This is a guest post from Hank Coleman who writes about money and investing on his blog, Money Q&A. Have you ever noticed the only people in a laundromat are those spending money washing and drying their clothes? I have and my mind instantly went into business mode with my first thoughts being minimal monthly expenses and no employees. Those two factors convinced me this long-standing and low-risk business model and is still earning a passive income for many owners in 2017. Then I did some research…
Below are a few positive factors relating to this industry I found while reading the Coin Laundry Association’s website
- The industry is 70 years old and has steadily grown since inception
- Currently around 29,500 laundromats open in the US
- Does $5 Billion a year in gross revenue
- Income averages from $15,000 to $300,000 a year
- No authority franchises
Stats like that get me excited!
The first 2 things I look for in a business are: Is it proven and can it be replicated. If 70 years of steady growth didn’t answer that question (which it did) then this will. The market is expected to grow even faster!!! Due to mortgage loans increasingly becoming harder to obtain, approximately 35% of Americans are renters; therefore builders are constantly constructing multiplexes to keep up with the huge demand. Why do I mention these facts? While the CLA says laundromats can operate anywhere, they also state densely populated areas with a high number of renters is a perfect location. In order to determine if this growing industry will bring sufficient passive income to justify moving forward let’s look at a hypothetical scenario of opening a laundromat in the Midwest.
If we opened a laundromat in Ohio how much monthly passive income would it bring in?
BUILDING: The average size laundromat is around 2,000 square feet which rents for around $60,000 a year in Ohio. In that size store you can expect to fit anywhere from 20 to 30 coin operated washing machines and another 20 to 30 coin operated dryers. Purchasing all the equipment for your new laundromat will be the largest up-front expense AND the most work you’ll EVER need to put into this business.
MACHINES: When bought in bulk, debit/credit card operated washers and dryers cost approximately $800 each and the standard coin-operated machines go for around $500. Going with the card operated machine would be a no brainer for me considering we live in a world where cash (especially coins) are used less and less each year.
SEWAGE HOOK-UP: Then you must consider the cost of connecting the washing machines to the local sewer system in your town. This can cost upwards of $200 per washer according to Entrepreneur Magazine . Since no two municipalities are the same, making an educated guess with any accuracy is impossible so we are going to assume the worst-case scenario and say it will cost $200 per machine or $4,000 total.
Note: Always assume worst-case scenario with little information
Total Up-front cost = $21,858
Building deposit = $1,858
Machine Cost = $16,000
Sewage Hook-up = $4,000
*Note* If you have a credit score above 660 and some assets you can get a loan for the $21, 858 at 6% interest which is approximately $390.00 a month. If this isn’t and option, there are companies that lease these machines on a monthly basis…
Based on information from the Coin Laundry Association ( www.coinlaundry.org ), a washer is used between 3 – 8 times a day with the nationwide average cost per turn being $2.50. Dryers typically bring in 40% – 60% of total washer revenue. For the purposes of this hypothetical, we’ll assume washers get 4 turns per day and dryers account for 50% of total washer revenue.
Are We Turning A Profit?
- Washing = $9,000 (4 turns per machine equals $300/day x 30 days)
- Drying = $4,500 (50% of washer revenue
- Leasing a building = $5,000 per month
- Loan repayment Note: $390
- Hiring a person to collect the money = $300 (1 hour a day x 30 days)
- Utilities: (electricity, water, etc.) = $4,000
Monthly Income = $13,500
Monthly Expenses = $9,690
Potential Profit: $3,810 per month or $45,720 per year
That’s more than the average American’s salary and its passive income to you! You will have to take into consideration the possibility of incidental expenses popping up. Assume 20% will be lost due to these unplanned expenses, the annual income is $36,500 a year. If you don’t have the credit or money to open a 40-machine store; start smaller. If expenses and income are cut in half, you’re still left with $18,250 in profit at a start-up cost of around $10,000. Good luck and go make some money!!
Take action or gather more research with this Resource
The opportunity here is amazing! If you’d like to begin the process of earning excellent passive income from a laundromat go for it! MyCorporation.com also provides phone assistance and guidance to help start everything you need. The first thing you need to do hire a professional to write you a well thought out business plan. There are plenty of resources for this service on the internet. Our friends at MyCorporation.com being one can provide you with exceptional service starting an LLC for $69.00 plus state fees. The minimum for a lawyer to assist you in this is $200.00.
Hank Coleman is a finance writer who has written extensively for many financial websites and publications in addition to his own blog, Money Q&A. Hank holds a Master’s Degree in Finance and is currently studying to take the Certified Financial Planner exam later this year. Be sure to follow him on Twitter @MoneyQandA.