Are laundromats “the ultimate side hustle,” like my guest Jordan Berry described?
These simple, local, cash-flowing businesses have been around forever, but surprisingly this is the first time discussing them in detail on the show.
Jordan is a former pastor turned laundromat mogul. Along the way, he’s become an advocate for the industry through his website and podcast at LaundromatResource.com.
Jordan got the idea to buy a laundromat after his wife told him about a family friend quitting his day job in tech after buying one.
Jordan has been able to achieve both of those things through buying laundromats.
Tune in to hear:
- why a laundromat makes a great side hustle and investment vehicle
- some of the expensive mistakes to avoid
- where to look for financing and some creative marketing and monetization ideas
Here’s a look at the 10 most compelling reasons why owning a laundromat is — according to Jordan — “the best investment you can make.”
1. High ROI
Jordan explained that laundromats have a high ROI, and he compared buying a laundromat to investing in real estate to prove this point.
When investing in real estate, you can expect an ROI or cash-on-cash return of around 6-12% leveraged after you take out a loan.
Laundromats are valued very differently from real estate. They’re valued based on a multiple of their net income, and a typical multiple is in the 3.5 to 4.5 range.
This means, if you pay in cash you can get an immediate 20-30% return on your investment. Laundromats are cash flow businesses, too. You can pick up where the previous owner left off and start collecting quarters the next day.
2. Inefficient Market
“Most laundromats right now are run by mom and pop owners,” Jordan said.
What this means is, most laundromat owners have a few laundromats in their portfolio. There are very few large chains owning dozens or hundreds of them.
Jordan said this means the market is very “inefficient”. Each laundromat owner runs their business differently, and he said there are often some great opportunities to be found.
3. Equity Build-Up
Laundromats are valued at around 3.5 to 4.5 times their net operating income. The net operating income of a laundromat is calculated by deducting all the operating expenses from the income a laundromat is making.
So, say a laundromat is making $1,000/mo, that’s $12,000/yr which is around $50,000 in equity. Similarly, every additional dollar you generate in net income is worth $3.50-$4.50 in equity.
4. Tax Advantages
Jordan is quick to say that he’s not a qualified CPA or a lawyer, and your individual circumstances may differ from his.
However, talking about his experiences, Jordan called laundromats “a tax advantage business.”
There are a couple of areas where you can save taxes by operating a laundromat:
- The first is that business tax is very different from employee tax. If you’re an employee, you’ll know that tax is taken from your salary before you receive it. When operating a business like a laundromat, however, you can pay expenses before deducting tax.
- The second way is that you can depreciate your machines and assets each year and effectively write off that value. You do not have to pay tax on the amount you depreciate your assets by.
5. Cash Business
Laundromats are cash businesses, or “simple businesses” as Jordan calls them. Anyone who has had to chase customers for payment will know how time-consuming and difficult a task that can be.
There is none of that with laundromats. People come in to wash or dry their laundry, they load up the machines with quarters, and they pay right there and then upfront.
6. Self-Service Business
A laundromat is a self-service business. People pay you to do their own work!
Some businesses offer some other services that require labor, like folding clothes. But for the most part, the service a laundromat provides is the machines people use to wash and dry their clothes themselves.
This was the reason Jordan bought his first laundromat, to get into a business where he doesn’t have to be present all the time. He wanted to spend more time with his family, and laundromats are the perfect business for that.
7. Financing Availability
If you need finance for a laundromat, Jordan said there are several ways you can raise the funds to purchase a business.
Four of the main ways he recommends raising finance are:
Talking With the Distributors of the Machines
Jordan said a lot of the companies supplying machines for laundromats will do a good deal on financing. This is because it’s in their interest to have you purchasing a laundromat and their machines.
Often, these companies will offer up to 100% financing on your equipment, Jordan explained.
Obviously, there is some risk involved on their side. Some companies will only finance people with experience running a laundromat. Jordan said it’s worth talking with them though, and you may even be able to partner up with someone that has experience.
Jordan explained that a lot of laundromat owners are willing to finance the sale of their business. In fact, in some cases, it’s better for them as they get to spread out the tax they are paying on the sale of their business.
Jordan recommends talking to a couple of laundromat-specific lenders. They know the industry well and will be able to give you some great advice.
He likes this option for first-time buyers as you get to not only leverage their finance but also their expertise in this area and industry knowledge.
SBA 504 Loan
You may be able to get an SBA 504 loan. These loans provide long-term, fixed-rate financing with 10% down if you meet certain criteria.
8. Multiple Streams of Income
The bulk of your income is going to come from the self-service wash and dry service most people come to laundromats for.
However, there are many services you can offer and ways to generate additional income streams.
Some monetization methods Jordan mentioned include:
Wash, Dry, and Fold Service
You can offer a service where customers drop off their clothes, and you wash, dry, fold, and then return their clothes to them.
Laundromats are great places for vending machines. You can install an ATM, snack, coffee, or toy vending machines and collect some extra income.
Jordan has a billboard on the side of one of his buildings and some advertising inside that generates income. With lots of foot traffic coming through your laundromat, you could add advertising in a number of places.
Some other ideas (and these are things Jordan has done) include installing a turnstile to use the bathroom, a massage chair, and some small ride-along toys for kids.
Basically, anything that requires coins to use, you can add inside your laundromat.
9. Relatively Passive
As service businesses go, laundromats are fairly passive. Jordan said there are a couple of different business models most laundromats use, which are:
Unattended laundromats are exactly how it sounds, no one is attending them. You can set the doors to open automatically in the morning, then customers go full self-service with the machines.
Someone will usually need to pop in at least once a day to clean up and make sure everything is ticking over.
If there is a service component or some other reason why customers can’t self-serve, you’ll need to have a member of staff in the laundromat all day.
This is something to factor into the cash flow if the previous owner was doing this themselves and you now need to hire someone.
10. Your Laundromat Can Acquire Real Estate
When you own a laundromat you are leasing the space where it’s situated and paying rent to yourself. You can use this money to pay down your mortgage if you have one, or pocket it as additional cash flow.
What’s Next For You?
In terms of laundromats, Jordan is always on the hunt for more great deals. He believes in this model so much that he’s put together a team of investors and is looking to buy up larger laundromats and real estate in the future.
On the laundromat resources front, Jordan is always looking to provide more opportunities for people within the business to share their knowledge. He has a podcast, in which he does long-form interviews with laundromat owners and other people in the industry.
Jordan’s #1 Tip for Side Hustle Nation
“When you work with the best, they help you become the best.”
Links and Resources
- Eastern Funding
- Alliance Funding Group
- Unconventional Acquisitions – Training from Side Hustle Show guest Codie Sanchez on buying cash-flowing businesses
- Alternative Investment Platforms
- Stacy Caprio on The Side Hustle Show – “Fast Track Your Financial Independence” by buying mini online businesses.
- Skillshare – Get a free trial of Skillshare Premium Membership, with unlimited access to 30,000+ on-demand classes!
- Freshbooks.com – Start your 30-day free trial today!