Gas stations can be lucrative investments, but they come with serious obligations. Learn more about hard money loans for gas stations.

Gas stations can serve as reliable investments, but owning or investing in a gas station comes with risks and obligations. Loans for gas stations may take those risks into account, which could mean higher interest rates or other less favorable terms. With that being said, many types of loans are available for gas station investments, including commercial loans and loans through the U.S. Small Business Administration (SBA).

Hard money lenders offer financing on shorter terms to help investors quickly deal with matters like construction and renovation. Read on to learn more about loans for gas stations, the gas station construction process, and other issues you might need to address as a gas station owner.

What types of gas station investments are possible?

Investing in a gas station does not necessarily mean that you have to go into the gas station business long-term, although that is an attractive prospect for many people. You could also renovate an existing property in order to sell it for a profit. The following are a few of the ways you could invest in a gas station:

Build a new station: Perhaps the most complicated way to get into the gas station business is to build a new one from the ground up. This is complicated because it comes with an array of regulatory requirements, such as environmental impact statements. The plus side is that you should not have to deal with problems that could come from buying an existing — i.e. older — gas station, which can also get you in trouble with environmental regulators.
Refurbish and operate long term: Renovating an existing gas station property can be almost as complicated as building a new one. You must confirm that everything meets regulatory standards. Depending on the age and condition of the property, that could require expensive repairs and cleaning.
Using the property for any other purpose might also require environmental remediation, such as if any storage tanks buried on the property were leaking. This is why a significant number of properties used for gas stations remain vacant for years or longer after the gas stations close.
Fix-and-flip: Finally, you can renovate a gas station with the goal of selling it to someone who wants to run it. The overall process is about the same as if you were renovating the property to operate it yourself. One important difference is that you have an obligation to disclose known hazards to a buyer. However, you can buy a properly-working station that’s all up to code, and simply make aesthetic improvements to the storefront before selling.

What types of loans are available for investing in a gas station?

Capstone Capital Partners provided $1.65M for a Houston, TX borrower in purchasing this Shell Gas Station.

The type of gas station loan that you will need depends on the type of project you are running. Buying an existing gas station in good condition might only require a commercial real estate loan or other commercial loan to cover the purchase price. Other types of projects might require a construction or renovation loan. A hard money lender can help with short-term financing needs.

Long-term gas station loans

Long-term loans can help investors finance the purchase of existing gas stations and certain other projects. Conventional lenders may offer commercial real estate loans that can serve this purpose. Some lenders may even offer specialized loans that function as gas station mortgages.

Investors may also be able to obtain long-term loans to purchase fixed assets needed in a gas station. SBA loans may also be available for real estate or fixed asset purchases, or to provide a gas station with working capital.

Terms for these loans may range from 10 years for fixed asset purchases or working capital to 25 years for real estate. Gas station loan rates may vary based on factors like the borrower’s credit history, both at the business and personal level, and the value of the property.

These types of loans tend to work best for investors who plan on holding onto a gas station. They have time to pay the loan off over time as they run the business.

Short-term gas station loans

Long-term loans often will not work well for projects with shorter timelines. Investors with these types of projects need financing that can keep up with the pace of their projects. Construction loans, renovation loans, and various types of bridge loans usually have much shorter terms than other commercial gas station loans. A common timetable for a construction project, for example, involves getting a short-term construction loan to finance building costs and then taking out a long-term loan with a lower interest rate to pay off the construction lender.

Hard money lenders are particularly well-suited to helping with these kinds of projects. Hard money loans generally have short terms, often even when compared to other short-term loans. They are flexible, meaning that they can be adapted to fit a wide range of gas station investment projects.

What is the process of building a new gas station?

*Removing an underground gas tank*
Photo by Versageek on Wikimedia Commons [Creative Commons]

The U.S. Census Bureau states that, as of 2021, there were 110,925 gas stations in the country. Assuming a national population of 330 million, that’s 1 gas station for every 2,975 people. Clothing stores are more common, with 1 for every 2,669 people. Part of the reason for this is that building a gas station requires numerous regulatory steps.

The initial process is similar to most new businesses. Tasks include:

Write a business plan
Register the business
Obtain financing
Purchase a property

From there, the steps become specific to the gas station business:

Join a gas station franchise, such as Valero, Shell, or Chevron, or enter into a contract with a gas supplier
Obtain permits and licenses
Begin construction

The two most important fixed assets for a gas station are underground storage tanks (USTs) and gas pumps. You usually have to install the USTs before you begin construction on the rest of the facility. Gas station USTs typically hold 30,000 to 40,000 gallons. You must register all USTs with the state, even if they are empty. Local ordinances and federal regulations may also apply.

The cost of all of this depends on many factors, including location and local environmental and geological conditions. An initial investment of at least $500,000 is fairly common. Operating the gas station as a franchise may offer support from the parent company, as compared to going it

Obligations come along with owning a gas station

Gas stations present a greater risk of pollution than most other businesses, considering that it involves storing large quantities of petrochemicals on-site. Gas station owners are responsible for following all environmental regulations and maintaining their properties in safe condition.

Leaking USTs, commonly known as LUSTs, are one problem that can severely impact gas stations. They can be a source of pollution, environmental illness, and financial liability. Gas station owners who fail to maintain their USTs properly can be liable to the government for penalties and to nearby residents for damages.

Learn more about financing a gas station investment with a hard money loan

The hard money lenders at Capstone Capital Partners provide real estate investors in Austin and throughout many parts of Texas with a variety of loan options. Our team has extensive experience with Texas real estate deals. We can evaluate your project and help you get the funding you need. Applying is easy: answer a few questions about your next project. We’ll reach out ASAP. With an appraisal in hand, our borrowers close in only seven days.

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Learn: Commercial Loans for Constructing Gas Stations