What are the little known issues to look out for when buying a mat?

[norice4me]

My very first post!! :)

I've been lurking here for quite a while, and I've put in an offer to purchase my first mat. In your experience, what are some of those obscure problems that I should look out for during my due diligence? For example, I noticed several large water stains in the ceiling tiles, so I'll need to thoroughly inspect for leaks and check for deferred roof maintenance (so I don't face big CAM charges in the near future).

I have done the basic homework. About 50 washers (about 30% are under 3 years old) with an averaged vend price of $1.45. With a $13k/month revenue for wash/dry, that comes out to about 4 TPD using a 2:1 wash:dry ratio. For the past year, it averaged 380 HCF/month and that checks out using the 2 gallons per pound formula. Doing the math for LA's $2.10/HCF water and $2.30/HCF sewer rates, it matches the stated water/sewer expenses. Gas & electric expense is also in line. So I guess what I'm trying to say is that the numbers seem to match up, but I will do a more detailed analysis once we're under contract.

The mat is currently run by an "absentee owner" and you can really tell. A few machines are broken, the soda machine is turned off, and it's not the cleanest. The demographics are perfect, mostly low to mid income hispanic neighborhood, busy local street (60,000 cars/day), good visibility, and mostly rental properties all around. There is competition nearby, but they were both packed on the weekends (when I checked) with customers waiting in line, while this mat for sale was only moderately busy (only 1/3 or less of the machines in use each time I checked). Gross rent is decent at about $1.50/SqFt. I will not pay more than a 3x multiple of the verifiable net income for this mat.

I feel this is a good turn-around opportunity. I've some very limited experience. I have a small rental property that generates about $150/month laundry revenue from 2 maytag washers and dryers, so I can perform basic maintenance (replace a belt or pump, clear a clog, remove jammed coins/tokens/slugs, etc.). Any insights and/or things to watch out for during the escrow from all you veteran operators would be greatly appreciated!

Thanks!

[Kitty]

Sounds like you have a plan stan....and on the right track you don't need insight as you learned to see it yourself. Great luck to you.

[CharlieS]

I agree, you are already doing some good homework.

You can count on a significant amount of deferred maintenance, such as dryer ducts full of lint, bad bearings, etc., that will cost some initial time and energy to get into shape.

Be sure to ask other merchants around the neighborhood about the area. Make sure that nothing else is going on, such as a new mat in the area, a plan to tear out and rebuild the street, etc.

Look for ways to improve the property, yet reduce expenses.

Consider a good camera system, with internet access for remote viewing.

Plan on changing the coin boxes, or at least rekeying them, (it easier just to buy new ones), so that you have the piece of mind from knowing who has keys, along with new locks for the change machines.

Charlie

[mike]

Sounds like you've checked it out well,

Why are the others more busy on the weekends ?

How do you compare vend price wise ?

And always, of course, Get as long a lease as you can !

[Andrew]

Good job Stan! I agree, sounds like you have done your homework. Once you get in and clean the place up, you should have a grand opening. This may be your opportunity to 'win back' the customers that may have left due the previous owners lack of concern for maintenance.

Good luck.

[norice4me]

Charlie, thanks for the great pointers! I hadn't thought about talking to other merchants. I had gone down to the city planning office to see if there were any revitalization plans for the neighborhood (nope), but didn't think about possible street rebuilds, either. Looks like a visit to the CalTrans folks are in order.

Mike, great questions! I'm assuming that the competition is busier due to the interior condition of the mat. In addition to the things I mentioned before, I also found bolt holes in the floor where (I assume) chairs or benches for the customers once existed. No sign of a cart anywhere. Most of the signs are simply handwritten with a marker on 8x11 sheets of paper. A lot were torn... The mat has great visibility and decent parking (small corner strip mall w/ ~15 spaces). The other tenants are a hair salon and liquor store. Am I missing something? What else could drive people away from a mat?

The vend prices are all comparable: 1.00-tops, 1.25-18#, 2.00-25#, 3.25-40#, and .25/15min. I'll try and test the waters by slowly lowering the dry time per quarter, and also see if it makes sense to swap the older tops out for more front loaders & bump the price to 1.50. Tops seem to be universally priced at 1.00, so I'm probably stuck with that for a while.

I've also been searching the forum for past marketing ideas (for the grand opening too). But it seems the market really sets the prices and there's not much individual owners can do.

Thanks to y'all for the advice so far!
-Pete (not Stan :D)

[pete f]

Not sure why, but I remember that from a long time ago..
It sounds like you have most everything under control, there will be things happen that are out of control. Don't worry or over analyze, it sounds like a strong mat, just clean it up and make sure everything is working most of the time.

As for pricing, new equipment does demand a higher price.

Maybe swap out a few tops for neptunes and price them at 1.25-1.50, move the 18"s doubles to 1.75, as they are water hogs.
If you bt new tops than 1.25 is a given, assuming your current tops are old..

[Winston]

In my opinion, the best mat to buy is one that was at one time very busy, but due to the current owner's lack of interest has gone downhill.... smokey, dirty, many out of order machines, attendants who don't care. But all of this is fixable. The difference is having an owner who is on site every day. The mat I bought was like this. It was so bad that during negotiations, after spending an hour in the mat, I'd have to go home, shower and change clothes due to the amount of cigarette smoke absorbed while I was in the mat. Two and a half years later gross is up 38.9%, profits are good, and we are frequently complimented on having the nicest and cleanest mat in town. The equipment is not new (except for 19 tops that are less than 3 years old). The newest frontloader is 1996 vintage, and there are 13 Super IIs (from the 80's or earlier), Super Mates, and some rebuilt Wasco 184s. But everything works well. Best of luck!

[mike]

norice4me,

You may proceed. (have patience for a year or two)

[laundryboy]

Here's a question:

If the mat has pumbing underground (under the floor). Ask, Has there have been ANY repairs to the exiting plumbing?

I recently signed a lease and retooled a mat that have been vacent fro several months. My second mat. Six weeks after opening, a little water was comming UP through the concrete floor. Hot water at that.

Fortunatly, I was able to contact a prior owner (not the eveucted one) who informed me that he had a leak fixed about 18 years ago. I say fotunatly, becuese this was where the leak was. One night of cutting a hole iin the floor, directly over the leak, my luck. 5 hours for the plumber to repair.

This was a little thing that I would never have thought asking, especially the landlord.

[Jim]

I've noticed that whenever someone asks about opening a mat or buying an existing one, someone advises them to get as long of a lease as possible.....What happens if your mat fails...are you not responsible for the rent even if you closed your biz.???
Do you not have to be prepared for that ???

[MSKLAUNDRY.]

So as long as you operate the laundry under a proper business structure, LLC. or Corp. and don't sign a personal guarantee you should be OK. Most landlords will insist however on a personal guarantee of some sort.

[mike]

Jim,

Another way to go about it is 3 years with 3 five-year options.

Best if you can buy the property though !

[pete f]

most of my leases have been as mike said, 5yrs, options for 3 more 5 ys at a time, with about 3 to 4 going on at any given time, so it adds up to 20 or so..