If you are in the market for your next or first triple net (NNN) lease investment, you may not have considered a gas station for sale. Gas station businesses with attached convenience stores are easy-to-own, long-term investments that provide stable income for 15 to 20 years. These NNN lease properties are also a strong choice for 1031 exchanges.
So, what makes buying a gas station and convenience store such a great opportunity? Read on to learn more.
Why Buy a Gas Station Business for Sale?
As commercial real estate buyers look for new investment opportunities, gas station businesses and convenience stores are a wise choice. Gas stations and c-stores are essential in nature, providing much-needed products and services to everyone in any economy, and as the pandemic has proven, in other unforeseen crises. They are also internet resistant.
In fact, many gas station and convenience store brands have evolved with consumer and market demands, implementing omnichannel shopping capabilities, digital rewards programs, and delivery, and have watched their revenues grow as a result. This adaptability instills confidence in the dependability of a gas station and c-store investment.
“U.S. convenience stores, which sell an estimated 80 percent of the fuel purchased in the country, saw revenues per store per month increase 32 percent in the first quarter of 2022.” — NielsenIQ & NACS Global Convenience Store Report
Other reasons to buy a gas station for sale include:
- Location and real estate value
- Accelerated depreciation benefits
- Tenant creditworthiness
- Lease type and term
- 1031 exchange viability
1. Gas Station Location
Location is one of the three main factors that determine the strength of a NNN investment. In the case of gas stations and convenience stores, the real estate on which they sit is usually valuable — typically in a prime location with high traffic counts and easy accessibility near other essential businesses, such as dollar stores, fast food, and drug stores. Deciding which gas station location is right for you depends on many factors that a buyer’s advisor can help you identify.
2. Accelerated Depreciation Benefits on a Gas Station
If you desire increased cash flow in the early years of owning a NNN property, accelerated depreciation allows for greater depreciation value earlier in the life of an asset. Depending on the gas station property you purchase and your individual tax variables, accelerated depreciation could allow money spent on non-structural, Capex improvements, such as carpet, indoor and outdoor lighting, heating and cooling systems, and landscaping to be depreciated over five, seven, or 15 years, versus 27.5 or 39 years.
This substantially shorter depreciable tax life — possibly an immediate 100% write-off the year of purchase — helps you preserve capital, increase after-tax cash flow, scale your portfolio, and achieve significant tax benefits on new and existing buildings. These benefits are also gained through asset reclassification and write-offs when the asset is sold.
3. Gas Station and Convenience Store Creditworthy Tenants
Creditworthy NNN gas station and convenience store tenants are financially strong with a low risk of default, and many have investment-grade ratings. The higher the credit rating, generally, the more stable the company. If the c-store and/or fast-food restaurant that comes with the gas station is operated by a different company or franchisee (ex: Mobile with a 7-Eleven), it is just as important to ensure it is a credit tenant by performing a thorough financial assessment and requesting the historical and current store performance.
4. Gas Station Lease Term & NNN Lease Type
Gas station and convenience store tenants, such as 7-Eleven and Mountain Express, typically operate with 15- to 25-year triple net leases with rent escalations and extension options. This provides protection against inflation and any other rising costs and ensures your income continues to grow.
While each gas station company has a preferred lease type, the majority of them are guaranteed absolute NNN leases, which means the company pays rent for the lease term no matter what and takes care of all common area maintenance (CAM), building maintenance, repairs, taxes, and insurance. This provides worry-free, hands-off ownership and lifestyle freedom. You can simply collect rent and carry on with your career or enjoy retirement without any hassles.
5. 1031 Exchange for a Gas Station
If you’re transitioning from a high-maintenance or underperforming property using a 1031 exchange and want a maintenance-free, income-producing property, a gas station and/or a convenience store is a great choice. And yes, you can use a 1031 exchange on new construction and existing gas station properties alike.
To meet the 1031 timeline set by the IRS, it’s best to engage a buyer’s advisor before the sale of your original property to meet the 45-day identification requirement.
Since the NNN lease market is moving fast and properties are selling off-market and pre-market, and gas station properties are in hot demand, an advisor can prepare you to make an offer as soon as you close on the sale of your property, get to the closing table on time, defer all capital gains taxes, and help you achieve the best outcome for your goals. If you have already sold your original property, be sure to contact an advisor right away.
“Factoring in fuels sales of $427.8 billion, total c-store sales reached $705.7 billion in 2021, meaning that overall sales were 3.1% of the total U.S. gross domestic product (GDP).” — CSP Daily News
Why Buy a Gas Station NNN Lease Property?
- Essential, recession-proof, pandemic-proof, internet-resistant.
- Creditworthy tenants.
- Triple net lease for 15 to 25 years or more.
- Stable income for the lease term.
- Incremental rent increases account for any rising costs.
- Real estate value: high-traffic areas in prime locations.
- Potential accelerated depreciation for increased cash flow.
- 1031 exchange opportunities.
- Typically sell between $2–4 million.
- Average cap rates: 4.50 to 6.00%.
How to Find the Best Gas Station to Meet Your Goals
When looking at gas stations for sale, it can be difficult to know which one would satisfy your financial goals. There are many factors to consider and by the time you find one you’re interested in chances are it will be under contract in the fast-moving NNN market.
The best way to find exactly what you’re looking for is to engage a Westwood Net Lease Buyer’s Advisor, at no cost to you. Your net lease advisor will help you locate the best gas station and/or convenience store for your objectives; perform due diligence, a full lease review, a tenant credit investigation, and more, representing your best interests from before the property search through closing, and thereafter.
Our triple net and 1031 exchange specialists listen, educate, advocate, and get our clients to the closing table on time and without worry.
To Wrap it UP — NNN Gas Station C-Stores For Sale: A Smart Investment
As you analyze your triple net buying choices, a gas station and convenience store property would likely be a smart investment with a long-term, guaranteed monthly income, rent escalations, tax opportunities, and no-hassle ownership. However, with the fast-moving inventory of gas stations, to purchase the most ideal property for your financial goals before it is sold and be represented throughout the transaction, it’s best to engage a buyer’s advisor.
At Westwood, we have the inside scoop on what’s coming to market and have relationships with developers who often only work by referral. We can help you purchase your next NNN property and/or utilize a 131 exchange, at no charge to you. Contact us today for a no-obligation conversation about your investment goals and see if a gas station is the right net lease property for you. 314-997-5227
