I’ve thought about laundromats as an investment, especially since many near me that are for sale will offer owner financing. Anything in particular I should watch out for with these? Obviously its just like anything else (number coming in must be larger than what’s going out) but is there anything in specific I should watch out for with these?
I know a guy who owns 6 laundromats in the ghettos of NYC (that’s where you make a killing b/c people don’t have their own washer + dryer at home) and he’s doing AWESOME. I think he’s cashflowing close to $1m a year but then again, they are pretty large.
I read somewhere that the concrete slab underneath the machines that absorb the vibrations from the machines can be very costly. Also, for high trafficked laundromats, you want to consider having there someone full time b/c 1) security 2) to provide drop off service (in big cities, that’s where the big pay off is… not from the self-service machines per se).
The place I am looking at right now does according to the owner $124,800 a year with a net of $77,400 after expenses. Purchase price is $180k. Owner just last year spent $70k on new machines and A/C. I looking to appeal to his inner greed a little and offer him an owner financing deal like no other. I am going to try and offer a lot of the profit back to him in terms of a percentage of net or gross and a pretty severe interest rate. My thinking is this: If I can do this with little to no money out of pocket and even only take home half of what the annual net is I am making out like a bandit. $0 investment, $35-40k profit…what’s the ROI percentage on that? That and the fact that this would replace my day job earnings. Hell I could sit there watching TV 8 hrs a day and be in the same position I am now, except that in a matter of years I would own a nice business free and clear. On the flipside for the owner if he gets $35k yr income off his money that’s 19.4% ROI on his $180k, beat that in the stock market or a mutual fund. It’s true what they say I guess, the less money you have to get started the more creative the offers get.
Well I just sent the agent my initial offer. Very lucrative for Mr Seller, over the course of the 5 yr loan term he would get $255k (far above his list price of $180k). I would also net about $26k a year total for my troubles. What I proposed is 80% of the $180k at 8% interest, 20% at 20% interest. I also offered 15% of the profit after expenses and mortgages. Yeah those are severe terms but with nothing down getting $26k a year for the first 5 yrs, a $180k business free and clear at the end of 5 yrs and a net income of almost $80k when its paid off with $0 out of pocket its a winner.
Rich I use to be in love with laundromats but after talking to my CPA 2 yrs ago about them and then him putting me in touch with some of his clients who own them, they all convinced me not to buy really…
Here are the problems with them.
If you have a busy one, you will be empting the machines 2-3times a week which is great, but you or a family member has to do this. Unless you have a real trusted friend, your not going to have an employee doing this since they can keep some of the money.
REPAIRS>…many of these guys fix the machines themselves. Repair guys will rip you off on repairs and eat into your profit. In the beginning you need to watch these guys fix stuff and they have more breakdowns then you would expect but a repair job that can take 30min and a $40 part will cost you $300 by a repair guy and take 1hr to complete so they can milk it
You need to be ready to handle all problems, floods, powerouts, etc.
If you have an unattended laudromat, you will have people breaking into the machines and coin machine stealing your profits away.
You need to have an employee or 2, someone to handle watch and clean the place daily. If you have a self service or drycleaner, be prepared for damaged clothing and plenty of complaints from customers.
Also the worst thing of them all… The business is open 52 weeks out of the year, 7 days a week. That means do not plan on a 1week vacation unless you have someone ready to handle the problems and empty machines, fill coin machine, etc. And a good location can not go 1 week without service…Also the self service machines, like soda, snacks, soap, phone cards, etc…you want to own them as they are the bread and butter to pay the electric bill, water, ins, etc…you need to restock them weekly…
As for sale prices…it is pretty much the same at 1-1.5% of the yearly gross sales.
Owner financing very common on laundromats in the $125K-and up range. real cash is made in the 250K and up range…but many have self service in that range.
andrew
Thanks for all the info. I don’t mind having to go down 2-3 times seeing that I just quit my part time job. Its still less work and more money than working part time somewhere. 
Just remember you will be marrying this place. And just like a woman, it will have PMS all the time… you will never get a vacation away from it, it will always have to be on your mind and your first thought of the day and last. You will need to care for it, clean it, fix it and never get to hide for even 2 weeks from it because you will have to empty it, fill it and maintain it…LOL
I helped a friend purchase 1 of only three coin-operated laundramats on the Cape (in MA) a few years ago and although this thing cash flowed, his expectations didn’t match reality (and he ended up selling it less then 2 years later).
These are things he didn’t like:
- High Employee Turnover
- Acts of Theft & Vandalism effecting ROI
- Enviromental Compliance (the largest expense in this business)
- Not a true absentee business (collecting money, babysitting employees, equipment maintenance, etc. require onsite management)
- Seasonal nature of the business (Cape Cod is for the most part a summer community)
Regards,
Scott Miller
Way easier ways to make money.
I like converting single family homes in business districts into law or dental offices.
Buy them, pave the front and back yards for parking, rip the siding off and replace it with Dry-Vit (this makes it LOOK like office space) blow out some walls and bingo. Instant triple net lease.
Now THAT (triple net) IS REALLY absentee landlording. And it’s a business, no where NEAR the B.S. as far as evictions go. Renters in residential real estate have ALL the rights. You can’t just throw them out, it takes time. But… if it’s a business it’s a whole other ball game. Their not living there. Their not paying??? Their out! Nice iron clad lease agreement from your lawyer and the balls in your court.
You got some very good advice.
Evironmental concerns can be costly. A lot retail owners won’t allow new laundry mats because of the environmental clean-up (could limit competition IDK).
Make sure you take a good look at the financials.
From my experience watching my grand parents, a lot of laundry mat owners do thier own repairs to cut on cost. They also service thier own machines and mop the floors DAILY. No one wants to clean thier clothes in a dirty mat. My family has owned several and we eventually opened our own appliance repair company for ordering parts etc. The appliance company has done better than our mats. All 3 laundry mats have been sold but the appliance repair company is still kicking!