laundromat closing

[vohraajay]

I've got 30 days to leave my place and either sell equipment on my own or sell it to a wholesaler....I'm interested in knowing if any of you have been in that situation before and found one way better than the other. here are my options:

1) put it in local newspaper and liquidate
2) contact every laundromat in this area to purchase my equipment.
3) sell it to a wholesaler.
4) put it in storage - what's the cost of that approximately? does it need to be heated?
5) sell it you folks on the INTERNET - but how do I ship to you?

6) how do I move the equipment?


ajay

[Follow]

I am looking for Dexter stack dryer or washer.. do you have any of those..tia.

[vohraajay]

I have dexter washers and 1 55lb dexter dryer. rest are stacks SQ and 1 hubesch. please email me directly at vohraajay@hotmail.com and I will send you an excel sheet of my equipment.

ajay

[vohraajay]

if someone can help me price my equipment based on fair market value, I would appreciate it. Please email if you'd like to help. vohraajay@hotmail.com

Thank you

[Howard]

I am afraid you are in for a little bit of shock. Used equipment doesn't garner much money or interest unless they are newer dryers or Wascomats. Generally speaking, ten cents on the dollar (original cost) is the normal return.
In my opinion, your best bet to sell them lies in two directions. A local used equipment distributor (if there is one) and direct selling through thus bulletin board. The direct selling through this bulletin board would most likely result in a higher return, but that would vary greatly acording to age, condition, type, and shipping expense.
For shipping, contact a local freight forwarder that also offers crating/palletizing. Contact at least two of them and ask for a commercial discount (usually around 40%).
The only other possibility that I can think of is to sell them to local landlords that want to add them to their laundry rooms. Of course, this would not be easy and could be costly (in ads).
I am surprised your lease allowed this to happen. A good lesson for the future!

[CharlieS]

It is unfortunate that this lease was not renewed. However, it brings up several points for owners and newbies.

First - With a month to month lease, the laundromat operator has nothing. The landlord can terminate the lease at will, without cause, with one calendar month of notice. If you do not have a long term lease - GET ONE NOW !!!! If you are looking at a location with a month to month lease, don't even waste time talking to the operator. He owns nothing except the equipment. For all intents and purposes the landlord owns the business in that the business is based on the location. The operator can remove the equipment, but cannot legally destroy any of the plumbing, electrical, etc, which forms the infrastructure of the business, unless those improvements are easily and readily removable, such as pre-fab bulkheads, and are not an integral part of the building. That assumes that the current lessee actually installed them. If not, they are already the property of the landlord. The landlord can terminate the existing lease, put in a new tenant, who can replace the equipment and have customers almost immediately.

Second - If your lease expires, you are obligated to remove your equipment prior to the expiration date of the lease. In this case, if Voorahjay leave his equipment in the laundromat, expecting to remove it after the expiration date, he may be in for a rude awakening. Under commercial real estate law, trade fixtures may be removed prior to the expiration of the lease, BUT BECOME THE PROPERTY OF THE LANDLORD AFTER THAT DATE!!! The only exception is if your lease specifically gives the lessee additional time to remove the equipment. This is the case in Virginia, and is typical in most other states as well.

So, the moral of the story is, get your lease renewed well in advance, with as long a term as you can get. If possible, the safest way is to have multiple renewal options. 30 years or more is the goal.

I built my newest store with only an 11 year lease. This is too short, especially for a new store, but fits into my long term financial plan. However, I recognize that in 11 years, I may have to walk away with very little. I hope to get a lease extension, but have no guarantee other than the good will of the current landlord. Meanwhile, I must assume that this is all I will get, and plan the business accordingly. It will have to pay for itself, plus provide the return I want, completely in that time period. Anything else is a bonus.

Charlie

[CharlieS]

Howard is pretty much on the money. Here are some general guidelines that I follow.

2-4 year old equipment may retail for at most about 50% of the current street pricing for that equipment new. Wholesale, even less.

Older equipment is worth even less. The best guideline is to look at the listings from equipment brokers in the back of the Journal. These, of course, are again retail prices for used equipment, and only a starting point.

If this equipment is in decent condition and relatively recent (3-5 years) you might be able to sell all of it as a package to someone who wants to upgrade their store, at 40-50% of new. If older, start talking to the wholesalers and take whatever you can get.

If you put it in storage, it probably does not need to be heated, but be sure to drain all water from the machines and from the hoses. The biggest concern would be water trapped in your valves. If you decide to sell direct, spend some time cleaning, fixing, and buffing all of this stuff up! Make them functional and pretty.

Charlie

[David]

What about this scenerio?

Laundry is rented from convenience store owner. CS goes out of business. Bank reposses property. Bank sells to new owner.

Does the new owner have to give any kind of notice of eviction?

I would think the bank and buyer would have to sort that out before the sale of the store was complete.

Comments?

[Howard]

Whoever buys or acquires the property also buys or acquires the leasehold obligations.

[pete f]

Just a thought vohraajay.. is there another place you can move to? I assume you probably have looked around, but having a clientel already if there is space nearby it may be best to move. I know it cost me 50k last time I moved, but was worth it.

[vohraajay]

To answer yours and few other people questions as well: I have thought about moving to another location, but I think at this point I don't want to be in the business anymore. going month to month was the hardest decision I had to make, knowing the repurcursion effects. But, it was either that or sign a five year lease at $13sgft (+5% additional every year)in a location where almost 2.5 weeks of my gross was going towards the rent. I tried lots things to imporve the business, but quite honestly there is no market potential for that business in the location I am in. The person I showed my store to for sale months prior to lease termination, spoke with the landloard after my lease had expired. the landloard has given him a reduction in lease but wouldn't give me the same reduction - they simply denied offer 1 month before my lease was terminating.

I'm not sure if I have grounds for a law suit but I'm speaking with an attorney on this.

In any case, I've been in the laundromat business for 20 years now and now, I want out.

Currently, I'm going to school for MBA, full-time job, 3 yr old kid, wife, and a house. my plate is quiet full.

I'm in the process of opening a Network consulting business for which I have close to 10 years of experince.

If nothing else, I would like to go into Laundromat consulting business who would help laundromat owner in purchasing, upgrading, selling and in repairing machines. Being in this business made me realize what laundromat owners need and what they don't get.

I would like to provide the owners with the things that don't currently get.

Thank for your thoughts guys and I hope I have clarified my reasons for being in the position I put myself into.

ajay

[Coinwash]

$13sgft (+5% additional every year)


How big was your place.

I would love to fine that rent, not so mush the Plus 5%.
Does that include CAM?

[Anonymous]

Sounds like it is just not a good place for a mat, I pay over double that in rent and the rent is not really that bad a killer.

[CharlieS]

Howard - Your assumption is not correct.

Ownership begins with a fee simple, unencumbered property. Then various things begin to happen. Mortgages, leases, resales, bankruptcy, etc.

Generally speaking, the first entity to acquire a security position, leasehold position, or other right to the property AND RECORDS THAT POSITION IN THE PERMANENT LAND RECORDS then has a superior position to anyone else who comes along later.

You have a recorded lease, and the property is sold. Your lease is properly recorded, the previous owner had the full right to lease the property, unencumbered. The new owner must accept the legal right which you have to the property, because the existing owner cannot sell or take away the right he has given you in your lease agreement.

However, lets say you you enter into a long term lease with the property owner, who already has a mortgage lien on the property. He defaults. If the bank forecloses, your lease is dead. They can cancel your lease, and throw you out.

I just had this happen with a property I used to manage. The owner stopped paying the mortgage, in a bad divorce deal. The bank foreclosed and evicted the resident, who had a perfectly valid lease and was fully compliant. However, the mortgage was superior to the lease, and foreclosure will eliminate all inferior liens or rights to a property.

Conversely, you have a properly recorded lease. The owner refinances. The new mortgage is recorded after your lease. You now hold a superior position, and foreclosure will allow you to retain all rights to your leasehold. The same thing applies if the owner sells, and the new owner obtains new financing.

The owner of a property can only lease rights which he owns or controls. When a property is mortgaged, he gives the right of ownership to the bank in the event he defaults. He can not subsequently enter into a new agreement which restricts the rights he previously gave to the bank.

What does this mean for you, the lessee. If entering into a long term lease, ideally you want anyone with a superior position (ie, the bank) to sign off as well, giving you the right to retain your lease in the event of a default by the owner. The owner cannot give that right to you without the approval of the bank.

This is particularly important when you are investing hundreds of thousands of dollars into upgrading someone elses property, based on your lease.

The bottom line is, this rarely happens, and in most commercial property foreclosures, the bank wants to retain all of the existing lessees. However, this is their option, not yours.

Ideally, you want to see the owner assign the property to the bank, without foreclosure. This is a new deal, inferior to your position, and leaves your rights intact.

Some commercial leases specifically require you, the lessee, to accept an inferior position in the event the owner refinances. Ideally, it also provides that you will do so with the understanding that the new owner will honor the lease. In reality, you retain your lease, which is all you care about.

This is a rare event, but possible. I tried to negotiate this into my new mat lease, but was unsuccesful. I then had to decide if I could live with the risk, and I decided I could. However, my other mat is in a shopping center that is selling this month. I have a great 15 year lease, paying only $400 a month for 2400 square feet. Leases longer than one year must generally be recorded to be enforceable, at least in Virginia. Recording gives legal notice to any potential owner, bank, etc, that you hold a legal position on a property, and gives you precedence over subsequent recorded conveyances. My lease does not require that I subrogate to a new bank with this sale. I will, but only if I get the protection I require.

With an unrecorded lease, even a new owner could say that they had no legal notice of your lease, and could potentially challenge it if they wished. Your lease agreement may have additional language which restricts your rights to record the lease or to obtain a superior position to refinancing.

I'm not an attorney. This is my understanding, but its pretty well based in education (I am a real estate agent as well). To be sure, talk with your attorney, and have your attorney review your lease or any prospective lease. And always, record your lease.

Charlie

[vohraajay]

Dear Coinwash:
I'm in albany...and as I said I'm paying almost 2.5 weeks of my gross on rent. my current rent is $2300. I know a guy whose paying $6000 for rent and he's happy to do it.

ajay

[SudsMan]

CharlieS... Many thanks for your comments on recording a lease. My lease states that I may keep my lease if and when the property was ever sold. But from what you've stated, that section of my lease may mean nothing since my lease isn't recorded.

Here's a question for you. My lease goes back to 11/95. I've extended it once, in '00, for another 5 years. I have two more 5 year options to go. The landlord refinanced (at least he said he did so to get money to put a new roof on the building) in 2001. If I were to record my lease today, do you think the fact that my lease originated prior to the landlord's last refinance would mean my lease would be superior to his current mortgage with the bank?

As a result of your comments, I WILL be seeing my attorney on this. Thanks so much for your advice.

[SudsMan]

CharlieS... I forgot to ask, is there any downside to recording a lease that you can think of? Say, that your competitors would know what you are paying in rent? Don't know if I really care about that anyway.

[mike]

After reading CharlieS's post, I think that this may be a good time to repeat my refrain:
Don't lease, BUY

[CharlieS]

Sudsman -
There are only three possible downsides to recording a lease. First, your lease may have language requiring permission from the landlord to record. If you record without that permission, you could be held in default. Second, your landlord won't find out until he tries to refinance or sell, and then may become irritated with you and try to create other problems, because it may create a few hassles for him, while enhancing your security. Third, if your landlord has lost his copy of the lease, and you want out, the original is always available for viewing at the courthouse. Not a likely scenario.

The order of precedence is never based on the document date. It is based on the filing for recording date and time. Your lease may have an earlier date, but will only take precedence over documents which are recorded after it is recorded.

Charlie

[CharlieS]

and Mike is right. Always buy if you can create that option. I was unable to find a property in the location I wanted to build my mat. I ended up accepting a very poor lease term and have no long term security beyond 11 years. However, I did so knowingly, and with full expectation that I will be tossed out at the end of the lease. The deal still worked for me, even with these limitations. But the deal is much better for you if you can own the property.

Charlie

[Lar Hylobates]

Suds>>>

Charlie is absolutely correct. My landlord recently refinanced and effectively force me to sign the banks releases which of course give them the option of control and cancelation of my lease in the event of foreclosure.

Interesting point that you have about the original date of lease. I would be in that same boat and interested in recording for that reason.

I was assured that they were avery wealthy family and would not default. LOL. Like any of the defaulters planned on it.

[Coinwash]

vohraajay $6000 for rent that guy is nuts. (His silent partner the Landlord loves him)

How old are your machines. How long has this Laundromat been around? What kind of location are you in and how close is you competition.
$13 a sqf (That's great rent). Your landlord is a fool. He rather no renter and an empty store.
He’s a fool.

This is your Quote

“If nothing else, I would like to go into Laundromat consulting business who would help Laundromat owner in purchasing, upgrading, selling and in repairing machines. Being in this business made me realize what Laundromat owners need and what they don't get.”

First before you do a Laundromat consulting business. Work on getting out of this mess smelling like a rose. Good luck