by Laura Dobbins | Blog
So it’s been a few quiet months (for the blog, at least). However, behind the scenes it’s been far from quiet. More like a herd of elephants all wearing tambourines and blowing those annoying birthday horns while a rocket takes off in the background. Can you picture that? Yeah. That’s about right.
Last you heard, we were in escrow to buy our second store. And on January 1st, just as planned, we closed escrow on what is now called Lincoln Village Thrifty Wash.
I can tell you that it was/is a major fixer, but we were able to get the price down to $28,000. Because it was so cheap, we paid cash. But it needed a LOT of work, as you can see below.
And it’s profitable, but not by much. We essentially bought the customer base and sewer hookups, because not much else was worth anything. Most of the machines are 30 years old, but we knew we could get in there, rehab it and make it a successful location.
So we’re slowly getting it fixed up…and there will definitely be “after” pictures…at some point!
And as to our first location, things are going very well. Our remodel is almost complete. We had the floors done, and we also built new bar-style seating with integrated outlets so customers can charge their devices while they sit and enjoy the free wi-fi.
BEFORE…
and AFTER…
A New Competitor
But as life goes, just as we were counting down to a romantic holiday in Paris for Valentine’s Day, we got some bad news. It actually gave us a knot in our stomachs. The broker that helped us buy this first store called us with an inside scoop that a competitor was looking to build a new store just down the street from ours. Seriously? No bueno.
So as soon as we returned from our vacation (and even while we were on vacation), we started brainstorming ideas to make sure we either convince them our store is so awesome that it’s not worth competing with us, or make sure they aren’t successful if they do decide to go through with the build.
The good news is that an owner in our position is already ahead of the game. The new store isn’t going to be that big and we already know what they are paying for it. $750,000. Yes, that is a 6-digit figure, and not a typo. They will have to bring in so much money just to break even that it’s going to be difficult for them to stay in business. And they have a very strong competitor, ahem, right down the street. We’re in a more convenient location in a major shopping center and our customer base is established.
Are we worried? Not anymore. At first we were, but after talking to other owners who have experienced the same thing (and their stores aren’t as nice as ours), we don’t think the competition will hurt us too bad. Even if 15% of our business went to them, we’ll still be making good money, and they will be struggling to survive. The new store isn’t supposed to open until early 2017, so we’ve got plenty of time between now and then to improve further and build up our customer base even more.
The Latest Laundromat Numbers…
We’ve now owned the first laundromat for over a year, and the other for only 5 months. I haven’t run the numbers for the second location yet, but the first location I have some updated figures for you. (And with everything going on, I’m lucky to even have those.)
In our first 12 months in business, our gross income blew past the prior owner in both his last 12 months, as well as his higher 3-Year Average. And our net profit just surpassed his 3-year average as well.
Net Profit is NOT Cash Flow!
A reminder, however, that Net Profit is not Cash Flow. Net Profit (aka Net Income) is just the Gross Income minus the Operating Expenses. It does not take into account any debt payments an owner may make. This is because debt is unique to the owner, and not to the operation of the store itself. This allows for an apples-to-apples comparison of profitability between stores because it eliminates the effects of financing.
Once we account for the debt payments we made towards the purchase loan and the new equipment loan, the Cash Flow is closer to $31,000 for the 12 months. And technically, we also rolled a portion of that cash flow back into the business as part of our ongoing improvement efforts, which then increased the value of the asset itself. But thankfully, those are one-time costs.
So when you go to compare one store’s profitability to another, you’ll only compare net income figures. Then from there you can determine what your actual cash flow and ROI will be after financing (if any).
Well…I think that’s enough for tonight. I’m sure your eyes are starting to glaze over, and my fingertips are getting a little numb.
Until next time…
11 thoughts on “We Closed Escrow on Laundromat #2!”
Welcome back fellow Half-a-Millionaire! 🙂
Thanks J! It’s good to be back. I didn’t realize how much I’d missed it until I started writing this post.
Cool update.
Your yard reminds me of my projects right now. Redwood decks, and pergola’s.
I have been looking through dozens, or hundreds Laundromat listings at Bizben.
Do you have other regular places you looked for them.
Since beginning my education about all this a few weeks ago, I have been obsessed with the idea.
I just got the heads up from my lender. They will loan me 100%. There is risk with that. It looks like cash flow for a typical Laundromat will be somewhere just above or below expenses, and the loan will be against my property. If this works out, I might go in full force and by four more the following year instead of flipping houses.
I dream of having ten with camera view of all of them in my office.
By the way, here is an idea I thought of. Get one of those reverse coin machines where people put in the pennies, nickels dimes etc to receive dollars….or hopefully quarters they will need.
Being a coin collector, I bet every once in a while valuable old coins will get dropped in, besides the 8% it charges the customer.
I am going to order that book you suggest in this blog.
So anyway…where else do you, or did you look for Laundromats?
And I seriously do love your financial turnaround story. Since I am making my comeback, we are on much of the same path……and ……I was looking at drum sets…….Its either a “harmonic convergence” or..
https://www.youtube.com/watch?v=XVSRm80WzZk
Thanks,
Martin
AKA ohgeewhiz…AKA zazaza…..
Hey Martin, it is kind of spooky that our paths are becoming so parallel. 😉 And the other site we checked for listings was bizbuysell.com. Another option that works for some is to reach out directly to owners to see if they’re interested in selling. Some stores don’t even make it to the “open market” because someone just approached them about selling. All it takes is someone asking at the right time to convince them it’s time to sell.
I laughed at “I dream of having ten with camera views of all of them in my office”…or on your phone, right? We monitor both stores via our phones and tablets as well as our laptops. It allows for live viewing as well as playback. It’s pretty nice.
And even with the 8% fee, you’d HAVE to be a coin collector to want a reverse change machine. 🙂 At least with quarters they just get collected and dumped back in the change machine, almost like a token. But pennies, nickels, dimes…not so much. But it’s funny how many customers think that we deposit quarters at the bank every week. When we tell them that we just deposit the cash from the change machine, and the quarters just get cycled from the washers/dryers back to the change machine, they go “oooooh, yeah, that’s true!”.
Let me know how those drums start coming along…
Whoah, there is a lot to digest here. However, one question immediately comes to mind: Will there be a 3rd laundry location?
The remodel of our second store makes it feel like we already own a third one. Whew! But I think the number of laundromats you own is kind of like the number of kids you have. Once you have more kids than you do hands, it gets interesting. So anything more than two laundromats, and I think it would take over our life. We wouldn’t be able to take off and go on vacations as easily as we do now, that’s for sure.
If we wanted this to be our only “career” and support our family with the income, we’d probably try to build up an empire. But since we really just want to cash out in a few years, two is enough!
“But since we really just want to cash out in a few years, two is enough!”
Do you mean sell the laundromats or quit your normal job?
Well, both. But when I said that, I was specifically referring to selling the laundromats. Then hopefully I’ll also quit my ‘normal’ job soon after. 🙂 We’ve got a lot we want to see and do in retirement, and owning laundromats (as semi-passive as they are), would still tie us down too much.
I feel it is time to remind you again, and I’m sure you need no reminding, but I feel strongly about it so here I go: I’m 1000% behind the “Kauai Plan.”
I second that Mr. 1500!
I am looking into building a new store. I live in a small town with about 1400 residents and another 1350 in the neighboring town 3 miles away. The competition is 12 miles north, south and west, and 6 miles to the east. My distributor is suggesting putting in 16 machines and 14 dryers. Rent will be 1400 a month with no CAM fee’s and 6 months free rent. I have brought up in the past thirteen years to people in town that we needed a laundromat and everyone always agrees. So since I retired last year, I started looking for a business idea and stumbled onto Danny D’Angelos website. I did buy his DVD and got some good advice but unfortunately there are no laundromats near me to take over, hence building one. Any advice? My wife is a little leary because of the overhead expenses. Just wondering how can I fail with hardly no competition nearby? Wondering if you had any pros or cons. All the laundromat websites naturally say this is a great business to get into. Thanks!x
Comments are closed.