Are Laundromats a good investment?

[rkoudelka]

I have been looking for investmenst and came across laundromats. I never thought of them before so I started to look into them a bit.

It seems that they tend to sell for very close to one year's gross. The net seems to be about 20% of that.

So, if you buy for 300k, your net may be 60k.

They seem to also be, generally, the type of business where an absentee owner (or just a few hours a week) can handle. But these numbers seem too good to be true. If you have 300k available, a 60k return each year would be fantastic.

So, Im wondering if Im missing something or if these tend to be good investments.

Any thoughts?

[slumlordfrank]

Well I'd sure be taking a hard look at their water and electric bills, they could be pretty stiff in many markets. My wife used to be involved with one and she said that the maintenance and repairs can be quite bad, people don't take care of what's not their own. She got pretty good at some basic maintenance but beyond that it gets pricey to call the repairman, unless you learn all aspects.

Also remember that downtime is real expensive as far as lost revenue.

I'd find a trade journal and a regional/national trade show and subscribe/attend before I'd lay out the money. That's where you'll likely find more deals to be done and also the "inside" scoop and poop on the "real numbers".

Good luck and let us know how it goes.

frank

[rkoudelka]

At this point Im just wondering if it is even worth investigating. The numbers seem too easy. In fact, based on the numbers given, youd think that the entire deal could be financed 100% and STILL turn a profit - I find that a bit hard to believe.

You say your wife used to be involved with one - you mean she owned one?

If so, could you share any numbers? Sell/buy price, expenses, gross, net? Hours spent working?

[mitch17]

It's just like any other business, too, where you need to analyze the market for the specific area into which you are looking. If buying an existing business, take a look at their books.

[slumlordfrank]

No, she worked for a large manufacturer of laundry and (lots of) other products. The corp owned one and offered discount prices to users if they used the (test formulation) detergents and other things. She used to have to get up at all hours to go investigate clogged drains (socks) lint filters etc.

I've heard they're very profitable but I would sure want a bit of an "insider's" view like I described. Too many people buy into businesses thinking they "know" what's going on only to find out later that (for example) the published price list is not what anyone (other than them) buys at. Everyone else is buying at 45% off that sheet.

Investigate like crazy.

frank

[Pendragon]

Also worth checking in to your local environmental laws. Something new may have come up that is causing the owners to sell.

I know here in Florida, laundromats and dry cleaners pay a separate tax for environmental impact, on top of all the other taxes.

[radioconnection]

The guy I worked with built and owned one for several years.

He got out because he and his wife got sick of the hours they were putting into the place. It was not an absentee owner type of business for them. There was always some one there, either one of them or a girl whenever it was open. (They also offered drop-off laundry service and had a small drycleaner, so the need was there.) Otherwise, being a "cash" type operation had advantages too. But, make sure it will be something that doesn't need a lot of babysitting if that's what you're planning. Machines break, customers are slobs and do stupid things (he caught people dyeing clothes in the washers!), and in some areas there is vandalism and worse.

[Integrator97]

There are several businesses along these lines, which are good to look at, but you have to realise some things about. First I'll name a few.
Laundromats
Carwash
Tanning Salons

I've known and done work for owners of all three. If you have to finance it, and expect if to be your livelihood, forget it.

The owner of the tanning salon was late 40's I'd say, and had moved here to the midwest from California, and was financially comfortable. He had the cash to invest, and said you could never do it on finance. He now owns several salons, but those tanning machines can run upwards of $40k each for the fancy ones. A nice return though, if you have the cash.

The carwash owner, was ready to sell, and disappointed that his son didn't want to buy it. His son said there was no money in it. A carwash is more absentee, I was told about an hour a day, and 4-5 hours on the weekend for maintenance. What he told me was, if you can do it, it's great to buy when you're young. You can have a job, maintain it, and 15 years +/-, it's paid for. When you retire, you work those same hours, and it's all gravy then. Or if you have the cash to buy one, it's immediate gravy, with minimal work.

I figure the laundromat is the same. And I agree, you better be able to do the bulk of your own maintenance, or find a mostly retired appliance repairman to put on the payroll. I think of you financed it, you better keep your day job. But it's one of those things that can pay off later.

Remember, if they were easy, everybody would do it. Good luck.

[turbogeek]

The genius of landromats is they can 'pay for a commercial piece of real-estate' that you later sell for other use.

I have co-owned laundromats and car washes for 25 years. Car washes are more absentee. Laundromats require DAILY cleaning or your clientele will migrate on you.

The 'buy for 1-year gross / 20% flow' is about right -- for a laundromat with recently recapitalized equipment. I have never owned one worth $300k, so I will scale down for my experience.

My biggest one is worth about $80k and does flow almost $12k. Of that $12k, however, I have to retain a significant portion to recapitalize the equipment every 10 years or so. In this case that is 20 washers and 15 driers, costing about $90k. That leaves $30k residual. Now, you are asking why I am in this business to long-term net only $3k per year (divided out being only $150 per washer per year). Here is the rub. Of the initial $68k cost structure per year about $9k goes to mortgage/taxes on the commercial property. I was in the business to have something that would self-fund buying a commercial property worth some $60k at the end, and do so in 10 years. Then I sell that commercial property if I want to take my profit, or I sit on a self-funded business that will flow a little more until real-estate appreciation works in my favor.

Where I have cash-flowed more is by putting small landromats in apartment complexes, where I capitalize only 6 to 8 pieces of equipment. In this case I have flowed $500 per washer per year, and it is a little more absentee in nature.

The rub is that the vending machines, particularly colas, flows more cash than the washers. For years I farmed that out, but then I grew a brain and bought my own.

[brianbrb]

There are two great paths to wealth; one is through investing and the other through business. Of the two, the fastest way to improve your cash flow is without a doubt through owning a business. The problem with most businesses is that they require full time attention. You want to get ahead but don’t have time for another full time job and let’s face it; most people already have a full time job or business.

There is a business that once set up, can be run part-time. That business is a coin laundry, better known as a Laundromat. I personally own several stores and spend between 3 to 5 hours a week per store running them. It is one of the few businesses that I know of that you can truly run part-time.

If you are looking for a small business or just want the cashflow, it is a great way to go. There are lots of benefits of owning a Laundromat but the best one is that it is an ALL CASH business! It is an easy business to run, but a hard one to find, at least one that makes sense. In fact, I would say that finding one is the hardest part about this business.

Brian

[twelvepole]

The laundromat owners I have known have told me that such an investment is not worthwhile unless you can do your own repairs to the washers and dryers. And, there is nothing more disheartening than to go to the local crowded laundromat where there are multiple out of order signs. My closest local laundromat has out-of-order appliances, no change machine, and it is filthy and depressing. But, it's only a dollar a load for both washer and dryer. The other two facilities in town are not much better. Gone are the days when there was an onsite manager who made sure everything was spit spot and working.

[ray2047]

I know nothing about laundromats but reading this it occurred to me what happens if you don't own the building or the land it is on and at the end of the lease the owner declines to renew? Finding a new place close enough to maintain your client base could be hard. Even if you find a nearby building chances are the cost of conversion to a laundromat would be costly.

What if the laundromat is in a strip mall and you bought the building and mechanicals but the land is leased and the lease is not renewed. I actually saw this happen to a man I knew. Not a laundromat but a news stand in a mall. Basically everything he had paid tens of thousands of dollars for, existing customer base, fixtures, and location were suddenly of almost no value.