Laundromat (eBook)

AN INTRODUCTION TO INVESTING IN THE VENDED LAUNDRY BUSINESS

The self-service laundry industry offers much more than just a sound investment; it is an American dream business. Laundry owners are everyday people fulfilling their greatest dreams. Regardless of what you do now or intend to do in your life, whether you are currently a blue-collar worker, a grocery clerk, a mechanic, retired or active military, an attorney, or an owner of other businesses, the laundry industry has a place for you. The diversity of the industry offers rewards for each investor, regardless of their background. For some, the business is run simply as a “quarter factory”, with the owners using a minimum amount of their time. But for those who grasp a better understanding and have a hunger to maximize the benefits of laundry ownership, it is a challenging opportunity with rich rewards. Most laundries are independently owned and operated. However, there are individuals and families who do own in the hundreds of them.

We will be answering the biggest questions about laundromat investing and identifying issues that only the most seasoned laundry professionals understand. We are dedicated to sharing our education and experiences so that you too will have access to the secrets of this mystifying investment.

You are about to be guided along a path intended to lead you to a successful business; a future that is greater than you now realize.

The following questions will all be answered:

1. What makes the laundromat the best example of the American Dream?
2. Can I get wealthy in the laundry business & how?
3. Understanding the various categories of laundromat investing
4. How do I find a laundromat to A?
5. Is financing available?
6. Can I trust the income and other information I receive?
7. How do I conduct due diligence?
8. What resources do I need to have available?
9. How much of my time will I need to put into my laundry business?
10. Is the laundry business really that easy to operate?
11. How much money do I need to get started?
12. How much money should I expect to make in my laundry investment?
13. How difficult is it to sell the laundry if needed?

Welcome! You will probably like the answers to the above questions but, like anything in life, there are winners and there are losers. The laundry business has long been known to offer high returns. Also, laundromats are easy to operate. It is also known to be an All-Cash-Business and a Safe Investment. All of these statements are, or rather, can be true. The coin laundry is in fact a “Necessity of Life Community Service Business.” The need is there so the opportunity exists, but the reality is that each investor can and will run their laundry business in the manner that they see fit. It is dangerously easy to get lazy when you are in the laundry business. Deferred maintenance should always be expected.

Laundry owners all share one common trait: all are very independent. The key for you, the investor, is to understand that the laundry business is a timeline business, and your success will be largely determined by your understanding of this single fact and how you choose to handle it. Most laundry owners run their businesses too passively, minimizing the quality of service to the customers and in doing so, they are leaving a lot of money on the table. This is the stuff of a greater opportunity.

We will be discussing the successful laundry and its operations, strategies to advance it, and the very important timelines that you should understand and consider before acquiring a laundry. This book is not intended to puff up the business or to push you toward investing your money. The purpose of this book is twofold: first, to demonstrate the fantastically diverse opportunities that are available to you and how you can succeed, and second to urge you to look deep inside yourself and test your commitment before entering this business. I need to warn you that if you aren’t aware and prepared for the hazards, laundry ownership can turn into a truly miserable experience.

Let us begin by looking at a single average priced laundry and cast a realistic understanding of the returns that you should expect. A caveat, in this case, the laundry is bought without excessive deferred maintenance and operations are consistent with the market. This may help simplify the base level financial picture for you.

Understanding the Return on Investment (ROI).

Throughout this book, we will refer to the ROI, with reference to a level of 20%, cash on cash as a base buy-in level. This is completely subjective and variable to the market and location and other comparable opportunities, the current cost of money, and timing. It is important to figure out the acceptable multiplier and adjust the formulas and examples based on the current conditions. The 20% buy-in level is the most expected level of return by most laundry buyers at the base level. However, that return must be verified and also be sustainable.

With that in mind, the minimum-return at base levels that one should expect to earn in the investment of a laundromat should be something like this example,

• Acquisition price = $400,000.00
• Down payment = $150,000.00,
• Finance $250,000.00 over 7 years with an estimated Monthly Loan Service Payment of $4,200.00
• Total Discretionary Monthly Cash Flow = $6,900.00 = Annual $82,800.00 = 20.7% return of total investment
• Cash on Cash return = $2,700.00 = $32,400.00 = 21.6% of cash investment.
• Asset Value at end of term is the variable, but it is likely 20% or more above your original down payment.

Note that the laundry must have a reasonable lease and a path forward.

This is the promise, and this is also the fact, but don’t forget the caveat. These equations are quite typical and consistent, regardless of the purchase price. There are exceptions, of course, and various market areas and regions may differ and therefore be working on a far different valuation style. In these situations, laundries with certain circumstances will require added discovery and valuations. All this said, a greater opportunity awaits your ongoing investment.

In our example, we are using the base level investment scenario. A clean laundry, with good working equipment, free of serious deferred maintenance, with a model level lease. The primary elements of value are within preferred guidelines, which will become clear to you as we continue.

There is an added value that comes from your own efforts. There are elements that if you modify and improve them, you will increase revenues and better enjoy your business. If you were running the business with only the minimum efforts, keeping the laundry clean, the equipment running, having the laundry well-lighted and safe for your customers, then the business should continually perform and improve. You must also maintain the lease. Given all of that, then this above example represents the minimum return that you should expect.

Your first challenge is in understanding the caveat and having a plan to correct any issues related to it.

Is this investment safe? Yes. Since it is likely, looking at the above example, that the business would still be valued at or above the $150,000.00 that you originally put down; there is only minimal concern. Only the loss of the lease, which is largely within your control, or an atypical market change would hurt you. So, the fact is, that even in a situation where the owner has been neglectful of the business, the 20% cash on cash return is still likely. Quite frankly, if the full experience were less than this level, the buyer would likely have made serious errors from the beginning, possibly failing to do Good Laundry Diligence and/or have failed in discovery and been unaware of many things, including how the business works. Or possibly had been taken advantage of during the transaction. Yes, this all happens. Clarity and awareness are critical elements of the acquisition.

The laundry industry is well solidified and part of American life. It is a very stable industry. As new investors enter the business, many will do well, and others will do poorly. Only some investors will see the larger opportunity that this business has to offer. For those that do, the opportunity is huge.

The opportunity to make a fortune is realistic, even for those who enter this business with minimal investment. Of course, you may make either more or less than the example given in this text. Within two, five, or maybe ten years, you could be owning and operating three or more laundries with a tremendous cash flow, without digging into your own pockets for cash and still only using a minimal amount of your personal time.

This business stands alone in its general availability to any investor because of a continuous turnover of the “laundry for sale” inventory. This keeps the opportunity very healthy. There are specific laundry investment timelines that must be understood. Many influences will need continuing consideration; the costs moving forward can also be very high, so the need for forward planning is essential. You are not buying the history. You are...