Another business opportunity

[hardy]

I know you regulars must tire of these endless business opportunities, but I must put one up for scrutiny. I must add that this is the information as given to me by the seller and has not been independently verified.

Price: $200K - includes the building
Gross Income: $98K
NOI: $ 44K
No WDF service. Not attended. Coin-op. The rates are what all of the mats in the area charge.

Equipment:
30 Maytag top loaders; 15 are 18 mo old and 15 are 3 years old. @ 1.00/turn
4 Wasco 30# front loaders @ 2.25/turn

** Note: The owner says the front loaders sit unused most of the day and the clientele prefer the top loaders.

Dryers: @ 0.25/10 minutes
10 Maytag - 2 years old
4 Maytag - 5 yo
2 Maytag - 8 yo
4 Wasco
Boilers: x 3 all 15 yo.
Very large, but don't know the capacity. Owner says a single boiler keeps up with demand. One boiler is down, the third is kept in reserve. I suspect they will need replacement before too long.


Expenses:
Rent - $0 /ubbthreads/images/graemlins/grin.gif
Gas - 1000 - 1800/mo
Elec - 600 - 1000/mo
Water - 1000 - 1200/mo

The owner maintains his own equipment and has someone come in at night to clean. The doors are on a timer. No security cameras. The owner states he keeps the washing machines new to decrease the maintenance load, but says the top loaders are good for 10 years??

There was a new mat that opened across the street 6 months ago. Revenue initially dropped about 2000/mo, but has improved to approx 1200/mo off 2004 numbers.

Please let me know what you think.

Ozzie

[azkid]

What do you think? You can do a search on valuation and determine that 3x NOI is a reasonable value for mat, so you're looking at $100K or less for a building. Sounds good to me - buy it. Of course you didn't say anything about how old it is, or how big it is...must not be important.

[hardy]

I don't know the square footage of the building, but I'd guess 2500-3000 sq.ft. The building was built in 1972 and is a metal building with brick facade in front.

[Duane]

I noticed a $0 and a smiley face next to the rent amount. If you buy the building you should have the mat pay you a fair market value for rent. There are tax advantages to doing this.

This also brings up another good point. Create a corporation, probably an LLC, for the property and then create another corporation, again probably an LLC, for the laundromat. Run as two different businesses. This will protect the property from someone suing the mat and vice versa. Of course nothing is 100% protected, but this sure helps a lot.

Get advice from your accountant and attorney on these matters.


Have the property appraised to find the value of the building and then do your due diligence to calculate the value of the laundromat. These are two different values that must be determined separately. Later if you decide you don't like running a mat, you can sell it and still be a landlord.

The new mat that opened across the street is the reason he is selling.

I would be leary...

Duane.

[hardy]

Duane, thanks for the input. I too am concerned about the other mat. They (husband and wife) say they have run the mat for almost 30 years and are ready to retire. I have to ask myself if it might be worth his while to pad the income on his books to sell the facility for a higher dollar amt. I have asked for the water bills to verify income to my ability. I may ask for a guaranteed income for the first year of ownership in the contract if we get that far.

I had not considered selling the mat and becoming a landlord, but that would suit my existing work schedule better. Thanks for the input.

Ozzie

[JamesWash]

I sold one mat before.

There is no such thing as guaranteed income in the business world. Not even in the franchise business. The only place you can get guaranteed income (interest) is from the bank.

Don't dream too dearly, my friend.

[hardy]

Thank you for your post. I have not purchased a laundromat before, but I own several businesses including 3 mini storage facilities and my medical practice. In the past, I have requested and received gross income guarnatees from the Seller. Obviously, your experience has been different. Nevertheless, it can't hurt to ask.