Investing outside the laundry???

[danskines]

Does anyone on here have any other types of businesses besides mats? I was looking into investing some money in some other ways. Last night a buddy of mine was discussing his recent purchase of a multi-family house. I feel that the market may be a little high in price right now to invest in 2 or 3 family homes. For instance a few towns over in Randolph there is a 2 family for $415,000.... That is a little over priced especially for that area of NJ. Are these multi-families worth it or not??

[JeffLange]

I understand your desire to diversify but bewarned the real estate bubble may pop. Im not familiar with Randolph NJ, is it a ghetto area? If so stay clear.

[danskines]

No it is not a ghetto.... It is actually a pretty decent area. Maybe your right about the bubble popping!

[mike]

If your looking for something to invest in other than the mat, invest in the building that the mat is in ! Then your are "hedged", being both a landlord and tenant, so that no matter which way the real estate market goes, you are protected.

[Anonymous]

I think this is a typical conflict between the investor and businessman. Most of us would probably consider ourselves both of these types. But if we continually pour capital only into our laundromats without regard to the opportunity cost (other options) for this money, then we are only businessowners. Nothing wrong with that, just don't lie to yourself, right ?

I agree with Mike that you should strongly consider the building the mat is in as it truly can be a good hedge. May not always be the best idea, but it is always one that should be considered at the top of the list.

From an investment perspective, when you can get a better return on capital elsewhere, you should consider it. My wife and I have a couple of rental properties and we've done alot better financially (with alot less work) with the rentals than with the laundromats over the last few years. Much of that gain is due to appreciation which cannot be counted on. Especially now, after much real estate appreciation across the country. There is good reason to be concerned about a real estate bubble but i'd put my best bet that realestate prices simply stay flat for a number of years. In an inflationary environment (which we're in) i think it is always good to have some debt tied to appreciating assets. But this debt (real estate) needs to cash flow. Don't tie yourself to something you'll have to feed. One thing to consider is that right now alot of folks across the country are looking at their neighbors who supposedly have made BOOKOO bucks in realestate due to appreciation - and now everyone wants to get in the game. It keeps prices high but many of these properties don't cash flow and require annual capital expense. Don't fall into this trap, concentrate on cash flow and if they don't, walk away. And buy a Dexter :-)

[danskines]

Well I own the buildings that my mats are in. I just want to spread the money around a little bit. Like the old saying goes, don't put all your eggs in the same basket.....................

[Anonymous]

Well, I did real estate/rental properties for 15+ years. My dad was in the business for almost 30 years. At one point he own as many as 35 units. Never really lost money, but never made a lot either....

I heartfully echo SuperDave's comment. Make sure the place at least does positive cash flow - even if the place is financed to the max. And remember that real estate is an investment - the big money is made by apprecioation of the property when you sell or refi. Usually, there will be very little monthly cashflow.

A two family for $400,000+? Would the rents cover the payments, taxes, insurance, and repairs? A one or two month vacancy would eat into your cashflow significantly.

And don't kid yourself, no matter what the market or the financial level of your building, you WILL go through an eviction at some time or another. With court costs, lawyer fees, and three to four month's worth of lost rent (the amount of time for an eviction to take place), the cashflow for that building could be eaten up for several years. Just from one loser tenant. And that's not counting the cost of re-vamping the unit after the eviction. And believe me, after an eviction, the place will need to be redone.

All the "references" in the world won't keep you from getting an occaisional dead beat. And all it takes is one dead beat to blow the building's cashflow for a year.

If you can tolerate the headaches and the low cashflow, you will probably make good money in real estate. You just don't see it on a monthly basis, so it may feel as though you are working for free.

And of course I'm speaking from a point of view of a person who did all of his own managing and repairs. You could always have that hired out..... but then again, that eats into the cahflow also.

Just this past year I finally sold out of all of my buildings. Like I say, didn't really lose money, but I didn't really make a killing either. If I had wanted to let the places sit on the market a little longer, I could have sold them for more. But I had had enough of the headaches, and I just wanted out. I sold cheap, but still made some cash........ and kept the government from getting too much of my money from taxing my reclaimed depreciation.... the crooks!

[Liz in IL]

My hubby and I have owned a six unit building for about 13 years now. We thought rental property was great till we bought a mat and now hubby does not even want to hear about another rental property. The norm by us is if you get a 8-10% return you are doing great. We are lucky to have many long-term tenants and after doing most of the work ourselves for the past 13 years we are doing pretty good. By far the laundromat business is more profitable, albeit with more work. If nothing goes wrong at the six flat, there are months at a time where all you have to do is collect rents. All you need is to have one tenant move out in a 12 month period and you have to paint, replace carpets and fix and caulk and so on and so forth. Not to mention the amount of time you spend answering the phone and showing the apartment and all the no-shows. Just my 2 cents worth.
Liz

[Chuckels]

.... and historically the stock market has outperformed the real estate market. (not an endorsement)

[pete f]

I think the risk/reward ratios will/should be your guide..
I have always owned some sort of rental property. Get rich quick, no, slow, maybe. But in the long run was always worthwhile. Owning a business was always more profitable, but more work, and more risk. Stocks, bonds, well, same deal.
Since you already own the buildings, you got the real estate side already. Maybe look at stocks. at 5-6 year lows, there are some interesting potentials. If safe is your game, teasurydirect.com and buy t-bills online from the us gov.. latest yield 1.615%

I got some of those also. My eggs won't break all at once..

[danskines]

Thanks for all the information! It's good to know I am not the only one with an iterest in this matter.

[CharlieS]

I came to the laundromat business because of the success of my laundries in my rental properties. I currently have 2 mats and about 60 rental units.

Like any business, real estate takes significant effort. Currently, with the money flight from the stock market, prices for investment property rarely make sense. I will not purchase an investment property unless it will be at even or positive cash flow when financed over no more than 20 years.

This sort of question really requires you to ask yourself some hard questions.

1) What is your goal? Current income or future retirement income

2) What are you best at? Where are you skills? Will you manage this business yourself or hire others? Are you comfortable with the clientele you will be dealing with?

3) What resources do you have to work with, financially and personally. Will your spouse be helping (this can make a huge difference).

4) How risk adverse are you? Can you handle it financially if things turn a little south. What's your contingency plan going to be? Winning the lottery is not an acceptable answer!

My skill sets include good analytic capability, good mechanical ability, a background in business and real estate, and comfort with virtually any and all segments of society. I am big on risk management, but not completely risk adverse. I avoid the stock market, because I have very little knowledge and expertise, and the experts don't seem to succeed very well either. I like the sureness of knowing that I can buy a property for X dollars, receive Y dollars every month, and have a 99% chance of success in achieving my investment goal. Controlling expenses is critical, along with maximizing income, the same as with any business.

One little tip about those appointments for showing your rental. Schedule everyone for the same time on the same date. Most won't show and you won't waste your time waiting for each one. The ones that do show are serious.

Better yet, offer your residents a $50 referral rent discount whenever they refer a new resident. Treat all of your residents with respect, provide a nice place at a reasonable price, keep out the riff-raf aggressively, and you will find that good prospects will seek you out.