What would you pay for this mat

[tlev89]

Hi,
IM looking at a mat with 55 washers and 56 dryers.
18 year lease.
Gross 50k a month.
Nets around 16k a month(utilities are running high).
Machines are 3 years old.
20 car parking.
Currently no wash and fold is being done but I believe it can be built up.
Any insight what its worth?
thanks.
P.S, Does anyone know what you can make on a atm machine.

[fluffy]

Don't know if you'll get a specific answer, or if you should trust it, but in my opinion you should forecast out the cash flows you expect and do a discounted cash flow analysis. Of course equipment age and competitive environment are significant factors (which are not discussed in your post). You may also be limited by the size of the financing required in a big store like that. I also wouldn't put a big weighting on incremental cash flow new ideas you may have (ATM or counter services).

[AggieRob]

Good question!

The book that I am currently reading on the industry, "Start your own coin-operated laundry", believes fair value to be to 50x monthly net earnings. The statement assumes that there is at least 15 yrs left on the lease, equipment is no older than 3 yrs old, neighborhood is stable, and amenities are average.

For more favorable conditions such as longer leases, growing population of renters, and new equipment the value is higher. Of course, just the oposite is true if the conditions are less favorable.

From the book:
"This rule of thumb can give you a basic idea of the value, but be aware that many other conditions can affect the price of the mat: cost of land in the area, high sewer connection fees and competition from other mats all figure into the equation"

My personal advice: Get a book and learn how to properly evaluate the value. No sense in overpaying.

You have a huge example there and it's value using the rule of thumb above is $800K. That's a huge investment and responsibility if you are only going to be running it part time.

Good luck!

[sdl]

My wife and I are looking a purchaseing a mat in Oregon. Here's the pros and cons:

Pros:
Only mat on this side of town.
20k buy in. (we can get in with cash)
machines dated, but generally in good condition.
all but one machine functional.
First time customers were showing up as we inspected it.

Cons:
'Mat was on verge of going under when current owner rescued it.
current cash flow is negative. (~ -200-300 per month)
dated equipment = no depreciation + higher utility costs.
After purchase, cash supply severely limted for marketing etc. (~5k)
We're going to need to learn spanish quickly to serve the demographic

[Silent Roo]

SD!

If the cash flow is still negitive what would you change to make it positive.... To me to pay 20,000 for the honor of loosing 200-300 a month seems odd. How about you invest with me! I will only take 10,000 up front and 150 a month!

But seriously.

To redo the store will cost $$$$ If it is not cutting it now are you willing to risk 100,000 to take a chance on sales picking up?

I know mats in small town where the owner would give you the whole thing if you assumed the debt, I know other mats in similar or the same town you could not touch for $150,000 to $200,000 Same is true all over.

My mats are in a town of about 75,000 I am looking at selling the three of them to a local couple. They have been running them for about 3 years and know the cashflow. They are looking at buying a couple more in the next town over which is about 100,000 in population. These two mats are bigger nicer and one has brand new equipmnet. Both will sell for a handshake and take over payments because they are upside down. Mine are not as nice, not as big and not as new and I will get $$$ because there is Profit. Their plan is to use the profits from my mat to make up the difference until they can turn the other two around....

Will it work????? I'm guessing yes! because they know the Game! We walked through the two other Mats last week and we started talking about the changes and they were on the right track.

If you think working harder than the current guy will turn it around you better be sure you can outwork him!

[sdl]

Thanks for the advice Roo! Fools rush in... :)

We've been studying the area market and laundromat ownership in general for about two years. I'm not sure I'd want to put 100k worth of equipment in, untill I could prove to myself that I'd get a decent ROI.

Since the current owner took over in 05, he's mostly worked on cleaning up the basics and fixing the equipment. The store is mostly clean, but is sterile and lacks personality. More importantly, he has done nothing in terms of advertising. Not so much as an "Under new ownership" banner. We saw more than a couple people poke their heads in to "see if the place was open"

Building a new mat in town is cost prohibitive becuase the SDC charges are so high. ($1100 per machine) but the town is slowly growing. The area the 'mat is in is underserved. There is no other 'mat within 10 -15 min drive. (depending on trafic)

Current owner had a 2 hr drive to town. We have a 10-15minute comute. :)

What the heck..I've talked myself into it. Will post again with either tales of woe or sucess.

[ablaw86]

Pardon my ignorance, but what the heck is an SDC charge?

[sdl]

In our town an SDC charge is a 'Service Development Charge'.

Essentially the theory goes that whenever you have new construction, you have to expand the capacity of the water and sewer systems sooner or later. The SDC gives the city enough cash in an account to enable them to do just that.

The problem in my town is the methodology for calculating the SDC does not distinguish between front-load and top-loading machines. It's based on instaneous water demand, not total water use. It's kind of stupid for a town that supports sustainability can't figure out a way to give a discount on more efficient machines.

When you buy an existing 'mat, the infrastructure is already in place so no SDC charge.


Oh, and on another note, every time we've visited our prospect, there are people in it "for the first time". I belive we will have no problem expanding our customer base.