Has anyone Owned Car Wash and/or Laundromats? How does it compare to Rentals?

Question

Hello, the housing market has really slowed down where I'm from and prices have seemed to have gone up.  I'm looking to reinvest into other ventures until things have stabilized.  The returns and financing terms seems to be very favorable with 100% returns on the first year for laundromats/car washes.  I'd like to know which is better Real Estate or these businesses?  If both is good to have in the portfolio and how it compares to real estate? The cashflow comes in larger chunks in the businesses.

Example #1-

There is a laundromat for sale that has literally automatic everything (ie. doors unlocks at 8am outside/lights lights turn on by themselves etc).  This guy who owns the place only goes there twice a week and has a cleaner cleaning it everyday.  Brand new machines etc, and the returns are 100%.

Example #2-

Buy a rental cash for $50k, fix up for 15k, and rent out for $1,200.   Then refinance at 70% of new appraised value ($130k) which would be $91k.  I'd actually be able to get back 91k-65k=  approx $26k with a 91k mortgage.  I'd guess the property would cashflow approx $250-300 with a mortgage.  The advantage is I would get all my initial + extra cash in pocket to buy more.

The returns seems better with Example #2, but I don't know how many properties they will do this for.  I'm wondering which one is more hands off, and has more potential in the long run with less headaches etc.

Thanks everyone.

David Midgett · Answer

Greg:

I've owned self serve car washes and a laundry mat.

Give me rental houses any day.

The problem with self-serve is you either need to pay to have round-the-clock attendants- or pay to fix what the public does to your equipment.

Our laundry mat had brand new, card reader machines.  Somehow one of them broke every week.  Even with an attendant.  People overload machines.  They won't empty lint traps. They let their kids hang on open doors.  They leave ink pens in the dryer for the next poor soul.

The car washes are even worse.  People steal the wands, brushes, vacuum houses and anything not chained down.  They pressure wash old engine blocks with your recycle grey water.  They rinse cement into your drains.  They dump tires in your trash cans.

And that is from actual customers.

Add in the crack head who breaks into the digital selector box because he's too stupid to realize the quarters fall down into a wall safe.  Or the kid who thinks he can run a dollar bill on a string into your change machine and pull out a stack of twenties.

Some weeks our checks from criminal restitution payments exceeds the coin collections...

Leasing the coin op businesses to hard working immigrant families was the best thing I ever did with these ventures.  They have family members on site to wash cars... or wash and fold clothes... which adds to the bottom line and prevents problems.

And it let me focus on my rental houses.

Brian P. · Answer

Laundermats, can be great, I had a young couple start asking me to find them about 40 years ago and the last time I saw them they owned over a hundred.

Also had another guy buy anything they didn't and I suggested he talk to the couple as a source. Many years later I saw him leaving his office in handcuffs, seems like they were good for laundering money as well as clothes. I asked the G-man how they found him out and they said the amount of water and electricity used was way to little to meet his income declarations, IRS computers can find all kinds of things I guess. Too bad, any time I got a laundermat listed it was a slam dunk sale.

Ryan M. · Answer

David - Thanks for chiming in. It would be nice to hear from more 'people in the trenches' than tire kickers.

Ken Latchers · Answer

This is not true at all.  Laundromats are a low margin business.

Also, a new laundromat opened in our small town and effectively killed the older existing laundromat.  This is still a business, and one cannot assume it will cashflow in any predictable manner

K. Mitchell · Answer

Its slightly off topic, but the most passive investment I have seen is leased cell phone towers. I had a client who installed them for a living. He ended up investing in a few of them on the side. He negotiated long term leases for them (like 20+ years), and that was it. The rent is a set amount, he has no expenses, and he doesn't even have to maintain anything.

I have heard billboards might be the same, as there is a company that will do all of the work for you once you get a billboard set up. I don't know much about those though.

Greg P. · Answer

Thanks guys.  Anyone who has owned a laundromat/car wash?

Rich Weese · Answer

I've always looked at RE as a potential PASSIVE income situation business. That is DEFINITELY not the story with laundromats/car washes. The owners tend to be on site MANY hours on  these businesses and don't take it into consideration in their balance sheets.

Also, sometimes these businesses are renting the location. You can get screwed by GREEDY landlords at any time. These will never run themselves like RE, for the most part. Good luck. Rich

Loc R. · Answer

I have been doing research and shopping around for a laundromat for 3 years now...here are some things to consider:

1.  Sellers ALWAYS fudge their #s.  It's too easy in such a cash heavy business.

2.  You are at the mercy of water rates.  That is one factor you just keep your fingers crossed on.

3.  You must set aside a certain % of your gross for replacement.  Replacement is a (very big) fixed expense.

4.  It is more time consuming.  Who is going to manage the coins for you?  Someone else?  Good luck with that.  Now you've just bought yourself a regular route in your weekly routine, so you better get something close to you.  In a laundromat with 80 machines, there will always be a problem with one of the machines.  You can have a repair man go out ($45+ a call) or learn how to do the "easy" fixes yourself.  That's like having one tenant call you per week with a problem, except that when one of your machines is down, that machine is making you ZERO money.

Shane Woods · Answer

This was going to by my post exactly.  Your homework must include finding out their motivations for selling, if possible.

Karen Margrave · Answer

I have never dealt with any, however; have heard others that have and it seems the biggest concern these days is what environmental liability there is or could be. For instance, with the new nanny state movement, there are concerns from some about polluting the air with "scents" and dryer sheets put out a scent. Will the EPA come in and tell laundromats they have to add some expensive filtering system? What about the water from the machines? Who regulates what on that? I would ask the County or City Departments on that and see if there are any special fees associated with laundromats or car washes, and if they know of any legistation in the pipeline that may impact the business.

If there's 100% return (and I highly doubt it) there has to be some reason the person is selling. DO YOUR HOMEWORK... and hopefully it's as great as it's been represented.

Has anyone Owned Car Wash and/or Laundromats? How does it compare to Rentals?

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