Gas Station Feasibility Study Example: A Hard Money Acquisition in Houston, Texas, Underwritten to an SBA Takeout

MMCG Model Study. A worked example on real Houston corridors using public data current to September 24, 2026. The subject is a composite built from live listings and public benchmarks. It is not a client engagement, no borrower or lender is involved, and no property is under contract.

Question. A buyer wants to acquire an under-managed 24-position fuel station with diesel lanes and a 6,000 square foot store in north Houston, rebrand it, remodel it, and refinance out of a hard money bridge into an SBA loan. Does the plan work, and at what price?

Answer. Not at the seller's price, and not on a 7(a) takeout. At $4.6 million with a $2.6 million program the buyer needs $2.64 million of cash and still lands at 1.11x coverage after replacing the tanks. Repriced to $3.9 million after the Phase II finding, with the car wash deferred and the program cut to $1.8 million, the stabilized project covers at 1.34x on an SBA 504 takeout sized to the bridge payoff. The 7(a) route fails on the payment test: an interest-only bridge at 11.5 percent produces only a 7.4 percent installment improvement against a 25-year 7(a) at 9.25 percent, short of the 10 percent SBA requires.

Determination: feasible as repriced and restructured, with the takeout documented as 504 interim financing before the bridge closes.

By Michal Mohelsky, J.D., FMVA, Practicing Affiliate of the Appraisal Institute Last reviewed: September 24, 2026

Program. A 3.0 acre site on the I-45 North frontage near FM 1960: a 6,000 square foot store built in 1998, 12 multi-product dispensers (24 fueling positions) plus 4 high-flow diesel lanes under two canopies, three underground tanks installed in 1997, unbranded fuel, a washateria bay on the back of the building, and a large but poorly used parking field.

Why a bank will not lend on it today. The seller markets $480,000 of cash flow. Normalized on a lender's basis, the site produces about $40,000 of EBITDA on 1,320,000 gallons and $1,800,000 of inside sales. The gap is add-backs, owner compensation and unreconciled cash. Under SOP 50 10 8.1, a 7(a) acquisition must clear 1.25x on historical results and cannot be underwritten on post-closing projections, and a purchase price at or above $3 million excluding owner-occupied real estate triggers an independent Quality of Earnings report ordered by and prepared for the lender. On the seller's actual numbers there is no historical coverage to test. That is why the deal starts on a bridge.

Why it is worth buying anyway. The site has scale that cannot be rebuilt at this basis: 24 positions plus diesel, 3.0 acres, and frontage on one of the country's heaviest freight corridors. It is priced near what the land and improvements alone would cost to replace. The thesis is volume recovery, not a new market.

How the comps price it. Live Houston listings in September 2026 show business-only sales at roughly 1.7x to 1.8x seller cash flow, or about $10 to $12 per monthly gallon, and fee-simple sites with real estate at $800 to $950 per building square foot. LoopNet showed 25 Harris County gas stations for sale averaging $864 per square foot on an average 5,201 square feet. The only live listing near the subject's program was a Houston station on about 2.1 acres with a 5,800 square foot store, 7 gas and diesel dispensers plus 3 unbranded diesel, and a washateria, asking $5,500,000. At $3,900,000 the repriced subject is $650 per building square foot and $22.29 per monthly gallon at stabilization, below the observed range on the square-foot measure and above it on the gallon measure.

Traffic and market. Houston regular averaged $3.83 on September 17, 2026 against $3.93 statewide and $4.44 nationally, and Texas diesel set a record at $5.96. Houston is the cheapest major Texas metro, which compresses street margin and makes the diesel lanes and the store, not the gasoline price, the earnings engine.

Three tanks installed in 1997, single-wall fiberglass with pressurized piping. Under Texas rules, only tanks and piping installed on or after January 1, 2009 must have secondary containment with interstitial monitoring as the primary release detection method. A 1997 system may legally remain in service if it meets release detection requirements. The risk is age and construction, not legality.

What changes the arithmetic is that Texas no longer backstops cleanup. The Petroleum Storage Tank Remediation Fund has ended, and claims filed after March 1, 2012 are barred. Contamination found on this site is a buyer, seller or insurer cost with no state reimbursement.

Diligence sequence in the model:

What the model assumes happened. The Phase II found petroleum impact under the tank field consistent with a historical piping release. Tank system replacement is priced at $800,000 including closure, soil sampling, backfill and a corrective action contingency, and the timeline adds 10 to 16 weeks of fuel downtime. Two responses follow: the buyer reprices the acquisition by $700,000, and the tank replacement is carried as a funded contingency rather than a base-case cost. Both are shown below.

The car wash is deferred on purpose. Adding it inside the bridge period would put unseasoned revenue into the trailing twelve months the takeout lender will test, and a wash ramps on its own schedule. Phase 2 goes in after the SBA loan closes, funded separately.

Houston entitlement is light on zoning and heavy on drainage. There is no zoning, so Chapter 42 platting, driveway permits through Houston Public Works and TxDOT for the frontage, and Harris County Flood Control detention criteria control the work. Repaving and the wash pad add impervious area, which triggers detention on the disturbed area. If the parcel sits in the 100 or 500 year floodplain, a new structure must be built at least two feet above the 500 year elevation under Houston's 2018 Chapter 19 amendments, and fill below that elevation must be mitigated. The model assumes the parcel is outside both and the work is a remodel, not a rebuild.

The bridge year does not cover, by design. Year one produces about $206,000 of EBITDA against $450,700 of interest. The shortfall of roughly $245,000 comes out of the funded interest reserve. A bridge on a repositioning is a cash-burn instrument, and the feasibility study's job is to size the burn and prove the burn ends.

Structure the bridge as 504 interim financing on day one. Under 13 CFR 120.882(d), eligible 504 project costs include "Repayment of interim financing including points, fees and interest." Under 13 CFR 120.884(a), "Debt refinancing (other than interim financing)" is not eligible except under the narrow refinance provisions. 13 CFR 120.801(b) notes that a project "usually" requires interim financing from an interim lender, often the same lender that later provides part of the permanent financing. If the bridge is not documented as interim financing for an identified 504 project, the payoff is treated as a refinance and must instead pass 120.882(e) or (g): twelve months current and a lower installment for a refinance with expansion, or two years of operation plus a 15 percent contribution on a limited or single purpose building for a refinance without expansion. A gas station is a limited or single purpose property, so that fallback is expensive. The model therefore identifies the CDC and the third-party lender before the bridge closes.

At acquisition. 110,000 gallons a month (1,320,000 a year) at about 30 cents gross, $150,000 a month inside at a 29 percent blended margin, lottery at the Texas Lottery retailer commission of 5 percent of sales, and a washateria producing modest rent. Normalized EBITDA is about $40,000 after real labor, card fees at about 8.5 cents per gallon, insurance, Harris County property and business personal property tax, and UST compliance.

What the plan changes. A branded supply agreement with an image package, 16 new EMV positions with working card readers at every fueling point, a remodeled store with a made-to-order kitchen, a cold vault that holds temperature, and 24-hour staffing. Public filings show what the brand side costs and constrains: CrossAmerica discloses that "Certain suppliers offer volume rebates or incentive payments to drive volumes and provide an incentive for branding new locations," and that "Certain suppliers require that all or a portion of any such incentive payments be repaid to the supplier in the event that the sites are rebranded within a stated number of years." The model carries a $300,000 image and incentive package amortized over a 10-year supply term and repayable pro rata on early exit, shown as a contingent liability in the takeout file.

Stabilized. 175,000 gallons a month (2,100,000 a year) at 33.5 cents gross, $230,000 a month inside at a 31.5 percent blended margin. That is a 59 percent gallon recovery and a 53 percent inside recovery against the acquisition run rate. It is defended by the position, the diesel lanes and the competitive inventory, not by an assumption that management alone fixes the site. The stabilized volume is an MMCG assumption and not a measured capture rate.

Operating expenses carry labor at 14 to 16 full-time equivalents with a 3 percent escalation, card fees at 8.5 cents per gallon plus 2.0 percent on the card share of inside sales, Harris County property tax at 2.3 percent on 72 percent of cost, UST fees and annual testing, insurance including a pollution policy, and an owner-operator management draw.

Sizing. SBA will not fund a cash-out to the sponsor. The takeout is therefore sized to the bridge payoff plus eligible closing costs, not to 85 percent of project cost. The sponsor's $2.11 million of cash stays in the deal at 35 percent of total cost, well above the 15 percent a limited or single purpose project requires.

The 504 debenture priced at 6.541 percent effective for 25 years in the September 10, 2026 sale, up about 82 basis points from the March low. The bank piece is modelled at 7.75 percent in a market quoting the 504 first lien at 7 to 9 percent.

Why 7(a) fails here. A 7(a) refinance must improve the installment by at least 10 percent. Interest only at 11.5 percent on $3,919,500 is $37,562 a month. A 25-year 7(a) at 9.25 percent on $4,059,500 is $34,765 a month, an improvement of 7.4 percent. It fails. The result flips if the takeout rate falls near 9.0 percent or if the bridge amortizes rather than sitting interest only. That is a structuring decision the feasibility study has to flag before the bridge documents are signed, not after.

Other SOP 50 10 8.1 items on the checklist. Applications receiving an SBA loan number on or after October 1, 2026 fall under 8.1. Change of ownership rules sit in Appendix 15. Limited sources, which now include minority investors below 20 percent, may fund no more than half of a required injection. Under Policy Notice 5000-876441, effective March 1, 2026, all direct and indirect owners must be U.S. citizens or U.S. nationals with a principal residence in the United States; lawful permanent residents are no longer eligible to hold an ownership interest. The branded supply agreement is reviewed against the SBA Franchise Directory, and under 8.1 the CDC's closing counsel certifies the franchise documents. A going concern appraisal by a Certified General appraiser experienced with fuel properties separates real property, equipment and intangible value.

USDA is not available. B&I exists to improve the economic and environmental climate in rural communities. A City of Houston site does not qualify. The program matters here only as the comparison an exurban buyer would run.

The return is made in the first 24 months. If the gallon recovery lands, the sponsor converts an 8.1x cash-flow acquisition into a stabilized asset worth more than $7 million. If it does not, the bridge matures into a property that no SBA lender will refinance, and the equity is gone before the sponsor can sell. That asymmetry is the case for paying for a feasibility study before the bridge closes rather than after.

Stabilized DSCR at takeout, gallons against gross margin:

(Grid uses year 3 expense levels; year 2 coverage runs about 0.15x lower.)

Inside sales at base gallons and margin: $2.2 million gives 0.96x; $2.5 million gives 1.21x; $2.76 million gives 1.42x; $3.0 million gives 1.62x; $3.3 million gives 1.87x.

Rates: a bank first lien at 8.75 percent and a debenture at 7.10 percent still clears at 1.32x, because the takeout is small relative to cost. Leverage, not rate, is what protects this deal.

Tank replacement case. If the tanks must be replaced inside the bridge period, total cost rises to $6,830,000, the bridge grows to $4,439,500, the takeout debt to $4,579,500, and stabilized coverage falls to 1.19x. It still clears the bank's 1.25x only if the gallon recovery beats plan, so the model prices the tanks as a funded contingency with a matching price reduction rather than absorbing them into equity.

Proposed case. At $4,600,000 and a $2,600,000 program, total cost is $7,550,000, the bridge is $4,907,500 at $564,400 of annual interest, and the sponsor needs $2.64 million plus points. Stabilized coverage lands at 1.11x with the tanks replaced. It does not clear. That is the determination.

Bridge extension risk. Market data on short-term CRE credit shows extensions are common: CRE CLO loan modifications reached 25.08 percent by December 2024, and distress climbed through 2026. Those sets are dominated by multifamily and office, so they are directional only. The model assigns a 25 percent probability that at least one 6-month extension is exercised and prices the extension fee in the returns.

Feasible as repriced and restructured. Conditions: the purchase price is reduced to $3,900,000 on the Phase II finding, or the tank replacement is escrowed by the seller; the improvement program is cut to $1,800,000 with the car wash deferred until after the SBA closing; the bridge is documented as 504 interim financing with the CDC and third-party lender identified before the bridge closes; a 12-month interest reserve is funded at closing; the takeout is underwritten as 504, with 7(a) available only if the rate environment supports the 10 percent installment test; the branded supply agreement is on the SBA Franchise Directory with the incentive clawback disclosed; TCEQ ownership transfer is filed within 30 days of closing; and one appraiser produces as-is and as-stabilized values so the bridge basis and the takeout appraisal do not contradict each other.

Author. Michal Mohelsky, J.D., FMVA, Practicing Affiliate of the Appraisal Institute. Studies are prepared under USPAP discipline and aligned with SBA SOP 50 10 8 and 7 CFR Part 5001. MMCG Invest built and operates MMCG Analytics.

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