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When you are investing into small businesses, it can be difficult to find a niche that suits you. After all, there is no single formula to make a business succeed. However, there has been a surge of online interest in recent years towards a particular business investment – laundromats.
Laundromats are an interesting business, because for those who have their own washer and dryer, you would probably never look at one twice. Yet, on sites like YouTube and TikTok there has been a buzz around investors buying and running laundromats as a trick to generate large sums of passive income.
So, are these claims true? Is owning and operating a laundromat a worthwhile investment that can help you make money in your sleep? Or are they an overhyped fad? Let’s take a look.
First however, if you are going to try this investment strategy, it is important that you meet with a commercial mortgage agent to discuss financing options. After all, things are going to look very different depending on whether you are buying an owner-occupied business or if you plan to rent it out.
That is why we want to offer you a free strategy call today. All you need to do is click the link below to book yours today.
What Types of Laundromats are There?
Typically, when you think of laundromats, there are two types that people will consider, staffed, and staffed. Each of these have their own advantages and disadvantages that can impact their viability as an investment.
If you are buying a laundromat and hiring someone to watch over it and assist your clients each day, that is a staffed laundromat. These can be great because not only do you have a watchful eye in place to assist customers and ensure no one tries to break open any of the machines but, they can also immediately catch if any of your machines were to suddenly fail.
However, by opting to run a staffed laundromat, you are also committing to pay for any employees that you hire, which can be troublesome for laundromats that operate on thinner profit margins.
Unstaffed Laundromats are generally more profitable than staffed laundromats because you do not have to worry about paying anyone’s wages.
At the same time, if you leave your laundromat empty and open to the public, you may have other concerns. First of all, if a potential client comes in to do their laundry and has difficulty operating your machines, there is no staff in place to help them. As well, if any of your machines stop working, you will not be aware and your ability to earn money will be hindered until you later discover and repair the machine. Finally, if anyone comes to vandalize your laundromat or tries to use it for illicit purposes, you have no means of stopping them straight away and instead will likely have to dig through security footage to find out what happened.
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How do Laundromats Make Money?
Unless you simply own the building and rent it out to a business owner to operate their laundromat, you will need to know how exactly they make their money.
Laundromats naturally have a selection of washers and dryers in place that clients can pay to use in order to clean their clothes and fabrics. However, many opt into additional services in order to bolster their income potential. For example, you can equip your laundromat with detergent dispensers for an additional fee, allowing customers to pay for the convenience of having it provided instead of bringing their own.
There are also a handful of popular inclusions beyond laundry that some owners choose to include in their laundromats to increase their profits. Some owners also use their laundromats as an opportunity to try their hand at owning vending machines and selling snacks and beverages to customers while they wait between cycles. As well, others may equip the business with arcade cabinets and games to provide entertainment.
Factors You Should Consider Before Purchasing
Before investing into a laundromat, here are some key factors you should consider.
Buying a laundromat is typically more complicated than just buying a building. Unless you are buying one that is already in operation, you are going to need to research the cost of buying all of your machines and reworking the plumbing in order to provide them all with water.
A well-placed laundromat has a very strong potential to earn money and become a profitable investment, but it is very important you know where that would be. Laundromats are often the most successful in neighbourhoods full of apartment complexes and student housing because many of these properties do not come with their own washer and dryer setup or have limited shared laundry machines.
On the other hand, if you opened a laundromat in the middle of a bunch of single-family homes, the odds that the neighbourhood residents already have their own laundry appliances and will not need to use your laundromat on a regular basis will be much higher.
As with any other business investment, you will have to consider the operating costs in order to maintain your laundromat. This includes any wages, utilities, maintenance, cleaning, and supplies you may need in order for the business to operate smoothly and consistently.
Unlike other commercial real estate investments, laundromats often require much more work on the part of the investor until they become profitable enough to stand on their own.
For example, frequent tasks such as payment collection, restocking and washer/dryer repair often fall upon the property owner in a laundromat, requiring you to come in regularly in order to keep things in working order.
Additionally, if you are not running a 24-hour service, you will need to either hire someone to lock up and ensure the machines are empty each night, or you will need to come do it yourself on a daily basis.
Laundromats have been a source of success for a variety of investors. While it does come with much more hands-on work than other commercial real estate ventures, it certainly has the potential to be rewarding in the long run. Just remember, just because a niche is profitable for someone else, does not always mean that same success will come your way, so invest carefully.
If you are interested in learning more about commercial real estate investing and finding a niche that is right for you, call LendCity. Our dedicated commercial department will gladly help you find the best investment solution to fit you and your lifestyle. We can be reached at 519-960-0370 or you can visit us online at LendCity.ca. Alternatively, you can click the link below to book a free strategy call today.