How Much Does a Laundromat Cost?
The big question on everyone’s mind is: How much does a laundromat cost? The answer is: It’s probably more than you expect. Let’s go through the 27 essential costs to budget into your laundromat acquisition. It may feel overwhelming when all of these things start adding up. Keep in mind, this is the largest barrier to entry in the laundromat industry for most people. If you can find a solution to funding your deal you’ll have a huge advantage over those who give up because it feels too difficult.
There are plenty of solutions to the problem of funding your first laundromat, so don’t let this list discourage you. We cover that on our blog and on our YouTube channel.
If you haven’t yet, you might want to go back and read How To Find the Best Laundromat Deal, Entering the Business With the Right Mindset, and learn the Three P’s of Location Pre-Analysis after going through this article. And you’ll definitely want to download and fill out the FREE Minimum Deal Standard Worksheet. It will give you an idea of how much you want to spend on a laundromat and how you expect it to perform. Use the 5 Money-Saving Minimum Deal Standards article to help you fill out the worksheet. Go do that now. Seriously.
You should already have a purchase budget in mind from filling out your Minimum Deal Standard Worksheet. Now we’re going to break down what to expect in your budget to help you refine what you can actually afford.
One of the downsides, which turns out to be an upside, to laundromat ownership is that there is a high financial barrier to entry. It takes a lot of capital to purchase, set up, and run a laundromat. Again, probably more than you expect. This can make it challenging to break into the business. But, the upside is that it makes it challenging for others to break into the business, as well. When most people find out how much it costs to buy a laundromat they will just walk away. This leaves space for the go-getters to find a way to overcome the obstacles and break into the business. That makes the high entry cost a beneficial barrier for you.
How Much a Laundromat Costs
How much does a laundromat cost?
A typical existing laundromat will end up costing you between $200,000 and $750,000. Of course, there are plenty of deals that are listed for less than $200,000 and there are laundromats that list for well over $750,000.
The list price is only one cost to factor into your acquisition, albeit the greatest cost. And if you’re planning on purchasing a laundromat for less than $200,000, just be aware that you will likely be putting in new machines and doing some renovations on your store. It will likely bring you up over that $200,000 threshold when it’s all said and done.
Let’s run through most of the acquisition expenses you’ll incur. It will clarify how much you will actually need to have or come up with to buy a laundromat and get it up and running.
This is a pretty comprehensive list of expenses you need to plan for and budget for before you start putting in offers on laundromats. There’s nothing worse than not being able to get through your first year in business because you didn’t plan for all of the expenses you will incur. Here are the 27 essential laundromat acquisition budget items.
Assuming you finance your deal, likely your largest chunk of investment capital will be in your down payment. This item is no doubt in your budget already. You can expect to have to put down 35%-55% of the acquisition cost as a down payment. That means you need to plan on putting down anywhere from $70,000 on the low end to over $400,000 on the high end. There are plenty of creative ways to invest less of your capital than that up front, so don’t let those numbers discourage you.
Loan Fees and Points
Again, assuming you finance your deal, you will probably pay some fees for the loan. You’ll possibly some points up front (points are payments made to lower your interest rate), as well. The amounts and percentages can vary widely based on your loan amount, your lender, and your credit history. Shop around for lenders if you’re going with a conventional loan.
You’re buying a business that hopefully will be producing income for you beginning the day that you are handed a bucket full of keys. You may be thinking, as I did my first time buying a laundromat, that you don’t need much in the bank since the business will support itself. While this is hopefully true, I still highly recommend having at least 3 months’ operating expenses in the bank.
This may seem like a lot of money, and it is, but you need to be prepared for the worst case scenario. What if the seller mislead you and the store doesn’t make as much as they led you to believe? What if your boiler breaks down and you have to replace it unexpectedly? What if a drain gets clogged and floods your store and you have to close for a week to get it cleaned up, get your pipes rootered, and make repairs to the damage from the flood?
The point is, it is still sound advice to expect the best but plan for the worst. Having at least 3 months’ operating expenses in the bank will help you weather any early storms when your business will be most vulnerable to catastrophe. Don’t bypass this requirement to buy a store before you’re ready. You’ll be gambling what you do invest and leaving it vulnerable to loss should the worst case happen early on.
As a related side note, I also recommend that you keep at least 3 months’ expenses in the bank at all times as an emergency fund, even after your store is profitable. Expect the best, plan for the worst.
Consultant or Mentor
I highly recommend having a third-party consultant or mentor whose paycheck (if you pay them, and you should) is not tied to you purchasing the laundromat to help you through the process. They can help you analyze the deal, especially if it is your first. I know first hand that you cannot rely on a broker, whose paycheck is tied to you closing the deal, to have your best interest in mind, even if that is their fiduciary duty.
I would also highly recommend that you hire a consultant that is an experienced laundromat owner. There are some unique peculiarities to our industry that an experienced owner will be able to help you navigate. Trust me on this one. Hire a consultant to help you purchase a laundromat deal. I consider it a necessary investment. It could save you thousands of dollars. In fact, probably would have saved me literally tens of thousands of dollars on one of my laundromat acquisitions.
This investment will pay you back multiple times over. You can find an experienced owner to consult with by checking out one of the laundromat forums, or find a laundromat consultant.
We do provide that service, as well, but this is genuinely not a pitch for your business. It is a plea for your benefit us. Use us if you feel that’s the best fit for you, but even if it isn’t, find a qualified consultant!
If you do want us to advise you through a purchase or sale of a laundromat, you can schedule a Free 15-minute Coaching Call with me to talk through your situation.
While we’re on the subject of investing in a team to help set you on the road to success, another wise idea is to seek some legal council. There are two specific roles to task a lawyer with.
The first task I would give to a lawyer is to help you include contingencies in your purchase agreement in the event that the laundromat does not perform as advertised. Being an all-cash business, it can be difficult to pinpoint the real income of a laundromat. It is crucial that there is an agreed upon plan if the income is significantly lower than what the seller claimed.
The second task I would give to a lawyer is to read through the lease agreement and purchase agreement. A lawyer will be able to alert you to any pitfalls that may be lurking in the legal jargon. I still highly encourage you to read through both the lease agreement and purchase agreement yourself. It’s one of the few things I did right while purchasing my first laundromat.
The third reason you may want to employ a lawyer is to set up a corporation or an LLC for your business. You definitely can use a do-it-yourself program, but it may be worth the extra couple of hundred dollars to hire a lawyer who will make sure your company is set up correctly. The lawyer should work with your CPA to help you minimize the taxes you incur, also.
Another crucial member of your acquisition team is a CPA, or at least a knowledgeable accountant. The CPA will collaborate with your lawyer to make sure your company structure will allow you to minimize your tax burden. A good CPA will also help you look over the current owner’s income and expense reports, bank records, and tax returns. Verifying laundromat income is the pinnacle task of laundromat acquisition and having a professional eye looking over the numbers with you can only help.
Your lease and your machines are your business so you’re going to want to take extra care to make sure both are of sufficient quality. I highly recommend paying a service technician to inspect the equipment during the escrow period. Have him or her record the make, model number, serial number, year manufactured, condition, and estimated life left in each machine. This will be crucial information for planning your steps forward after you acquire the store. We have a FREE Store Details worksheet to download to record all of this information on our Resources page. Use it.
Having your water heater/boiler inspected and acquiring the same information will be helpful, as well. I recommend having an electrician inspect your breaker boxes and power lines to make sure you’re not going to have a problem getting enough power to your machines, especially if you plan on replacing your machines or adding new ones.
Finally, hire a plumber to inspect the drains to make sure you’re not going to have a problem with cracked lines, major clogging, etc. The idea is to have as clear of a picture as possible as to the condition of the store and what you should expect in terms of major repairs or upgrades.
Your machines, your plumbing and your electrical are the lifelines of your business so make sure they are in good shape unless you’re already budgeting for them to be replaced.
If you are planning on upgrading any of the equipment in the store, it is best to know what costs the equipment supplier will expect from you. They may charge you fees, prepayment of interest, and/or a down payment. If you’re already in communication with an equipment broker and/or a financing company, ask them to give you what your out-of-pocket costs will be. It will vary widely. It will depend on factors such as the net operating income of your store, your personal income, your credit score, how much money you have invested personally, current interest rates, and other factors that the lender will consider.
Although your main source of revenue will come from your wash and dry revenue, one of the perks of buying a laundromat is the ability to have multiple income streams. One of my favorite value-adds to a new laundromat is the addition of other forms of income that optimize space that was otherwise being wasted. Common revenue streams are soda vending machines, snack vending machines, soap vending machines, video games, toy vending machines, paid bathroom locks, small rides, vended massage chairs, ATMs, a water store, in-store advertising, and a host of other creative ideas. You can opt to purchase them yourself and include the cost of the machines and merchandise in your acquisition budget. You can also allow a company to place their machines in your store. You’ll share in a profit split, which will not require any capital investment from you.
If you’re working through a broker, the broker should provide a demographics report for you free of charge. But if, for some reason, they don’t provide a report or you’re not working with a broker, you can order a demographics report yourself through the Coin Laundry Association. The demographics report will tell you the number of people living around your potential store, the household make up of the population, the ethnicities of the population, and more.
It should give you an idea of how many laundromats the area can support, what kind of customers your potential store should target, if the area is growing or declining, household income, how much traffic you might expect on a weekly basis and more.
Lease Down Payment
Similar to a lease on an apartment, you’ll have to put down 1-2 months of down payment to secure your lease. You should get that back if/when you sell your business. On the front end it is money out of your pocket, so include it in your acquisition budget.
Interest on Loan Payments
Often, as part of the closing costs, you will prepay interest on your loans for 1-2 months. You should get an estimate of all closing costs before the close of escrow and it will include a rough figure on what to budget. This will vary depending on the actual close date. But you can estimate a rough figure by taking your loan amount, plugging it into a loan calculator online, and seeing what interest will be for the first month or two.
If you’re buying a coin store or hybrid store be prepared to purchase the coins that are in the store the day you close. This is usually anywhere from $1,000-$7,000. That is a lot of quarters. Each time I have bought quarters from a previous owner we have gone through the store together and collected and counted all of the quarters from the machines as well as the change machines. I then cut a check for the amount and dumped the coins back into the changers.
Usually inventory is not included in the sale of the laundromat so you will need to purchase that separately. I have purchased inventory for a flat rate that we estimated. I have also gone to a wholesale store with an owner to record the price of each item and then counted each item to determine the exact cost. It is up to you and the seller how you want to determine the value of the inventory. You can negotiate it into the deal if the seller is willing.
The utility companies will require you to put down 1-2 months of an average bill up front. Usually they hold onto it to make sure you will make your payments for a year and then they will credit it back to you over a month or two.
Sometimes, however, they will keep it until you sell the business. If that is the case, then I highly recommend purchasing a bond through your insurance company. The bond is a relatively small sum that you won’t get back, but it will allow you to recoup the much larger deposit to help with the other costs on the list.
You will need to set up various services such as utilities, a phone line, internet, and a security system. Each of these services will charge you a set-up fee to get everything switched over into your company’s name and to create a new account. Your business should support the monthly payments when you take over the business, but you will still need to budget in the initial fees you will be charged to get things up and running.
You will need to apply for a business license in order to operate in your city or county. It is usually a small yearly fee to attain and retain a license with a relatively small upfront cost.
When you operate a business you must be sure to follow all laws and meet the requirements set forth by your city, county, and/or state. Often this means acquiring certain permits to ensure that you are complying. Some examples are a health permit, a seller’s permit, and an alarm permit. These can have small initial fees associated with them that you should include in your budget.
You’ll need to carry insurance both to cover your equipment, and to shield you from liability should anything happen in your store. Whether you open a new policy with an insurance carrier or you assume the policy of the seller, there are usually some initial fees associated with the establishment or transfer of a policy.
Way back in point number 4 I highly recommended that you hire a consultant to help you through your acquisition process. This is because the knowledge and skill of others more experienced than you will help you accelerate your timeline to success. For a similar reason I highly recommend that you join an association such as the Coin Laundry Association or a mastermind group of laundromat owners.
Being around other people who know more than you will not only help you learn much faster, but it will allow you to benefit from the knowledge and experience gained on how to find, buy, and run successful laundromats without making the mistakes that the veterans have made to earn their knowledge and experience. Get around people who know what they are doing in our industry. It will take you to a new level much quicker than you imagined.
Unless you’re buying a turn-key store, there will likely be at least some renovations needed. Possibly extensive renovations. As you’re inspecting the store during escrow and pre-escrow, look for ways to improve the appearance, the atmosphere, and the function of the store. Simple things such as a fresh coat of paint or mounting a TV or two can really add a lot of ambiance to an otherwise bland store. The amount of money and time you will need to invest in upgrading your store will vary wildly. Getting a good estimate on the cost of updates before you close escrow will ensure that you are prepared for the expense.
There is a good chance that you will need to upgrade some or all of the signage of the store when you take over. It may be old and fading, you may be changing the brand, or it may not be present at all. Whatever the case, it would be wise to develop a plan of what signage, both inside and outside of your store, you will remove, add, and improve before the close of escrow. As a bonus, don’t forget to include any banners, sandwich boards, flags, or other types of signage alerting customers and passers-by that the store is under new ownership.
Speaking of getting the word out, when determining your budget for an acquisition don’t forget to include costs for advertising. You’re going to want to let people know that there is a new owner in town and that you’re bringing value to people in new ways. I highly suggest that you develop an advertising and promotional campaign to launch leading up to your grand opening. This will draw in as many people as possible to come in and check out your store.
Grand Opening Promotions
Once you close escrow on your new store, you’re going to want to do any upgrades you plan on doing and get your store in tip top shape as soon as possible. You’re going to want to do a Grand Opening.
The idea behind a grand opening is that you want to entice potential customers to come in and experience the new improvements and atmosphere of the store. You want them to feel excited about the new way the store is being run. They should feel like they are getting a better value than they would at other stores in the area. You’ll want your grand opening to be for a set amount of time.
Your goal is to encourage as many people as possible to come through your doors during the grand opening and then provide enough reasons for them to continue to come back to your store. This can give you a big boost right at the beginning of your tenure and provide some momentum for you to ride as you’re getting to know your store and your customers.
I suggest you develop a comprehensive grand opening plan. But in terms of budgeting for it, you’ll want to include $1,000-$2,000 in giveaways and budget at least $200 for other promotions and decorations.
If your store is partially attended or attended full time, you’ll want to make sure you have enough money set aside for at least one month’s pay for your attendants. Hopefully you won’t need to use it to pay your attendants but you want to be prepared in case you do. One of the stores I bought had a drastic dip in income the month I bought it and I needed to cover part of my attendants’ salaries out of pocket that first month. Luckily, I had the money in the bank, but it wasn’t budgeted for the business.
This is a better safe than sorry scenario. With all of the unknowns of buying a new business, take the advice of the Boy Scouts and always be prepared.
I have never once written a budget for something that has panned out to be precisely accurate. Have you? There are so many variables and unknowns that you will never be able to anticipate every expense that you’ll incur in buying your laundromat. I highly recommend budgeting in about 5% of the down payment as a buffer for miscalculations, wrong assumptions, and missed expenses.
Worst case scenario is you need it but you have it. The best case scenario is you have it but don’t need it. If you fail to budget it in up front you run the risk of needing it but not having it. Don’t take the risk, plan for it.
There is a lot of work that goes into finding, researching, buying, and running a laundromat. It can take a lot of time. You’ll invest time in looking for laundromats that fit your minimum deal standards. Once you find it and begin the process of vetting it, you invest even more time in researching it, visiting the laundromat, visiting competitors, running calculations, negotiating, doing coin counts, verifying income, escrow paperwork, and more. And while those things may not take money out of your bank account, your time is still worth something and it will cost you something to complete your due diligence.
For some, it might set you back on your favorite TV series, for others it might cost you time with your family, and for still others it may cost you actual hours that you could be making money doing something else. So, while you might not budget time into the cost of buying your next laundromat using set numbers, consider the cost and decide deliberately whether it is worth the cost or not.
Laundromats can definitely be run as a side business, but, unless you opt to have your laundromat professionally managed it will require your time.
The First Step
Now that we have answered the question, “How much does a laundromat cost?”, it is important that you take action. You will not reach your goal if you never take deliberate action toward those goals. And, once you begin taking action, it becomes easier to continue to take action. This is the principle of momentum at work.
Your first step toward laundromat ownership is easy! Just sign up for a FREE account with us to join our community, participate on our forums, and contribute your knowledge and experience on our blog and podcast!
Conquering the First Hurdle
If you’re looking at your bank account and feeling your dreams of laundromat ownership being crushed, never fear, there are more than 8+1 Proven Ways to Buy a Laundromat that don’t require wads of cash under your mattress. Remember, success at anything is mostly about your mindset. If you really want to be a laundromat owner, or tycoon even, you can find ways to make it happen. We’re problem solvers, so when you encounter a problem, take a deep breath and get to work solving it.
The question isn’t, “How much does it cost to buy a laundromat?” A better question is, “How can I come up with the capital to invest in a laundromat?” This question will get your mind working in the right direction.
Schedule a FREE call with me to talk more about how you can find financial freedom with laundromat ownership!