About to place offer on first

[Jeff Marner]

Through some recent local real estate listings I became intrigued by the prospect of running a laundromat. I noticed my local self serve was rundown and decided to reach out and test his interest in selling. I’m about to submit an offer of roughly $80k for building, equipment, business, everything. The county accesses the building at $60k while its most recent sale price was $90k in 2007.

I’ve estimated this past years net income at $20k after seeing the buildings water consumption for the past 4 yrs. The owner says financial statements are forthcoming but he’s got another interested party so I feel I’m on a tight time crunch. I’ve done what due diligence a can with my real estate broker and he has given me some understanding of areas I’ve neglected research.

I will in all likelihood offer his asking price without seeing financials just because this worst this deal looks to me is break even. I’ll pay cash and have a building that would easily sell for $60k imho and have 26 washers and 20 dryers that would return something if worst comes to worst.

At $60k for the building am I stupid for not being more concerned with the financials? The net return before last tear was trending downward and I know I’ll have some work to recover the image of the store but before last year the net was roughly $25k. I believe a more present owner can overcome a lot of the stores current issues. Any insights or thoughts would be helpful.

[Jason Dodge]

You posted a few days ago so I could be late on this. The 2007 price was before the real estate led recession so disregard that. I just paid $325k for a building that the seller paid $600k for in 2007.

If the building can be repurposed and you still win, thats a no brainer. Having multiple strategies to cash flow is key. If you want to make the big investment and spend the $200k to retool you may have a big winner. $25,000 in annual net profit isn’t bad assuming that’s with a cleaning person in place and you could just run it as is. I would do some quick homework to make sure competition isn’t building nearby and if you have the right demographics and the right parking, maybe do a full retool and rehab and see if you can net $50k or $75k.

I bought a laundromat for $32k blind and never saw a financial statement at all from the seller. I walked in and saw multiple areas that I could use to improve revenue so at that price it really didn’t matter.

Jason

[Jeff Marner]

Thanks for the response, your last paragraph is probably the most encouraging. The place just feels neglected when you walk in and that’s what made me think the owner may be hoping for a way out.

At this point I plan to observe the business for a few months while also making cosmetic improvements. I hope to cashflow a gradual improvement in equipment but this year we plan to invest an additional 20-25k in newer used washers.

It feels almost too good to be true and I’m pretty leery of too good to be true. We’ll close on Jan 29 and take possession Feb 1, so I guess I’ll be in the forums this year seeking advice as I discovering all the things I didn’t know I was getting into start to reveal themselves.

[Jason Dodge]

If you can find multiple ways to make the business better. Like paint, lights, signage, superior customer service, all machines working, new flooring, super clean bathroom, and add some marketing, then you can improve the revenue. It doesn’t change overnight. Think of it as a ship turning in the ocean, it can’t turn fast, it takes time.

I can’t state this enough though, drive the neighborhood and look at every vacant storefront or building and look for any new competition. A new location can take the steam out of your project and slow your growth.

I’d probably roll the dice either way because you have multiple avenues to cash flow if you repurpose the building. But everyone’s risk tolerance is different.

[Author]

Posts