The Hidden Roll-Up Strategy Behind Express Car Wash Investing and Massive Exits

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In this conversation, Whitney Elkins Hutten, Director of Investor Education at PassiveInvesting.com, discusses her journey into the car wash investment space, highlighting the unique opportunities it presents for generating cash flow and diversifying investment portfolios. She explains the different types of car washes, their operational efficiencies, and the strategic approach to acquiring and managing these assets. Whitney also provides insights for new investors, emphasizing the importance of aligning investment strategies with personal goals and risk tolerance.

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Whitney Elkins-Hutten (00:00)
We can already see that multifamily cashflow is being compressed. We can see that there’s a little bit of, the deals are only penciling out if you have adjustable rate mortgages on them.

And we were continuing to invest in the multifamily space, but we wanted to be able to offer additional assets for our investors that had the potential to produce cashflow. And not just like 3%, but somewhere like after stabilization in 12 to 24 months, upwards 5%, 7%, 10 % true cashflow.

Dylan Silver (02:06)
Hey, folks, welcome back to the show. Today’s guest, Whitney Elkins Hutten, is the Director of Investor Education at passiveinvesting.com and the founder of ashwealth.com.

She’s also the author of the award-winning bestselling book, Money for Tomorrow, How to Build and Protect Generational Wealth, published with Bigger Pockets. With a portfolio of 800 million in real estate, including multifamily, self-storage, and car washes, she helps high-earning professionals and business owners protect, steward, and grow their wealth through tax-efficient passive strategies. can connect with her at passiveinvestingwithwhitney.com. Whitney, thanks for taking the time today.

Whitney Elkins-Hutten (02:46)
Thank you so much for having me on,

Dylan.

Dylan Silver (02:48)
I was mentioning to you before hopping on here, some of the spaces that you’re involved in, there’s a lot of interest in it right now. And I think not just from investors, but also from the general public. People see these car washes and they say, well, there seems to be car washes in more places now than ever. And they’re very nice. They’re high tech. And it’s one of these things where people love using them, right? You can sign up for a monthly membership and however much it is, you know.

30 bucks or what have you, get your car cleaned however many times and it just makes sense. How’d you get into car washes specifically?

Whitney Elkins-Hutten (03:23)
Yeah, so in about 2019, and just for everybody’s context, I am the Director of Investor Education at passiveinvesting.com. So when I say we in 2019, we were, for our investors,

can already see that multifamily cashflow is being compressed. We can see that there’s a little bit of, the deals are only penciling out if you have adjustable rate mortgages on them.

And we were continuing to invest in the multifamily space, but we wanted to be able to offer additional assets for our investors that had the potential to produce cashflow. And not just like 3%, but somewhere like after stabilization in 12 to 24 months, upwards 5%, 7%, 10 % true cashflow.

Now, not to say that the…

Express car wash market hasn’t had its own troubles much like multifamily has, but that was a market that we wanted to be able to bring to our investors, help them diversify their portfolio, help them continue to take advantage of getting cashflow, a little bit of equity growth and growing a cash flowing business that’s backed by real estate. So very unique play there. And then also take advantage of tax benefits as well.

And ⁓ we looked at so many different things. We looked at laundry mats, rolled them out. We looked at parking lots, rolled those out. ⁓ And then really landed on the express car wash space. at this time, even now, even for people who live in major metropolitan service areas and might see one on every quarter,

the car wash space is like the self-storage space about 20 years ago. A lot of the car washes

you know, exist today, ⁓ a majority of them are actually run by mom and pop owners. They don’t have, you know, good marketing to them. They’re not very tech efficient. And since this is a business, ⁓ you know, it’s hard for them to have like a scale of efficiencies here. So they have to have like four or five, six locations before they can even hire a regional manager. And we saw the opportunity to enter the space, start

consolidating some of these mom and pop ⁓ car washes, scale our own car wash management company. And that put us in a very unique position to be able to do a roll up exit to like a REIT or an insurance company, or if we’re shooting for the moon and IPO.

Dylan Silver (06:46)
Now, when people talk specifically, I want to get a little bit into the weeds here if we can about the car wash space. When people talk specifically about car washes, you mentioned that there’s a lot of mom and pops. Of course, this is the picture in my head coming from Texas. I’m thinking of ⁓ the brick car washes with like a nozzle that you pull down from one of the walls of the ceiling. ⁓ that someone individually might own that. But then on the flip side of that, you have like ultra

high tech, like luxurious, you know, it scans you in and then you go through and everything is automatic and then you pull off to the side and there’s high pressure vacuums and all this type of thing. And much like real estate investing, is there such a thing as investing in distressed car washes or if people are looking at buying car washes now that they’re really talking about, you know, new construction and building one of these high end facilities.

Whitney Elkins-Hutten (07:42)
It could be both. It could be a mix of both. And so yeah, you’re right. There are multiple different types. We’re talking about

car washes. So not your brick and mortar. ⁓ I always joke around, you drive a car in and you take your kid and you play around with the wand and you just pray they don’t spray you with the hose, right? That type of thing. We’re not talking about that. There’s no scale of efficiency there. ⁓ It’s…

⁓ very operationally efficient, but you can’t really scale those. You can only wash probably like 10 cars an hour. ⁓ Then we have the car washes that are attached to gas stations. Those are a cost center add to that particular business. Those aren’t scalable either. You can only get two or three cars in at a time. Then we will swing the pendulum all the way the other direction. Then we’ve got the full service car wash. This is where you have an army of people that…

There might be a tunnel, they’re driving the car through the tunnel, but there’s an army of people drying your car. There’s somebody at the counter checking you out. Maybe they have like a coffee bar in there or something like that. ⁓ Those are very labor intensive businesses. So really what we’re looking at is the sweet spot, kind of like the fast food of car washes. So we’re looking at the collision of how can we provide this high touch service like a full service car wash or close to it.

with the operational efficiency of the other tier, the other, you know, the, don’t want to call it lower end, you know, get as much operational efficiency as possible. And we do that by having a smart tunnel, right? A 60, 80, 120 foot long tunnel, where in theory, if the tunnel’s programmed correctly and all the apps and texts are working correctly, you can wash about 400 to 450 cars a day with just two to three full-time employees.

And so the tunnel essentially does all the work in combination with the tech. Now that could be an app enabled tech. It could be a barcode that’s on the car. Most mom and pop people that we were buying from, they didn’t have that technology. Now they might’ve had a long tunnel, but they still had somebody that had to drop the car off, ride the car through, somebody went in to pay. ⁓

There was no technology enabled on that particular tunnel.

They had to have four, five, six, seven people on site to be able to run the tunnel. So we’re really looking at how can we create that efficiency and put as much work as we can on this particular tunnel.

Dylan Silver (10:50)
When I hear you talk about the staff, right, and the efficiency, I wanna dive in a little bit here. When you’re talking about in between the full service with a coffee bar and then where it’s self-service, are you specifically referring to those ones where you go through, someone may be waving you through, but you’re not getting out of your car and then at the end, you’ll be.

washing down the car with, not washing down, but I should say you have an opportunity to like vacuum and nozzle that type of thing, but where you’re staying in the vehicle.

Whitney Elkins-Hutten (11:21)
Yeah, so there’s different packages that you can get. So when we have an express, when we convert one of these tunnels into our business model and our business model is anybody can look it up. Hurricane car wash, hurricane car wash. have four different packages. So package number one, basic pack package. You’re staying in your car. You’re just running, coming in, going through the tunnel. You know, maybe you, depending on the package and the location, maybe you get a free vacuum at the end. Very like.

bare bones. As you scale up in packages, the tunnel will now wax your tires, do wax on the car, maybe do some of these ⁓ higher end ⁓ finishes, so to speak. ⁓ Maybe one every time, one ⁓ every fourth time that you go through the tunnel, it keeps track of all that. ⁓ But yeah, what we’re doing is we’re removing that army of people.

that are vacuuming the car and riding the car through the tunnel. You’re staying in the car. A lot of our tunnels are enabled with lights, very family friendly. ⁓ We actually, you know, ⁓ when we were looking at buying, we actually bought one initially, like during COVID, know, parents were taking their kids as like a pastime activity into there.

Dylan Silver (12:39)
Yeah.

Whitney Elkins-Hutten (12:40)
They couldn’t go to soccer practice, but hey, they can run errands with mom and dad. Hey, let’s go right through a tunnel. And there’s all this music. We had a trunker treat for Halloween at a couple of our locations. yeah, the tunnel’s decorated and you can ride through on the conveyor belt, so to speak, and take a look at all the decorations in the tunnel too. So there’s just so many different cool things you can do.

Dylan Silver (13:03)
Now,

when we talk about the exit strategy with these deals, are these long-term buy and hold places, are these treated like businesses in a sense where, we don’t necessarily have a plan in place to sell them in five years, like you might with multifamily or if you’re syndicating or.

buying with a fund, but that this is a long-term cash flow opportunity. And I have a second part to that question, but first is, it treated like a five-year exit, like you see in a lot of multifamily, or is this more of a long-term play?

Whitney Elkins-Hutten (13:38)
Well, so I answered the question from an operator perspective, but also as a limited partner perspective. So from an operator perspective, operators are very much pressured, like us as the sponsor, to put out a pro forma. If we just say, it’s an infinite hold, limited partners are going to be like, I don’t understand where my return is. they want to see a finite time. So we really try to educate our investors like, hey, we’re showing you a five to seven year pro forma.

But we want to orient you around that this is a cash flowing business that if it’s, you know, we’re growing to success, we could hold importuity. Like we could do the long hold. And so that’s where, you know, if there’s an investor coming in that’s looking for a quick fix and flip, needs their money back in three to five years, as far as car washes probably aren’t the investment for you.

⁓ If you’re flexible and can wait to recoup your investment through cashflow, ⁓ additional equity events like a refinance or something like that, and then hold for the long term, Express Car Wash or Express Car Wash Fund can be a great pairing for you and your portfolio. But yes, they are business. They’re not like the traditional transactional real estate of having a single family rental lease or even a multifamily lease.

They are seasonal businesses too.

So most of our holdings are in the Southeast part of the United States. And so while we have great weather, we’re not necessarily worried about any sort of water restriction. Sometimes we get too much rain. And when we have too much rain, people aren’t propelled to wash their cars. They got a free nature wash.

We have to orient the investor’s mindset that this is a business that you’re investing in, something that has that smooth, predictable cash flow month to month. We’re going to be looking at smoothing out the cash flow on a quarterly and biannual basis.

Dylan Silver (16:26)
Do you also own the underlying land or are these leases for the land?

Whitney Elkins-Hutten (16:33)
We, our approach with Hurricane Car Wash, all of our car washes that we own the land. ⁓ It is a viable strategy to actually ⁓ build a car wash on leased land. But the problem is, is what happens when the lease is up? And if your business plan isn’t complete, right? You’re now introducing ⁓ some factors into your underwriting that you may not be able to overcome, either through a refinance or a sale or, you know.

If the landlord just says, hey, lease is up, sorry, you got to like take, you know, demo your tunnel. Like I’m moving on to the next tenant. I’m selling to a hotel developer. Right. You know, you can’t control that. So we want to control as many of the variables as possible.

Dylan Silver (17:11)
All

When we talk specifically about acquisitions, right, I’m thinking, now that I have a better picture of the scope here, by the way, it’s Hurricane, what’s the brand, Hurricane? Are they in Texas? Are you in Texas?

Whitney Elkins-Hutten (17:29)
Hurricane Car Wash.

We currently aren’t. We were looking to enter the Texas market. ⁓ it, ⁓ you know, it takes a lot. our property management company is based out of the Carolinas and we were looking to open up a hub. you know, there’s a very strong competition, I would say almost overbilled in the south part of Texas.

Dylan Silver (17:38)
Okay.

Yeah.

Whitney Elkins-Hutten (17:58)
And so we actually had some properties twice under contract in Texas and they fell through for various reasons, but primarily, you know, without getting into the non-disclosure part of things, you know, ⁓ overbuild.

Dylan Silver (18:13)
So the center is the East Coast or in the Carolinas, that’s where a lot of them are.

Whitney Elkins-Hutten (18:19)
Yeah, Carolinas, Alabama, Tennessee, Georgia, Florida, all the way up the East Coast into Virginia.

Dylan Silver (18:26)
When we talk about acquisitions for these deals, are these going to be ⁓ undeveloped land? Would there be a pre-existing structure there? And then also, how do you find an ideal location? And then also, how do you find the right type of seller to work with when you’re buying a property like that?

Whitney Elkins-Hutten (18:48)
Yeah, so I’ll work kind of backwards on that. You know, our acquisition strategy is twofold. We have a ground up development and then we also have ⁓ existing acquisition. Now, you know, if our investors, you we don’t make them participate in the ground up and the operational side of the business, they get to choose. So if we are doing ground up development, we will do that in a separate fund or at least we have to date.

⁓ And then whenever it goes into, when we’re done with the developing piece and we wanna flip it over to operations, we’re done, we’re ready to operate, then a different entity structure and potentially different investor base will invest in that side of the business and we exit the investors that were solely in the development side. So I’ll tell a story. We originally started the bulk of our portfolio. It’s easiest to scale

existing, nearly stabilized property. Anybody knows that. Single family rentals. That’s why a lot of people get in turnkey, right? Existing multifamily. And as you build your skillset, as you get your systems in place, you can take on more more more risk. I would never suggest to any individual investor, hey, you know, if you’ve got a cool 45 million laying around, go buy some land and build your car wash from the ground up. Like, let’s, let’s bite off like, you know, a little bit.

in stages here, in milestones. So we started off buying from existing mom and pop owners. ⁓ were able, we targeted, know, so car washes are businesses, they’re valued based on EBITDA, earnings before depreciation, interest, taxes, and amortization. What does that mean? Profit, they’re valued based on profit, and a multiple of that profit. So we were looking to purchase from,

especially if we could multiple locations from mom and pop owners, ones that could only get to two, three or four car washes. And we’re just tired, ready to exit. And we looked to get in on this car washes at a 7.5 to 10 X multiple. When at that time car washes were trading closer to 12 X. That’s what we’re eyeing for exit 12 to 14, 12 to 15 X on that EBITDA multiple after we do our value add strategy.

⁓ I was going to pause there, but long story short, that’s the acquisition part of the strategy. When we do the ground up development, ⁓ the story part of this is we actually bought a property in Florida. I think our cost base is all in as like somewhere between nine to $10 million. And then we bought raw land. It was actually already improved land. ⁓

in Gaston, South Carolina, and we built a car wash. And that property in Gaston, South Carolina actually has the same profit as the one that we have the higher cost basis on. So why is that? It’s because it just takes more to operate a larger car wash, right? There’s more overhead.

capbacks, expenses, and we could actually, from the ground up model, we could put in all the equipment that we wanted in initially. We weren’t having to reverse engineer a tunnel or anything like that. So as we move forward, we’ll probably continue to buy existing ⁓ car washes, but also do the ground up development so we can be in at a lower cost basis.

Dylan Silver (22:20)
I do want to pivot a bit here and ask you about working with newer investors. I know we were talking before the show that you also work with newer investors, really guiding them through their journey. And there’s so much, people all the time are asking me, what’s the best area of real estate for me to get involved in? Do I get a short-term rental? Do I start with a flip? Should I buy something on market, off market? Do I go knock doors for a closer options, right?

And everyone’s got a different perspective. When working with newer investors, what’s your feedback for them?

Whitney Elkins-Hutten (22:56)
Well, so most of the investors I work with have already probably been in real estate in some form or fashion and they’re looking to exit their active holdings. Maybe they’re a landlord or they own their own business. They already had the short-term rentals and they’re tired. They want out. They know that that’s not passive income and they’re ready to reposition those assets.

⁓ and go into truly passive assets where they’re hiring a professional manager or an operator or partnering with them and splitting the rewards. Now, if I’m encountering somebody who’s just brand new, stocks bonds and mutual funds has no idea about the private equity space ⁓ or even like, do they want to do single family rentals versus private equity investing? My first question actually to them is like, what do you want? Right.

What do you want in terms of the portfolio? What do you want it to do for you? Do you want it to produce cash flow, equity, protect capital, create diversification? Everybody wants the return. Everybody wants the tax benefit. But not all investors can actually take on that risk or have the risk capacity to actually take that on. And I think that’s what we saw in the past three to four years. There was a huge rush to get into private capital assets.

and people just didn’t understand the risk. They didn’t understand that even when you’re in a passive investment, you still need to have liquidity. You have to have patience. We can’t expect any one investment to take care of everything. mean, create cashflow, equity growth, and give you tax benefits. We need to look across the whole portfolio. So I go back to that investor and I say, what do you want? What do you need your portfolio to do for you? Are you wanting to trade time to get that? Okay, if they are, then…

maybe active investing like the one to four units or a small multifamily unit or the short-term rentals are fine. If they’re like, man, I already have a job and I have a family and I love going fishing on the weekend or hunting on the weekend. Okay, great. Let’s not do this actively. What capacity do we have to do this possibly? And once we start creating the backing in from what I call the vision side of things, we can actually create what we call in the business world alignment.

We’re actually picking the right investment tactic, right? Because you led with questions and most investors do. They lead based with tactic without going back to the strategy. Like what actually should they be doing?

Dylan Silver (25:28)
Yeah, that’s critical. I had someone tell me if you want to do Airbnb hosting, do you like being a host? And people may not think, hey, well, this is an investment. can outsource or what have you. I can hire property management. On some level, it’s still going to come back to, hey, do you like being a host? Because you could buy notes. You could. ⁓

you could invest in funds and syndication. So what’s the strategy that works best for you? What would you be most likely to be enthused by and get behind? Because to your point, Whitney, if folks were told, here’s your $30,000 investment and I’ll give you back 60 and 90 in this much time, who’s gonna say no to that? But if it’s through a different lens of, this is what timeframe is expected, here’s the risk profile, here’s how much.

is needed from you as far as effort or ⁓ underlying skill base, then that’s gonna be a different conversation. We are coming up on time here though, Whitney. Where can folks go, where can our audience members go to reach out to you and your team, as well as other any new projects that you’re working on right now?

Whitney Elkins-Hutten (26:42)
Well, I actually want, if I can indulge me, I’d like to stack on top of that is once you understand what you want, now we’re going to understand your risk alignment, right? Like you just brought up a great point. You know, if somebody invested 30 K and I told you as an operator, I can get you 60 or 90 back in a particular time period. You got to ask yourself, am I okay with the risk? Just because I outsourced to somebody else doesn’t mean that that’s actually what I need. I was talking to an investor this morning.

And she told me, I don’t need the cashflow. And I’m like, wait, you just told me you had to pay for your kid’s college in three years. Yes, you need cashflow. You just don’t need it now. So how about we get you in a cash flowing deal like our debt fund, real estate debt fund, and we get you cashflow now. You just stick it in the bank and reinvest. You’re going to get an equity like return with ⁓ a conservative investment. So there’s a lot of questions. I really encourage people reach out to me.

⁓ You can find me at [email protected]. I also have a YouTube channel at passive investing DOT com there. You can get all the data download insights out of my head at anything passive investing. And you know, really just to help to build your education and make sure you’re getting into passive investing ⁓ correctly. And maybe you are a seasoned investor.

and you need to reposition your portfolio or build new skills. I have plenty of material there ⁓ as well. As far as new projects, we are super excited to actually, our regulation A, cashflow bonds, ⁓ just got approved. That’s our new business, cashflow bonds. It’s a ⁓ blended ⁓ note investing asset between multifamily, equipment lending, and some rehab notes. ⁓

You know, has a little bit more risk to it, but is open to sophisticated investors and they can go to cashflowbonds.com.

Dylan Silver (28:45)
Whitney, thank you so much for taking the time today. Thanks for coming on the show.

Whitney Elkins-Hutten (28:49)
My pleasure, Dylan.

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The Hidden Roll-Up Strategy Behind Express Car Wash Investing and Massive Exits

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