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Real estate investors buy gas stations, but is it a wise investment?

On Behalf of | Aug 16, 2021 | Commercial Real Estate |

The COVID-19 pandemic led many people to stay home more than usual over the past year. Even this year fewer people are actually heading into the office — but office spaces were not the only form of real estate to feel the impact of the pandemic. Another portion of real estate that was hit by the reduction in travel: gas stations.

As gas stations saw business go down and their debt-to-income ratios become unmanageable, commercial real estate investors saw an opportunity grow. Listings for gas stations skyrocketed in early 2021 leading to plenty of opportunities for commercial real estate investors. But investing in gas stations is much different than investing in a rental complex or even retail space. Gas stations can come with serious environmental hazards and, as a result, the government generally requires these businesses to abide by a lot more regulations compared to a rental property.

What kind of regulations?

Gas stations will face federal scrutiny. In addition to dealing with the Internal Revenue Service (IRS) and local taxing agencies as is common with any business endeavor, a gas station owner will also need to abide by regulations put out by other federal agencies like the Environmental Protection Agency (EPA).

What should commercial real estate investors learn from this surge?

It is important to take the full picture into account before moving forward with a real estate transaction. Carefully review the real estate documents and be prepared to negotiate terms to better protect your business interests. What may seem like a great deal in the beginning could end up being a headache of unforeseen regulatory requirements. You can mitigate this risk with due diligence prior to closing the deal.