Coin Operated Laundry or Car Wash? Question please.

[Greg P.]

Hello, I'm thinking about purchasing either a coin operated car wash or laundry with good financials. My concern is that they are harder to operate than it looks. The laundry mat is in a mid-low income neighborhood and the car wash is in a 10-15k population town. Owners gave 3 years tax returns and show a good income. Has anyone owned a coin operated business? Is it worth investing in or is it better sticking with real estate? Thanks.

[Joel Owens]

Greg you would need to check water and sewer rates for the city or county you want to buy this in.

How much are the water rates compared to other areas?? Are there special assessments coming to fix the aging water and sewer systems at the the roads??

Have they been increasing water rates over the last few years or have they not increased the water rates for years and a big jump is fixing to take affect??

Have you looked into add backs?? If the owner is operating the business and you won't be you will be employing a manager so will lose that profit off the top as an absentee owner.

Those machines are expensive to replace so you would need to see how old they are.It's just like an old house or building with deferred maintenance.Everything might work when you buy it but the chance of things stopping to work will happen very soon and cost a bunch of money to fix.

You always buy the assets and NOT the liability.I can tell you I have had people come to me AFTER the fact buying partial ownerships into corps etc. and they are stuck.I do not know who advised them to do this but they were an idiot.

Now I have had to help them pick up the pieces.With the coin laundry or car wash make sure the building is owned so the lease doesn't keep going up or renegotiate the lease as part of the purchase.

Looking at books is fine but owners tend to manipulate the books and not the tax returns.The tax returns are usually more telling but people can lie on those as well but that takes big balls and doesn't happen often.If the coin laundry is older make sure if you own the building there is not galvanized going to the street for the water main.It's very expensive to dig up the road and replace with a copper line.You will also want to have the EPA phase one to make sure there is no contamination of the soils.

For competition you can look at applications for permits,businesses and new site plans in the city or county you are buying in.

You can also instead of buying outright have a 3 month period of running it with an option to purchase at the end of that 3 months.This way you get to see how it runs and decide if it was everything as presented or they were trying to "dump a dog" on you.

If they strongly oppose this they might be hiding something.I can see losing a small amount of option money if you walk away and not exercise the option but that is better than being stuck in a bad property.