Triplex Laundry Room -- Is it really worth it?

Question

I just purchased a triplex in Phoenix, AZ and was recommended to install a laundry room on the property.  I received a quote to construct a laundry room and the total bid was for approximately $8600.  I'm not sure if it's really worth it, but wanted to get your thoughts?  I was told that this will help raise rents to be more competitive vs. comps in the area.  Anybody have any experience with adding a laundry room and is there any hidden costs / watch outs to be aware of?

Ryan Swan · Answer

@Brian M. In my experience, having a coin op laundry room is rarely about turning a profit, but more about tenants deciding to rent your apartment or one down the street that does have laundry. It's a high priority amenity that tenants actively look for. I installed one at my 7-unit Tempe property and it was a game changer in terms of tenants deciding to rent there.

Seth Borman · Answer

We have two apartment buildings (7 and 8 units) and another under contract (5 units). All three have coin operated laundry rooms.With 20 years of data we have assessed that the laundry room pays for itself and allows us to crack into a slightly higher class of tenant with lower turnover. Whatever we make in coins is paid out in utilities, repairs and new equipment. It's also a pain in the ass to collect the coins, as well.

If we were making large changes to the buildings we would renovate the units and put a washer and dryer in each unit. No coins to collect, no cleaning to be done, and once again you can drive up rents and get better tenants.

Kyle Benham · Answer

@Nathan G.

As stated in my post, I am breaking even on the cost of machines alone when you factor in utilities, but I figure I am getting $25+ per month in additional rent which is where the profit comes from to make up the cost of putting in a laundromat. I never said I was making any money off of laundry being done. That is a net of $0. But I don’t deal with any headaches of broken machines and having to hire someone to come fix them or replace them. I get the benefit of higher rent which on 4-units is at least $100 per month (obviously I don’t know what the actual number is and I feel I am

being a bit conservative). That is more than an 8% cash on cash yearly return for an $8600 add on, which is my minimum number when renovating or improving a property. As long as he can break even on the machines, the return would meet my personal numbers (assuming $75/month gross increase on rents) but to each their own. Everybody has their own numbers and what makes sense, the purpose of these posts are to allow others to get different perspectives and see what works for them. Good luck!

Kyle Benham · Answer

@Brian M.

I purchased a 4-plex in Phoenix back in the Spring, it was my first REI. It came with a communal coin washer and dryer on a lease. My agent (who invests in multi-family himself) recommended I keep the lease instead of putting in my own and I followed his advice. After renovating one of the units I learned through advertising the newly renovated apartment that many clients really liked the onsite laundry machines. I don’t pay anything for the machines as they are in a lease agreement where the company gets their $50 monthly upfront and then we split any money on top of that 60% to me and 40% to the company. I don’t barely make any money off of it because only 4 units are using it (averages $60-70/month), but it definitely increased my rent on the unit I renovated and then rented out two months after buying the place. The best part is the tenants can call the number on the machine to get a technician out there without me having to do anything. And when I have called, they have been very responsive and I don’t pay anything for repairs and I don’t have to worry about it at all, so I don’t care about making money off the “laundromat”, but I will definitely have one in all my future investments as well. So I definitely think you could make your $8600 back over the course of maybe 5 years just in rents. Good luck!

Roy N. · Answer

Brian:

IMHO a laundry room is not worth it in a smaller building (say less than 12-16 units) and you will get better return (and less operating expense) with en-suite laundry.

Tom S. · Answer

@Brian M.  I'm not sure if I would do it for a triplex especially if there are laundromats in town.

I did it for a 5 unit I purchased which we rehabbed, so it was inexpensive to put the laundry in, plus there are no laundromats in the area.  So that was a nice selling point for tenants.  It's coin-op and it covers my water and water heater costs.

The main drawback is if something breaks from tenant use, no one will fess up to it. Like someone putting in a feather pillow that breaks and clogs up the system.  $200 or so and it's coming out of my pocket.  Rare but happens.

- Tom

Dennis M. · Answer

I charge extra each month to cover water because I pay the water bill . I bought the washer the dryer and utility shop lighting . I collect just enough to break even and some would argue that’s foolish however I only buy 100$ washer and a 100$ dryer . If it fails it’s not some huge financial lose or anything .

Why would I add responsibility and potential headache because in lower income areas laundry mats are really expensive ( price gouging) and often scary full of thieves weirdos druggies rift raft beggars . Offering laundry will keep the tenants from leaving for an apartment down the street and retains them over time plus if you do have a vacancy you can attract way more to your building and get higher rents . We all know turnover is your biggest cash flow killer That in itself is worth the trouble to throw some laundry appliances in

Ace Goodrich · Answer

Hey,

@Roy N

How would your numbers look to justify better return(s) with laundry ensuite? Wouldn't that mean more machines AND having to maintain each unit's WD separately?

Thanks for your perspective.@Roy N.undefined

Nathan Gesner · Answer

Multi-family units often have a common area that Landlords take responsibility for. I have multi-family unit that have hallways, storage, and laundry. There are five meters to the building, one for each unit and one for the common areas. I pay the common areas and Tenants pay for their individual units.

Even in a larger building, Landlords typically pay for lights in the parking lot, exterior lights, water for landscaping, hallway lights, security systems, laundry rooms, etc.