to buy a car wash, not build one,  because odds are good that an existing car wash already has a healthy amount of business. I made money right from the start because I didn’t need to find new customers. 

Now I make about $5,500 a month in profit, depending on the month. Spring and fall are the best months for business, and winter is the slowest.

For the most part, the car wash basically runs itself

Before I hired someone to handle some of the responsibilities, I used to spend a half hour a day there at most. Some days I’d simply take out the trash, and other days I’d just check on things. I try to do preventative maintenance like oiling my machines to prevent having to repair things later. It can be a dirty job, so I don’t recommend buying a car wash if you aren’t willing to basically act as a janitor sometimes. 

These days, I basically just stop by to mix the soap and take care of the money. I’ve made changes like using a higher-quality soap and creating an Instagram account. Otherwise, it’s entirely self-run — and I still make thousands a month.

Read the original article on Business Insider
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