building vs buying

[Anonymous]

Is it really true that builing a mat is more expensive than buying an existing mat. suppose it's both 2500SF. and the rent is the same.
which one will be more expensive?

If i decide to build a mat, how much would a distributor charge me?
the location is 3000SF
http://www.cityofclifton.com/water_sewer_department.asp

[Anonymous]

yes i know it depends on alot of things, like different equipment etc.
but im just aksing for an estimate price. in north NJ area.

it's 3000SF
http://www.cityofclifton.com/water_sewer_department.asp

for the new owners, how's the business the first year?

[Anonymous]

Most of the time the cost to build is more and the risk is greater. The laundry business in NY/NJ area is saturated and most new stores that open appear to be struggling to survive. A better route to go in my opinion is to buy a existing mat that has a proven track record and cashflow from day one.

[Anonymous]

I don't buy it! The cost to buy existing is almost always more than the cost to build -- and there is a good reason for that. When you build your only costs are the costs of the equipment and the construction. But you run a large risk that the store may never pan out and you might not make money.

When you buy an existing store you are paying for the cost of the equipment and construction PLUS the value of a going business that is making money. Sure the equipment aspect could be valued at a lower number as it is used, but you are buying the cash stream. Accountants call this goodwill, but really it is a premium for the lower risk that you take as you know with fairly good certainty what you are getting into.

All things being equal, the risk adjusted return for the two ventures should be exactly equal. That is, your return on a build could be much higher (because it is cheaper) but you may or may not ever get the return. Your potential return on an existing store is almost always lower, but so is your risk that it won't make money.

[Anonymous]

Sewer Impact fees on a new store can be cost prohibitive.
Extraplay, how come you didnt not build new when you went into business? How many of the new stores that opened near you are making money?

[Kitty]

I think extraplay is stating that it is cheaper to build, because most times it is. However, although cheaper in dollars it may not be cheaper in stress levels to the new owner.

With any new build there is greater risk, the possibility for a greater reward or possibility for a greater fall. Toss of the coin many times, however, like Bulldry's comments building in already saturated markets will reduce the amount of wash customers for all the laundromat businesses and uneducated buyers seem to further reduce the market by buiding in poor locations, and thnking this business is a build it and they will come adventure. Sometimes the new laundromat will be able to capitalize on the weaknesses of the older mats and their business practices and take the market share. Bu the potential investor/store owner should due dilligence in the business and thoroughly assess the market he is considering as well as each of the competitors in the radius he will draw from.

You may want to build or buy, which ever the case may be understand the market place for which you are considering and study it well. Then you will have your answer. You can certainly post more info as you get it and I am sure others will try to help you. You will want to keep your location to yourself.


Kitty

[Kitty]

http://www.coinwash.com/mb/showthread.php?t=5286

I want to make sure this thread is read in conjuntion to the topic of this thread as well.

Kitty

[pete f]

Where does the cost of new get cheaper than used?
I would like to see that backed up by real numbers.
I can't get mine to add up that way.

I have bought 4 "used" and built 2 new. In one case the impact fees alone were more than the used mat, though I got them waived becuase I moved it across the street. ( the 1st new mat, well new location but existing customer base ) and spent as much as the used mat cost me I was moving just in buildout costs alone.
Here is a thought, assuming you build a new mat and assuming "they come" you may not gross much more than a comparable used mat which you could buy for 1/2 the price of what the new one costs.
There are cases where a new mat is really needed and is the only way to go, but more than likely the return on investment will be less than it will be on a known existing store. There are the home runs mats, the ones the distrib spreadsheets show you, the odds are better in Vegas though for someone not very familiar with this business.
I will guesstimate the cost for a 3000 SQ ft around 500k. Plus.Plus.

[Aromaz]

There are intangble aggravations when building. Slow and incompetant contractors and subs, missed deadlines, local building departments and inspectors making you jump through hoops to get thing approved, many, many sleepless nights.

[Kitty]

Where does the cost of new get cheaper than used?
I would like to see that backed up by real numbers.
I can't get mine to add up that way.

I have bought 4 "used" and built 2 new. In one case the impact fees alone were more than the used mat, though I got them waived becuase I moved it across the street. ( the 1st new mat, well new location but existing customer base ) and spent as much as the used mat cost me I was moving just in buildout costs alone.
Here is a thought, assuming you build a new mat and assuming "they come" you may not gross much more than a comparable used mat which you could buy for 1/2 the price of what the new one costs.
There are cases where a new mat is really needed and is the only way to go, but more than likely the return on investment will be less than it will be on a known existing store. There are the home runs mats, the ones the distrib spreadsheets show you, the odds are better in Vegas though for someone not very familiar with this business.
I will guesstimate the cost for a 3000 SQ ft around 500k. Plus.Plus.

Of course there will be different scenarios and with different markets building being cheaper than buying will have alot of factors involved before determining this. A high volume store selling at 3-5x net could be sold for well over a million bucks in some areas. With land a 3000s sqft store would run at about 575K that would most likely include every nut and bolt to start. Any store that nets between 150-200K will cost you either as much or more to buy then to build. Depending on building costs in your area the cost may be less than buying exsisting, in my neck of the woods building can be cheaper, there is no water taps or other charges that may apply in larger cities. Like everything else, costs will depend on the particular market as well as how much stess you can handle and how much risk you want to take.

[pete f]

Of course there will be different scenarios and with different markets building being cheaper than buying will have alot of factors involved before determining this. A high volume store selling at 3-5x net could be sold for well over a million bucks in some areas. With land a 3000s sqft store would run at about 575K that would most likely include every nut and bolt to start. Any store that nets between 150-200K will cost you either as much or more to buy then to build. Depending on building costs in your area the cost may be less than buying exsisting, in my neck of the woods building can be cheaper, there is no water taps or other charges that may apply in larger cities. Like everything else, costs will depend on the particular market as well as how much stess you can handle and how much risk you want to take.

I will buy all that you can build at those rates. the only way to get volumes of 300k a year store gross is to be in a very dense market, so I doubt you can buy land and build a store for 575k under those circumstances. For 575k including land you might gross 100k a year becuase you will be building out in the lower costs areas that are not very dense. It costs $125 a sq ft just to put up a building, excluding land. There is NO way you can build a 3000 sq ft. mat including land and gross 300k a year for 575k.

[Kitty]

I will buy all that you can build at those rates. the only way to get volumes of 300k a year store gross is to be in a very dense market, so I doubt you can buy land and build a store for 575k under those circumstances. For 575k including land you might gross 100k a year becuase you will be building out in the lower costs areas that are not very dense. It costs $125 a sq ft just to put up a building, excluding land. There is NO way you can build a 3000 sq ft. mat including land and gross 300k a year for 575k.


I don't think anyone can say whether or not any location can or cannot gross a certain amount as the factors are just to broad to determine how one meets the market demands as well as the differences in the market places themselves. I live in an area that is not denely populated and the customer base is pulled well beyond the typical radius that you inner city guys see. During my tenure, there were two of the three stores producing at or above 300K in sales. Whether or not a new build could pull in 300K or better per year all depends on a variety of things. Is it risky, oh yeah, is it possible, definately.

[pete f]

Ok you win. You can build a new store ground included for 575k and make 200k net every year.
You should be doing spreadsheets for distribs~~!
I wonder why if it was that easy why you did not build yourself a couple..

[Kitty]

Pete you have taken the thread and misinterpreted what I typed. Once you said gross and now you have said net, thats two very different scenarios. Determining what a store could gross or what a store could net has alot to do with the market place and other variables as well and that particular question had nothing to do with actual building costs which was the original question.

No one said it was easy, it may sound simplified on paper, but never easy..and I am the first to admit it is not easy and I wish it was.

Kitty

[SuperMat]

Extraplay is on the money with his comments. The only thing not addressed is the high cost of connection fees in many areas of NJ. They can cripple cash flow for one to two years. I almost bought an existing, but in this area you pay a premium. After a long waste of time, deal fell through, and we decided to build new and accept the risk. So far so good. I only wish I had stock in Tums.

[pete f]

I don't think anyone can say whether or not any location can or cannot gross a certain amount as the factors are just to broad to determine how one meets the market demands as well as the differences in the market places themselves. I live in an area that is not denely populated and the customer base is pulled well beyond the typical radius that you inner city guys see. During my tenure, there were two of the three stores producing at or above 300K in sales. Whether or not a new build could pull in 300K or better per year all depends on a variety of things. Is it risky, oh yeah, is it possible, definately.


your net, not mine: >> Any store that nets between 150-200K will cost you either as much or more to buy then to build. Depending on building costs in your area the cost may snip<<

Then look above to see you state 2 out of three stores grossing 300k a year.

I think these numbers are not very average and for 575K you an not going to build a store that does the numbers you state, ie, 300 k a year gross, 150-200k gross.....

[fluffy]

FWIW, I certainly agree with Pete. I can't imagine the cost of building new to be anywhere close to that of buying old (and saying that you could also throw in the value of land in the new scenario is beyond belief to me). Of course, an equally important consideration for newbies in particular is the risk factor -- the risk in new is huge compared to the stable financials of an existing store. I would never want someone I know to build new if they could buy old for their first store.

[Kitty]

FWIW, I certainly agree with Pete. I can't imagine the cost of building new to be anywhere close to that of buying old (and saying that you could also throw in the value of land in the new scenario is beyond belief to me). Of course, an equally important consideration for newbies in particular is the risk factor -- the risk in new is huge compared to the stable financial of an existing store. I would never want someone I know to build new if they could buy old for their first store.


I know every build will never equal or better the deal of an existing mat, but the scenarios have so many different variable and the market places have so many different scenarios that I will never be able to get you guys to understand my meaning or to sway you to my thinking so I give up... I give in... I... I I SUBMIT... Write it down boys... mark it down on your calenders I have been defeated... I cannot argue this one any more..;)

[SuperMat]

To the original posters question. In this area (northern NJ) it is usually cheaper to build than buy existing. you could build a store (not including property) that size for anuwhere from 500K to 850K. Factors are how many and type of machines, card or coin, do utility services need to be upgraded, etc. etc. etc. Too many factors to give a clearer picture. Two things are very clear. First if a distributor builds your store you will pay a premium that may not be necessary. Second, and most importantly you will have to pay impact fees if you are looking in the Clifton, NJ area ( not Clifton, Tennesee as your link suggests). Passiac Valley alone will charge about $1100. per washer to treat sewer. If you have 35 washers that's over $38,000. before you even open. I am not sure if Clifton has impact fees of there own, but if they do they can be costly also. Some towns in this area can be as much as $3500. per washer. Many towns do this to make opening a laundromat cost prohibitive, because they have so many. In these instances it can be cheaper, to buy existing. It is definitely LESS risky, but you MUST do your homework first. If not you could be selling the mat at a reduced cost in no time. Laundromats aren't a get rich quick venture, nor are they a "can't miss" investment.

Kitty, show me where I can buy the property, build a mat, net even a $100K a year, for $575K and I'll personally come down and build it. I'll even throw you a handsome finders fee.

[Kitty]

I'm hoping I will find my own pot of gold somewhere and be able to swing that venture myself... I haven't thrown in the towel yet....so I can't throw a good location away to one of you boys yet :) But I'll keep you in mind...

[pete f]

To the original posters question. In this area (northern NJ) >snip< ( not Clifton, Tennesee as your link suggests).
>snip<
Kitty, show me where I can buy the property, build a mat, net even a $100K a year, for $575K and I'll personally come down and build it. I'll even throw you a handsome finders fee.


You have good eyes! Very sharp. I did check out the link and was taken to Tenn. Did not see much about impact fees but it look like a nice town, the kind that don't have impact fees and nobody "rents" business space, they all own thier own plot.. which ment maybe 575k buys all, but 200k net is no way.
I am first in line for that 575k w/RE mat that does 200k net. I may even accept the 100k net if we get in a bidding war..

[dsoesman]

I am looking for my first mat on Long Island. I am looking at existing stores and new locations. So far everytime I see a potential new location in one of my targeted areas there seems to be at least one existing mat within a couple of blocks of the location. Sometimes several within a 1/4 mile.

I am sure that underserved spots are out there on LI but they seem to be pretty rare. I am not looking to put up a mat near an existing one and try to take away his business.

I am leaning towards buying an existing mat and improving it.

[Kitty]

I understand completely what you are saying, I think from vieiwing first hand the type of city block competition your type of area sees I understand why it is so much safer to consider purchasing an exsiting mat. But also living in a rural area of NC, I have seen many areas throughout NC that thrive on hispanic migrant workers where the laundromat competition is lacking and the opportunities look promising but know has capitalized. Many, many laundromats in these areas have yet to succumb to the store levels and the promise of amenities that are combined in many stores today with what attracts customers. Although, no one one wants to go into anyone elses market, I suggest you look for the markets where there are snoozers, or where there is growth and capitilize on these facts. Markets change and they change quickly. Keep your eyes open wide and don't miss the right spot...

Good luck.

[pete f]

You may be better off with a used mat that has great potential, as you state most markets are already taken. Having a mat near your home is key, search this. Kitty may not have read your last post about the lack of quaility locations. Don't force a deal, either find something or move on to other business.

[CharlieS]

I have bought two "used" stores, and built one new. I'll take the used store anytime.

The costs to build a new store are huge. But you don't have a steady income stream to go with the huge cost of money. In my case, it took longer than I expected to build up m y business. I expected to be cranking in 4 months, but it took about 10 and a tripling of my advertising budget to get there. The result was about 40K negative that I hadn't planned for.

Older stores are much cheaper to buy. My first store was $15K. my new store was $260K, which was created with some 5 year old equipment from a store closing and a complete conversion of a building to a laundromat, but did not include buying the real estate. My third I paid $80K for.

My 80K store makes the most money. I spent weeks and lots of energy and effort, but few dollars, in cleaning up the store. I drywalled the walls, replaced the ceiling panels, replaced the lighting, repainted, cleaned up and repaired all of the equipment. Cash flow was full bore from day one and has gotten better. Probably spent less than 3 or 4K on the work I did (I did the drywall and the repairs, my guys did the ceiling panels and the paint, I hired out the lighting).

Its easier to fix a dog than to build one.

Charlie