lease the laundry room out for 40% profit from washer/dryer or purchase your own?

Question

Hey guys,
we wanted to replace an old dryer in our 4-plex. Our options are:
1. PURCHASE a new Speed Queen gas dryer 870$(with the installation, delivery, etc) that we OWN and collect all of the profit. But there are upfront costs and also we take care of maintenance once issues come up

2. LEASE the laundry room for 5 years to Speed Queen, and collect 40% of the profit. They will install their own washer and dryer and will service them once it's broken down.

I am wondering what is more cost-efficient in the long-run.
My questions are:
a. how much money do you usually collect a year from running 1 machine?
b. how much is the maintenance of the machines per year?

thanks!!!

Dale Osborn · Answer

Gerry: As I stated - you will not make money from the machines - it is only a convenience for your tenants that you provide for them. The lease is put together by their attorney and you need to read the fine print. Usually renews for another 10-15 years at a time unless you give them WRITTEN notice 6-9 months prior to the lease expiring. In addition, if you decide to go with a competitor, they reserve the first right to match or beat the other companies rate. The other companies know how the other companies writes their lease so will not even bother giving you an estimate to take over the lease. For small complexes, they will come out with smaller amounts, but it is an incentive for you to resign and you keep this and next owner is stuck with the lease in place just like you are stuck in taking it over. If you want to try to break the lease - better have a good attorney on your side and plan on them fighting you in court.

Gerry M. · Answer

I'm buying a short sale that has an existing laundry room lease that I'm told I must assume. Is it common to receive a lump sump similar to your decoration allowance even for small 4plexes? Trying to figure out if it's possible to get out of this lease somehow, if I decide I want to operate them myself. Also, is there a rule of thumb for how much these units make based on number of units?

Andrew Jones · Answer

I have a 50% split in my 6 unit. I make little to no money from laundry.

I once had a tenant that I evicted come back and steal the laundry machine. I filled a police report and they were easily found, but the machine was wrecked. The company I have a split with replaced the unit and I didn't pay anything.

Al Williamson · Answer

Edita D. at my 8-unit, I get a check for around $40 every 3 to 4 months from my laundry machine lease. I believe I'm in a 40% split arrangement.

Coin op is the only way to go. Don't open yourself to free laundry. Every joker in town will come use it.

Best to you.

Dale Osborn · Answer

During our 10 years of apartment ownership, we had several leases with laundry companies for 50% of the take. First of all even if you owned the machines and were getting the full 100% of  the take - this will not reimburse you for the utilities you will use. The purpose of having the laundry room is as a convenience to residents to use without having to go off site. You will have to assign a person or yourself to clean it daily as tenants do not clean after themselves. Then the tenants will overload the machines and cause them to break so they can save a dollar from not having to do a second load. Best way to recover difference is to raise the rent for having the laundry on site. Then Tenants also will have friends in other complexes so if you use a key system for the laundry, soon every one in the complexes nearby have a key to your laundry so they can also do their laundry without having to drive to a laundromat. Sometimes with a lease renewal, the laundry companies will give you a decoration allowance for use any where you want. We once used the $15K decoration allowance for resigning a lease for having the outside of the apartments painted.  Good Luck on whichever way you decide to go!

Phillip Dwyer · Answer

Does the purchase of a new machine come with a warranty?

Gerry M. · Answer

Hi Edita, I am in a similar situation with a 4plex I'm about to buy and I'm also in Vegas. However, I have an existing lease I'm considering re-negotiating or cancelling altogether. I interested to know about your experiences with these companies?