Laundromats and Similar Businesses as Real Estate Investments

[Ethan Brackin]

I am a 21 year old would-be investor looking to get into the world of real estate within the next year or two. I already have a general game plan set up but am trying to explore all of my opportunities before committing to any specific strategy. One of these opportunities I have been considering is investing in businesses like laundromats, as they supposedly can produce substantial cash flows (according to an investor I’ve spoken). I have a couple of questions regarding this investing strategy:

1. How much more challenging is getting into cash flow businesses (like a laundromat) than typical investment properties? (As opposed to SFH's or Duplexes, ect.)

2. Is it difficult finding actual businesses to buy? 

3. How long does it take to generate cash flow, and how would the cash flow compare to  “traditional” real estate investing? 

4. What are some other general challenges and things to consider when investing in these kinds of businesses for cash flow? 

Thank you for your time! 

[Cliff Benner]

From what I see and my experience, it is a bit hard to find one that is going to Cash Flow positively right away. You will have lots of expenses with the formation of a new LLC, lawyer fees, costs to start up payroll for this company, workers comp, new insurances, immediate repairs, etc. But you will be getting cash inflows that may reduce that burden.

You will have to stabilize the turmoil that comes with drastic change, and changes you implement to increase efficiencies. Where as a Turnkey rental has some of those same charges but can be rented and be a bit more passive, depending on the route you take. 

I would suggest working in your new business 6-12 months before you are able to see trends and find who can properly lead so you can step back from operations and focus on growth. 

Cash flow for businesses require more time which usually means higher returns in $ amount, % of CoC Return is more difficult, and keep in mind your time. my rental takes a hour a month and maybe cash flows $100, $100/hour is nice, but took $60k. My Bookkeeping is $65-$70/hour and but cost $1,000 to make it operational. I spend lots of time to automate and duplicate reports in order to save time to increase my efficiencies that help me increase the use of my time. I can't do anything to my rental to increase efficiencies in creating more income until it is vacant or the market decides I can.

Businesses will require workers, that require leading, and that requires more patience and more hard decisions/conversations to make. But can you find additional revenue sources for a business, yes. Sometimes it's not easy or cheap for Real Estate. 

For finding businesses, I use BizbuySell, Crexi, LoopNet, and Facebook. 

Good luck! I have interest in the Laundromat world too so let me know how this goes for you!