Is this business a good buy?

is the owner in the business every day hustling or is it self sufficient? is the owner also getting a salary or is he getting paid the 130k?

Do you have any experience with fuel, tire, and "minor repair"? Because it sounds like you will become the defacto manager. Are you cool with potentially making $130k to manage a tire shop? Do you have managerial experience and/or expertise in owning/managing/operating a business? How much of his repeat customer business is loyalty to him as the owner? Do they have high turnover of labor? I have a dozen other questions I'd want answered off the top of my head. There isn't nearly enough info in the OP for anyone to give reasonable advice imo.

Would you be managing this place? Does the $130k include any salary paid to the owner?

7.6x earnings for an auto service shop seems high to me

There are professional business valuators (typically a specialized CPA) that do this kind of thing for a living. If you are considering spending $1m I think it’s probably a good investment to get a professional to value it for you.

I could be completely off base but it feels high to me. Unless there’s some clear untapped stream that you have insight to.

ETA: LINK This has gas stations going for 3.4x earnings and 2.75x earnings for Auto Repair & Service Shops. Which is more of what I expected

130 isnt gonna go far when you throw in a note on a 1 mil loan. unless you have the cash. you really need to get someone to look at the whole picture including what the property is worth and maybe even any environmental remediation that would have to be done to the property if you get left holding the bag. I dont know anything about that but I would definitely do my due diligence.

I assume the fuel tanks are in ground. When were they last replaced? And max 3X

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but what is the value of the real estate involved in this deal? That is the big question, If it is valued at 6-700K then this makes sense

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Great point!

There is usually an earnings "multiple" that is the average/standard for every business/business segment for sales pricing. I'd track the multiple down for that type of business. A business broker can probably help you with that. I have no idea what the margins are to arrive and the $130k, so I'm of no help. Is the $130k NOI, EBITDA?

This. What kind of environmental liability are you taking on?

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Yea i always thought it was 2.5x the earnings on what a business is worth.

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There are a lot of other factors that need to be considered, and that 2.5x is typically dependent on industry.

OP needs to start with Net Income, the adjust for any owner expenses; does the owner run personal cell phone, internet, gas bills, health insurance, salary... through the company. He will then need to figure what additional expenses he'll bring to the company (his salary, health insurance...). Then calculate the EBITDA. This is typically the starting point for determining the earnings multiplier.

He will also need to consider his capital budget for the next 5 years and the effect on cash flow, and the amortization schedule for the new loan.

The adjusted EBITDA, future capital budget & amortization schedules will give OP a baseline to determine if it's a good buy or if he'll basically be working to pay the bank.