Farmingdale, NY · Member since 2019 · 14 posts · 13 votes
There has been a lot of buzz lately regarding the investment into an interesting asset class -laundromats.
I would love to offer some expertise as I have been in the industry for a while and have learned a lot of the ins and outs of the business from operations to financing the project.
There is money to be made in those business. However, they are not true real estate more of a brick and mortar business. For a laundry mat to be succesful it needs to be in a location with a lot of traffic. There is one here that is next to a pizza shop. Do your laundry and get a snack. It is in a strip mall and it is unlikely any of the tennants own the building.
Self storage and parking are similiar, love the idea, but I am not a fan of retail business.
@Vincent Chen you definitely can build equity in a laundromat since the value is tied to the amount of net income. So increasing income and/or decreasing expenses not only increases your cash flow, it also increases the value of the business.
That said, it is usually easier to build equity in real estate quicker. Laundromats are valued at, say, 4-5x multiple of the net income, whereas real estate is typically valued at, say, 15-20x multiple of the net income. So, an increase of $100/month ($1,200/year) in a laundromat increases the equity by $6,000 (5x multiple), but the same increase in real estate income increases equity by $24,000 (20x multiple).
So yes, you can build equity. But you call find bigger equity gains in real estate. It's why I think laundromats and real estate work so well together.
@Jordan Berry Thanks for that, that is what I thought, so cap rate for laundromats is around 20%? NOI is the key for all the business, but how about the land value for laundromats, anyway we can add value for that part as well?
@Vincent Chen You can definitely add value to the land if you own the land your laundromat is on. By charging your laundromat top of the market rents you'll maximize the income of your real estate, which, as I stated earlier, has a much greater value in the real estate than the laundromat.
Hi Paul — I'm a building contractor in South Texas with 28 years designing, building and operating self-serve and automatic car washes and laundromats, so I'll add the builder's angle.
On verifying seller numbers: don't take a P&L at face value on an all-cash business. Ask to sit in on coin collections over several weeks, and cross-check against the water-meter readings — water use tracks wash volume in a way that's hard to fake. If the seller won't let you verify collections and meter readings, walk away.
On layout costs buyers miss: the equipment price is only part of it. Price the drain trenching, dryer venting, electrical and gas service, water-heater sizing, and the machine mix for that specific building before you commit. A store that needs a new trench, bigger gas line or a re-sized water heater can cost far more to get right than the machines themselves, and the wrong machine mix will cap your revenue for years.