average investment > My Journey into the World of Laundromats: Lessons Learned
My Journey into the World of Laundromats: Lessons Learned
Over the past year, I embarked on a unique entrepreneurial adventure by venturing into the laundromat business. While I can’t claim to be an expert in this field,
I’ve gained valuable insights that I believe can be beneficial for those considering entering this industry. Specifically, I acquired two laundromats—one through real estate ownership and the other through a leasing arrangement. Both approaches have their advantages and drawbacks, much like the laundromat business itself.
So, why did I decide to dive into the world of laundromats in the first place?
My primary career revolves around real estate, encompassing commercial, multifamily, and single-family rentals, as well as house flipping. Additionally, I own a real estate brokerage and maintain a strong online presence through my blog and social media channels.
With a successful YouTube channel under my belt, I’ve always had a desire to complement my real estate and online ventures with a brick-and-mortar business.
In 2022, I acquired a property that included a liquor store and a mini-mart, an experience that I found to be quite rewarding. However, the same year, I also purchased a bar, an endeavor that turned out to be far less enjoyable and successful.
It was during this time that I encountered Brandon from Investment Joy, a fellow businessperson who owned laundromats. Watching him collect quarters and witnessing the apparent success of his laundromats piqued my interest.
Even before my liquor store acquisition, I had contemplated entering the laundromat business. In fact, I once attempted to convert one of the bars I owned into a laundromat, albeit unsuccessfully. My true awakening came when I acquired an 8-plex with coin-operated laundry facilities, and I discovered my passion for collecting quarters.
However, I faced a significant challenge: starting a laundromat from scratch seemed incredibly daunting, and I had never come across an existing laundromat for sale in my area.
Thus, my initial attempts at establishing a laundromat were met with failure. Here are some of the hurdles I encountered:
- Water Shares: The city required me to provide two shares of water to obtain approval for a laundromat in my building. In Northern Colorado, each share would have cost me a staggering $70,000, assuming I could even find available shares.
- Equipment Costs: Purchasing all-new commercial washers and dryers for my relatively small building was projected to exceed $200,000. Commercial laundry equipment comes at a premium, and financing options are often necessary.
- Infrastructure Upgrades: In addition to acquiring new equipment, I needed to make substantial upgrades to the building’s electrical, gas, and plumbing systems. Many large-capacity washers demand 3-phase electricity.
- Flooring Requirements: Operating larger machines typically requires a concrete slab to support their weight and absorb the torque they generate. Unfortunately, my building had wood floors with a crawl space, making this a challenging task.
After crunching the numbers, it became clear that financing all the equipment and necessary repairs would push the startup costs close to $500,000—a considerable sum for a laundromat in a building I already owned.
I had initially thought I was clever in pursuing a laundromat venture, wondering why no one else had attempted it. I soon realized that the complexities and costs involved deterred most from starting new laundromats.
However, I didn’t give up on my dream entirely. As someone deeply involved in the real estate world, I continued to share my journey, including my unsuccessful attempt to start a laundromat, on my YouTube channel.
It was through these videos that someone reached out to me on YouTube, mentioning that their family might have a laundromat for sale in the near future.
This laundromat was relatively small and located in a small town, but it was a promising lead. Although our initial negotiations didn’t yield a deal—they sought to trade the property for a house, which I couldn’t provide—our paths crossed again six months later. This time, they were determined to sell, and after months of negotiations, we struck a deal.
I acquired an existing building with a laundromat, a small apartment, a 2-bay car wash, and a 600 sqft shop for $310,000. Considering the soaring real estate prices in Colorado, this was a reasonable investment.
My newly acquired laundromat featured only top-loading washers and outdated dryers, but it provided me with invaluable hands-on experience in the business. Currently, I’m working on upgrading the machines, a task that presents its own set of challenges.
So, what have I learned from my foray into the laundromat business?
- Machine Availability: Finding larger, revenue-generating machines proved to be a daunting task. While other laundromat enthusiasts on YouTube praised these machines, it wasn’t easy for me to locate them. Many companies dealing in new or used machines ignored my inquiries due to my small-scale operation. Eventually, I found some used machines from individuals, although this required extensive searching within my state.
- Maintenance Challenges: Securing reliable technicians to work on the machines posed another challenge. I reached out to every appliance technician in the area, only to discover that most no longer serviced appliances, especially not laundromat equipment. Although I did find some technicians, they were often located far away, charged trip fees, and took their time with repairs. I learned that many laundromat owners choose to perform machine maintenance themselves.
- Complex Installations: Installing larger machines was far from straightforward. These machines demanded a concrete pad, 3-phase electricity, and experienced professionals. Given that my small laundromat was housed in a building with a wooden floor and a crawl space, the feasibility of utilizing these large machines remained uncertain.
- Parts Scarcity: Procuring replacement parts for machine repairs proved to be yet another challenge. Despite identifying technicians capable of servicing the machines, some necessary parts were no longer manufactured and were out of stock everywhere.
- Used Equipment: While new machines are readily available but expensive, used equipment represents a more cost-effective option. Although locating used equipment can be challenging, it does occasionally become available for sale. Some sources insist on the necessity of new machines, but I encountered others who swore by used equipment. Investing in used machines, which may cost around $40,000 instead of $200,000 for new ones, could be a viable alternative, even though it might entail more frequent repairs.
In conclusion, my journey into the laundromat business has been a rollercoaster ride filled with valuable lessons.
Although my laundromat ventures haven’t yet become profitable, I remain optimistic about their future prospects. It took time to familiarize myself with the intricacies of this industry and to establish a network within it.
Currently, I’m in the process of enhancing my laundromats and documenting every step of the way.
Additionally, I recently assumed the lease of a larger, more modern laundromat, and I eagerly await its performance once we open for business. My journey into the world of laundromats has been a testament to the challenges and rewards of entrepreneurship, and I look forward to what the future holds in this unique business endeavor.
