Where to invest the money?

[rmathome]

Im convinced that laundromats are a good investment path for me. But now, I hoping I can get some practical advice from those of you in the trenches.

I make decent money at my day job - 100k. My wife, who was out on maternity for three kids is going back to her job now at 70k.

We are both 38 years old.

For the past six years we havent saved anything on my salary alone - kids are a big expense and we didnt save well on top of it. But with my wifes additional salary we have decided her whole thing will go to savings (except daycare expenses) - no ifs, ands, or buts. That means we should be able to bank 30k in one year.

But, have been contributing to my 401(k) and have 100k init. I also have 300k equity in my house (and a 170k mortgage)

I know that we are behind when it comes to a nest egg so I am looking to invest in laundromats but, as of today, have no available cash. The way I see it, I have a few options here.

1) Lets say I find a mat that I can by for 150k and its a good deal - I can finance it 100% knowing that I have the cash coming in.

2) I can wait the year, and then some if needed, to save cash and THEN start looking. I dont love this option because I think every day that Im not active in this endeavor will eat away at me.

And here is the big question:

3) I can stop contributing to my 401(k) for a year and this way will be able to save about an additional 15k.

This would make my savings for a mat go quicker but I lose out on my 401k.

What do you guys think? 401k or laundromat? And why?

[Coinwash]

Keep your 401K buy don't get into the business with what your telling us.

This is not the answer no matter how you put it. 100% pluse your house ( contributing to your 401(k) and have 100k init. you also have 300k equity in your house and a 170k mortgage)????
At what percent will be your payments think about this what is your nut?- water bill gas bill Rent / Cam insurance are you going to run this yourself?
You have to make payments on all --Pluse more

Repairers ask MSK what is his average call is, and he is one of the good guys

This is not an easy business no matter what the distributor / seller my tell you...

Have you read this board till you eyes pop? Have you gone and read the Editorials

They're no panaceas

[TLR]

Can't finance 100% without Capital to back it up and at least 20% down. Also - the bank will not let you collateralize your house - or your 401K. Maybe some funds can come from Home Equity LOC.

Read the posts on this board for other info.

It is not all ROSES -

TLR

[rmathome]

I obviously didnt do a very good job of articulating my question. Let me try again.

If I want to save for a mat, which option would be wiser. For the next two years:

1) Keep contributing to my 401k and save about $25k
or
2) Stop contributing to my 401k and save about $40k

[Amex]

Either way you slice it 25k or 40k in NJ is not going to get you into any mat worth your time or effort. Mybe when you have 100k start looking.

[rmathome]

ok, lets try this again.

Would it be better to:

1) continue contributing to the 401k and have $100k cash in 4 years
or
2) stop contributing and have $100k cash in 2.5 years

My point is this: Is money better invested in a 401k or in a laundromat ASSUMING that the mat is a reasonable purchase. I am well aware that a mat that loses money would not be a better investment.

[Amex]

If you are asking this question you are not a risk taker. Keep putting your money in the 401k.
You are the only person that can decide your risk level. Some people would tap all the equity in their home to buy a mat, others would save up 1/2 the cost of a mat and buy.

[William]

As I read your posts (and I have not had too much coffee today), I am struck with the impression that you believe a laundromat is an investment. It is not. You are purchasing a job. Probably a 30 hour per week job.

Do you have the time?

If you can put $100,000 in a 401(k) over four years, or $100,000 in cash in 2.5 years, why can't you put $160,000 in the 401(k) or other tax sheltered retirement account in 4 years? What is the employer match? What is the opportunity cost of the money? How much will you avoid in taxes, and later pay at a lower rate?

What is your time worth? If you can earn $100,000 on 2080 hours per year, then an additional 1560 hours per year running a mat is worth $75,000. That number assumes that your time is worth the same, most would argue that their time is worth more as it becomes scarce.

What will the mat earn? There are very few people on this board that are clearing $75,000 per year in their mat. You would need a strong performer to do that.

What will it be worth when you go to sell? If you spend the $450,000 you are batting around to build out, you will need to clear between $90,000 and $150,000 to sell it for what you have in it (3 - 5 times net). What if you only clear $50,000? If you are lucky and get 4 times net you will get $200,000 for the mat. You will lose $250,000 on the deal. Whose money will that be? You are asking to go 100% on the note.

Without knowing you or your situation, I will offer the same advice I would give anyone - buy an existing mat. You will be able to accurately price the purchase, have a history to take to the bank for financing, and likely have employees in place who will train you.

Keep looking, keep thinking, be rational not emotional.

[rmathome]

William: "I am struck with the impression that you believe a laundromat is an investment" Youre right. As I was driving home I was beginning to wonder if maybe I had teh wrong impression. Although, laundries ARE seen as investments. They are listed by respected financial sources (magazines, etc) as such too. So, there must be SOME truth to it (low hours / good return on money) at least in some situations... no?

The problem with 401Ks is that you are limited to how much you can put in per year (currently 15k) and you cant touch it until you are 59.5 years old. Thats twenty years from now. So, while it is nice to know the money will grow for 20 years, its useless to me for all that time.

So, I get the feeling that I still havent posed the question correctly, Ill try to rephrase again.

Generally speaking, what is a better investment: stock market or laundry?

I ask because there may be more than just percentages here. For example, if a laundry generally returns more but requires more time... how do you guys - with experience - favor one over the other?

[Fred50]

I think that you are totally missing the point that people are making here. If you are comparing stock market investing to a laundromat investment you are comparing apples to oranges.

Stock market investing is totally passive unless you are day trading. A laundry investment is very active, especially in the beginning and certainly for a new store.

If you invest your 401k $$ in funds then there is little chance of losing $$ in the long run. However, if you build a new laundry in the NY Metro area the chances are great that you will lose money.

I am a long-term owner of a laundry and I can tell you that it is the least passive invesment that I have ever had. I know that others can and do spend less time than I do on their businesses, but those people are not as successful. The toughest part of this business is dealing with employess and being on call even when you are not working.

There are many metro areas that have become or are becoming saturated. NJ is definitely getting there. You should start with an existing laundry.

How flexible is your full-time job? What would you do when you get an emergency call during your work day? Can you get away on a moment's notice?

Take your time and do your research. You should have at least 50% of your total purchase in cash. Too little capital is the #1 killer of any business.

[rmathome]

"I am a long-term owner of a laundry and I can tell you that it is the least passive invesment that I have ever had"

But is it, in fact, an investment for you? Or do you do it fulll time.

Im getting the impression that, as you said, the laundry business is NOT to be viewed as an investment. Its a little misleading because everything I have read (aside from this site with people that actually do it) tout it as something where you can just spend 2 or so hours a day, 2 or 3 times a week.

Is that true in any certain circumstances - or is it simply a myth?

[William]

It is untrue if you want to be good at the business. If you want to run a dump, you can spend 6 hours per week. If you want to be good, figure at least 30 hours for the first year, perhaps 20 per week after that.

Consider the source that is telling you it is passive or semi-passive. I am willing to bet it comes from equipment manufacturers, distributors, and probably the CLA (which is largely run by equipment manufacturers and distributors).

Now, think about the responses you are getting here. From people that own laundries, will not make any money off of you, and will not suffer from competition if you open a laundry. None of us has a store next to the donut shop, we are not trying to talk you out of a specific opportunity. We are just trying to get you to see that it is not passive, takes more time than you think, more money than you think, and is unlikely to appreciate in value. In summary - every thing an investment is not.

Once again, I'll offer the same advice to you as everyone else - your first mat should be an existing one. The equipment manufacturers and distributors will disagree as there will be no money for them. But you might get a loan from the bank, will not pay tap or impact fees, will have a very good idea what the profit potential is, and will likely have employees in place to train you.

Keep looking...

[rmathome]

What a helpful post - thank you.

I am not looking for an extra 30 hours a week - a month maybe - but not a week.

At least not consistently.

So here is another question. Oe of the things that is attactive about mats, at leas to me, is the possibility of a low price. I see many at 15-250 k asking prices. If I wanted to buy real estate as an investment, Id be lookingat 300k minimum and, at that price, would need to do improvements and pay mortgage while I - hopefully - could sell it.

Very risky.

I guess laundries can be looked at the same way... buy a dump, fix it up, work to increase cash flow... then sell for a higher price than it was bought. All the while, there is income coming in - even if you just break even - and you can get in at a much lower price since the bank will more likely lend for a business that is bringing in money - plus owner financing seems to be much more likely.

Is that a reasonable thought for "flipping" a mat - or is that unrealistic as well?

[rmathome]

Here is a perfect example of something that NOW seems to be very misleading... or is it?

Asking Price: Gross: Cash Flow:
$299,000 $178,100 Undisclosed

Business Summary:
EASTERN NASSAU LAUNDROMAT - BEAUTIFUL SHOPPING CENTER, CENTRAL AIR CONDITIONING. 23 WASHERS - 18 DRYERS. ABSENTEE OWNER TAKES HOME 70,000. YEARLY, WORKING OWNER TAKES HOME OVER $100,000. YEARLY. WE WILL SET UP FINANCING FOR YOU. XXXXXXX Has Been Selling And Building New Laundromats For 25 Years In The New York Tri-State Area & XXXXXXX. Do Not Be Fooled By Unscrupulous Copycats Using Our Name And Reputation. FOR A FREE


Owner willing to finance: Direct Owner Financing


Now, if you could by for 300k and profit 100k thats OUTRAGEOUS.

On top of that, if you financed the entire deal with a second mortgage, payments would be about $40k-$50k per year. So, even with 100% financing you walk away with 50-60k per year.

Now, on the surface thats unbelievable. Of course there is no reason to believe that teh numbers are true.

But, is this as credible to you as what you hear spewed on late night infomercials? or is this deal credible based on your eperiences?

[pete f]

Here is a perfect example of something that NOW seems to be very misleading... or is it?




Owner willing to finance: Direct Owner Financing


Now, if you could by for 300k and profit 100k thats OUTRAGEOUS.

On top of that, if you financed the entire deal with a second mortgage, payments would be about $40k-$50k per year. So, even with 100% financing you walk away with 50-60k per year.

Now, on the surface thats unbelievable. Of course there is no reason to believe that teh numbers are true.

But, is this as credible to you as what you hear spewed on late night infomercials? or is this deal credible based on your eperiences?



I think everyone here has tried to explain to you one thing: SAVE UP SOME MONEY!!
you make 100k a year and have no cash? I have a brother like that. Do you think making 25k, 35k more a year will solve the problem? NO. Not to mention all the extra work load. When you get some money saved, buy real estate, like a duplex or 4 unit building. Work that for a few years, then maybe take a shot at a mat after you have some hands on experiance doing fix it work and taking emergency calls. Mats are a similar business only take much more time, and cash to get into, but have a higher yield. Start small and grow, learn how to handle money first. Dump your big SUV get a cheap pickup and put the extra $1000 a month into RIET stocks or something paying some dividend, then when you have enough for a downpayment in a apt building, cash them in and take the next step. Your retirement account let it be, add what you can also. It can be done.

[Silent Roo]

To answer your original question, And remember I am not a financial planner!!!!!
It is NEVER a good idea to stop paying in to a 401k unless you are paying down high rate debt. To stop paying in for 1-3 years you would need to see a HUGE return to make up the difference.

Secondly, As a distributer I get calls like this often. Any investment is risky! Any business you buy has an up side and an opportunity cost. There are business that do well consistently. Laundry's are not one of them. For a Laundry to be successful you need a location, clean, and a owner who is willing to work their tail off to make it work. IT IS LIKE EVERY OTHER BUSINESS OUT THERE!!! There is no easy money in the world. There are too many people in your same shoes. Every car show has the guy who bought a 69 CUDA convertible for $2000 from a little old lady who had it sitting in the barn for 25 years and sold it to him. he put 2000 into it and the car is now worth 250K. Does it happen? Yes I'm sure it does. Often no.

If I as a distributer see a mat that is priced low (unbelievable low that can be flipped) I will own it or a friend of mine will. Many mat sell with out ever being listed.

IT IS NEVER A GOOD IDEA TO FINANCE ANYTHING AT 100% house car toys business.
Look at the news. Debt can be a tool, however when the first 8-12% of what you make goes to pay the bill it can be tough...

It is generally not a good idea to finance with the value of your home. Some experts expect housing values to drop 10-20% over the next 3-5 years. (Depending on region) What happens to you when you now owe more than it is worth? Yes many of us do it. I have done it for short term stuff.

[laundryboy]

WOW - awsome posts.

Laundromats are not an investment! They are a business. A business requires attention from the owner, maintence, marketing, customer service. Some can be purchased, paying for an attendant, a manager, or cleaning service. Like ALL businesses, expenses can be high or low. The higher the expenses the LOWER profits.

I own three laundries, need to sell one. It is a great store for an owner operator but not for me. I do not have enough time to spend at this store to keep the margines high enough. An owner operator will make much more money at this location then I can.

I also have considerable inbvestments in the stock market. Which makes me more is a great question. The laundries pay my bills; house, kids, schools, house remodel, groceries. The investments give me piece-of-mind. My net worth increases greater from investment but I'm not liquidating stocks to pay my bills.

My JOB is great (laundromats). I'm flexable with my hours so I can be with my family. There are times my wife hates the laundry business but would never want me to go back to a 9 to 5 job. We take lots of car trips and get to visit family.

From your posts, you are looking to get the best ROI (return on investment). Remember INVESTMENT. If you start/buy a business you will have to run it. You can hire a Manager to handle everything, but you will need the margines to pay for good staff and still have some left over for yourself (ROI).

I have seen many sell because the owner doesn't have time BECAUSE of their day job.

You are doing the right thing by evaluating your situation and asking lots of questions. Only you can decide what is best for you and your family.

Now, I'm off to visit my gandmother at hospice :(

[pete f]

WOW - awsome posts.

Laundromats are not an investment! They are a business. A business requires attention from the owner, maintence, marketing, customer service. Some can be purchased, paying for an attendant, a manager, or cleaning service. Like ALL businesses, expenses can be high or low. The higher the expenses the LOWER profits.

I own three laundries, need to sell one. It is a great store for an owner operator but not for me. I do not have enough time to spend at this store to keep the margines high enough. An owner operator will make much more money at this location then I can.

I also have considerable inbvestments in the stock market. Which makes me more is a great question. The laundries pay my bills; house, kids, schools, house remodel, groceries. The investments give me piece-of-mind. My net worth increases greater from investment but I'm not liquidating stocks to pay my bills.

My JOB is great (laundromats). I'm flexable with my hours so I can be with my family. There are times my wife hates the laundry business but would never want me to go back to a 9 to 5 job. We take lots of car trips and get to visit family.

From your posts, you are looking to get the best ROI (return on investment). Remember INVESTMENT. If you start/buy a business you will have to run it. You can hire a Manager to handle everything, but you will need the margines to pay for good staff and still have some left over for yourself (ROI).

I have seen many sell because the owner doesn't have time BECAUSE of their day job.

You are doing the right thing by evaluating your situation and asking lots of questions. Only you can decide what is best for you and your family.

Now, I'm off to visit my gandmother at hospice :(


god bless grandma and you! say Hi to her from your friends at coinwash.