A laundromat is an interesting business idea that has been around for decades. Since laundry seems to be a ubiquitous chore in most households, it could be a worthwhile opportunity to build a business around it. If you want to give this tried and true business strategy a spin, keep reading to find out how to buy a laundromat.
How to buy a laundromat
If you want to buy a laundromat, it can be difficult to know where to get started. After all, it’s not as straightforward as buying a house or building out an online business, which comes with extensive resources.
To make it easier to understand, I’ve compiled a step-by-step guide to buying a laundromat below.
1. Talk to other owners
The first step in buying a laundromat is to talk to other owners. You’ll want to make sure you understand what you are getting yourself into before moving forward with a purchase.
Spend time asking questions. You can learn from listening to other laundromat owners.
If you hear something interesting, don’t be afraid to ask for more information. You might be surprised by how much owners are willing to share.
You can find other laundromat owners near you with a quick Google search along with their business contact information. You can reach out to them via email or phone to ask if they wouldn’t mind chatting with you about their business experience.
2. Do your research
Next up, it’s time to do your research about owning a laundromat. This would include determining the average costs of laundromats in your area, how much you are able to spend, what you can expect to make, and the time commitment involved in the process. Loopnet.com and Buybizsell.com are great places to start with assessing purchase prices.
As you take a look at the situation in your area, you’ll need to decide if the costs associated with purchasing a laundromat are worth it.
3. Find the right location
It’s also important to do some research into your own city when finding out how to buy a laundromat. In some neighborhoods, laundromats may not be needed, if the area is full of houses that all have their own washers and dryers.
But in others, a laundromat (or dry cleaning costs) is an essential part of life for many residents who don’t have a washer and dryer in their home.
As a business owner, it’s important to find the right place to begin your business.
You can do this by checking out several potential neighborhoods and finding out what kind of property – apartments, homes, condos, etc.- are most common. Then, find out if there are other laundromats in the neighborhood already.
In addition, look at parking, and how easy it would be for people to access the laundromat. This is all part of choosing a good location.
4. Work with a broker
Brokers often have their ears to the ground for potential laundromats for sale. If you are interested in making a purchase, you can likely find some leads through a broker.
Although the broker will take a commission on the sale price, they can also help you find a deal in the first place.
Planet Laundry explains that when you’re looking for a broker, you should check local laundry distributors, and you can also pay attention to ads to see who is selling laundromats in your area.
If you aren’t having luck finding a deal through a broker, consider driving around town to local laundromats. The current owners might be interested in selling, it never hurts to ask.
5. Run the numbers
As with all potential business ventures, it’s critical to run the numbers and answer the question, “How much does it cost to buy a laundromat?”. You’ll want to make sure that the business is profitable or at least has the potential to turn a profit.
According to Laundry Solutions Company, some of the costs to consider are the utility bill and your lease. The average amount spent for a laundromat per month can be anywhere between $4,000 and $8,500 each month.
Another potential cost is maintaining the equipment. Older machines tend to come with higher maintenance costs.
As you consider the potential for profit, make sure to take all costs into account.
6. Find the financing
As with more new businesses, you’ll likely need to make an upfront investment of capital. If you are like most entrepreneurs, you don’t necessarily have thousands of dollars sitting around to invest.
A few ways to finance the purchase include taking out a Small Business Administration loan or getting a business loan from your local financial institution.
Additionally, you could consider a personal loan.
However, the best way to buy a laundromat is with as little debt as possible. Which means you may need to create a savings plan and take some time to save before you make a purchase.
7. Manage the business
After you make the purchase, it’s time to manage the business. The basic management tasks involve keeping the machines operating, collecting the cash, bookkeeping, and making sure everything is clean for your customers.
Some tweaks you might make to the business include offering a start-to-finish service, which includes washing and folding clothes. Other potential income streams through your laundromat include coin-operated vending machines and selling laundry supplies.
As the manager and owner, you’ll also have many other tasks, such as marketing the business, hiring employees, and more, in addition to handling the day to day operations of the business.
Expert tip: Remember passive income takes time
Laundromats can generate passive income. But like all passive income streams, you’ll likely need to put in upfront work to make this asset produce a reliable amount of income.
If you want to buy a laundromat in pursuit of passive income, take the upfront work into account. Even if you buy an existing laundromat, it might take you some time to get up to speed on how everything works.
Is buying a laundromat a good idea?
Buying a laundromat can be a good idea, and the potential for profit makes buying a laundromat an intriguing possibility. Through the eyes of a business owner, buying a laundromat can make sense if you have the right location and opportunities.
According to the Coin Laundry Association, the average market value of a coin laundromat ranges from $50,000 to over $1 million. Based on the Coin Laundry Association’s estimates, these coin laundries can generate between $15,000 to $300,000 per year.
Reasons to buy a laundromat
A laundromat offers plenty of benefits to the owner. If you are considering this opportunity, explore the possible benefits below:
Passive income potential
The allure of passive income is that you no longer have to trade your time for dollars. A laundromat opens the door to one of the best passive income ideas.
Of course, the upfront effort of finding and opening a laundromat might not feel passive. But the upfront work can pay off in the form of relatively easy income later.
New income stream
Multiple streams of income may help you build a more stable financial future. If one of your income streams is unexpectedly disrupted, you can lean on your other income streams to cover your costs. A laundromat can add another income stream to the mix.
For example, let’s say you open a laundromat on top of your full-time job. If you lost your job unexpectedly, the funds from this laundromat could help you keep your family afloat.
Minimal labor costs
The business model tends to rely more heavily on machinery and equipment than labor. With that, it might be possible to operate a laundromat with minimal labor costs.
You might decide to tackle running the business on your own. Or you might hire an employee or two to help you run the operations.
In either case, reliance on machines can help you keep your labor costs down.
Cash is king
Laundromats operate on a payment upfront model. Unlike some other business models, which rely more heavily on providing credit to customers, laundromat owners can expect immediate payment.
As a business owner, the appeal of upfront payment is undeniably enticing.
Full-time or part-time commitment: How to decide
While learning how to buy a laundromat, you’ll want to know how much time it takes. Depending on your situation, you could opt for a more hands-off approach by hiring a manager for the business.
In general, the manager would open and close the facility, keep things clean, and source maintenance when required.
But you might choose to take a more active role, which generally involves a full-time commitment. As a full-time focus, you might be opening and closing the business on your own. Plus, you might handle customer issues more regularly.
The decision of full-time or part-time work will depend a lot on your financial situation, whether you plan to hire employees, and how much time you have to commit to the business.
How much does it cost to buy a laundromat?
Knowing how much does it cost to buy a laundromat depends, but will generally be anywhere from $200,000 to $500,000.
There are many factors that determine price, and you’ll also need to decide if you’re opening a brand new laundromat or purchasing an existing one.
In addition, do you need to purchase equipment? What else do you need to buy? Answer these questions to help you find your answer.
Can I buy a laundromat with no money?
If you are asking yourself, ‘Can I buy a laundromat with no money?’ you aren’t alone, and it is possible. Since buying a laundromat may cost hundreds of thousands of dollars, most new business owners will need to find financing.
In general, it’s difficult to purchase a laundromat, or get a loan to make the purchase, without a down payment. But if you have a solid business plan and ample experience, a lender might be willing to offer you a loan with no down payment involved.
So, is now a good time to invest in a laundromat? It’s very possible if you can secure the funds you need.
How is a laundromat valued?
A laundromat is valued through the process of valuation. Valuation is how you figure out what a business is worth.
Figuring out the value will involve many aspects of the business, including the net income, lease, competition, store, equipment, and more, according to Laundry Solutions Company. Furthermore, they state that valuing a laundromat involves using the net income and a multiplier that you choose.
In general, laundromats are valued based on a multiple of their Net Operating Income (NOI). You can determine the NOI of a laundromat by subtracting the costs from the gross income.
For example, if the business earns $200,000 per year and has $50,000 in expenses, the NOI would be $150,000. The size of the multiple is usually between 3.5-5x. So 3.5-5x the NOI will give you your answer for value.
Is buying a laundromat a good investment?
A laundromat can be a good investment because, according to Speed Queen Commercial, laundromats in the U.S. see a cash on cash ROI between 20% to 35%. That’s a fairly high return.
When compared to investments such as stocks with an average return of 8%, a laundromat seems to be a good investment. But you’ll have to decide for yourself whether or not a laundromat makes a good investment for your portfolio.
What do I need to know before buying a laundromat?
Before you jump into your laundromat purchase, here are some helpful things to know before buying.
Financing costs can add up
If you choose to finance your laundromat purchase, be clear about the terms of the loan. You’ll want to determine exactly how much the financing is costing you. It’s important to factor these financing costs into the overall profitability of the laundromat.
As you look for financing solutions, shopping around can help you save big on interest charges.
Maintenance might be involved
Laundromats rely heavily on machinery, which can break. When a machine in your laundromat is out of service, it’s missing out on the potential to earn money for you. With that, getting it back in working order quickly is a top priority.
As an owner, you can hire someone to help you repair machines. But if you are comfortable tackling these projects yourself, you might save significantly.
May need to hire employees
Laundromats are relatively hands-off. After all, the machines handle the clothes for you. But many laundromats need employees on hand to help customers, keep things clean, and offer extra services.
If you aren’t comfortable hiring employees, then opening a laundromat might not be the right solution.
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