Earning a Passive Income With a Laundromat

Earning a passive income with a laundromat, passive income, laundromat, making money


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
  • Recession-proof
  • 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?

 

Start-up Costs

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…

Potential Income

 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?

Monthly Income:

  • Washing = $9,000 (4 turns per machine equals $300/day x 30 days)
  • Drying = $4,500 (50% of washer revenue

Monthly Expenses:

  • 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.

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30 thoughts on “Earning a Passive Income With a Laundromat

  1. Sign me up! I would probably move towards cutting out hiring someone to work there as well, but you still need a human person or some sort of service plan to repair the machines when they break down (because they do). Still, not a bad plan by any standards.

    1. The problem with cutting out hiring someone is that it makes it much less passive for you the owner. You are right about needing a service agreement.

  2. Interesting perspective. But don’t forget about insurance, which can be a killer. Vandalism is a huge problem in laundromats. Then also factor in replacement costs. Because, not only do laundromat machines get more use than home meachines, people will use them for things they would never attempt at home. Like a load of 10 pairs of jeans, or four blankets.

    1. Edward, you definitely bring up great points. I’m sure that there are tons of costs I probably left out from my “back of the envolpe” math. And, I always take my crazy items to the landeromat. My wife would kill me if I messed up her washing machine and dryer.

  3. It’s definitely a volume business. You can lower start up costs by buying used washers/dryers if you have a trustworthy go to repairman. Plus it’s a great money laundering tool for the shadier types.

  4. Th4e beauty of an idea like this is that if it is profitable, then there is nothing stopping you from opening up hundreds over time. All those bits of profity will then nicely add up!

  5. You might have to install a security system of some sort as well, even if its just a camera system. That way you can hopefully deter illegal activities in your laundromats. If you had a franchise of these things, you could make some serious money.

  6. Hank, did you actually buy a laundromat or just run the numbers? I’ve actually been in the market for one since summer and have not found one that fits my requirements in my price range. Build-out for a new laundromat is prohibitively expensive and permits are difficult here in SoCal (for a water-based business in a drought zone) so you have to look for sellers. There are a ton of coin laundries for sale, however, owners are asking for a multiple of 4 or 5 of net earnings(industry standard) while the bank doesn’t want you to purchase at more than a multiple of 3. Also, the top-loaders you mentioned are extremely inefficient (something like 32 gallons of water per load to 6 or 7 for the front loaders). Also, if you need a business loan to finance the purchase of the coin laundry, many banks would be very hesitant to finance a loan for a business generating net earnings under $50,000 per year. Also, would you really advocate a business loan at 18% APR? I would prefer to look for businesses that qualify for SBA loans, which most banks offer at between 6-10% APR depending on the applicant’s credit history and personal financial statement. Finally, I consider a part-time attendant a must, and collecting the money yourself. Small business ownership means personal responsibility: you need to be willing to go to the laundry at LEAST every other day to understand what’s going on, gauge business, address repairs, fill vending machines (or call someone to fill them), etc. Coin laundries, much to new owner’s chagrin, is NOT a “set it and forget it” kind of business. That is not to say it can’t be a very good and profitable business.

    Anyways, there is a ton of things to consider in addition (location-are you OK owning a business in a low income neighborhood that might have higher crime rates?) but it’s a great topic. Just don’t make it look too easy and discount the many considerations you need to take as a business owner!

    1. American Debt Project – I understand the points that you bring up and I had considered them. They just didn’t make the cut on the final draft. I had read before about how most laundromat owners were switching from top loaders to front loaders. I was trying to keep costs down for my quick “back of the envolope” calculations. Front loaders are amost 3x or 4x more expensive. Also, there comes a line in the sand that you must draw. How much of this business and any business do you want to make it as close to truly passive as you can? Visiting every other day, while it is definitely wise, is not passive. Having to pick up your own coins everyday is not passive income. How am I going to be able to sit on the beach, golf, or travel if I have to go back to the laundromat every day?

  7. My dad’s a big fan of laundromats. I’ve thought about it a bit but don’t know enough about them… I’ve been tempted though (I actually check a few “laundromats for sale” sites pretty regularly… sad?)

  8. I actually had a client that owned 3 Laundromats. He seemed to be doing alright. It was quite a bit of work though, especially with maintenance and as said previously, vandalism. Edward also mentioned insurance, which was expensive for my client.

  9. We were spending about 200 a month on laundry with 2 kids and 3 adults. So what did I do? No I didn’t open up my own laundromat. I bought a small washer for my apt. We save tons.

  10. Nothing better than passive income. A couple hundred here and 1g here and there and viola! Set back and be at the beach. Its amazing how so few get the concept though. Less work more money! Even if at the end of the year I make less then others I spent less time making it.

    1. Some people actually think passive income is wrong! “We make a living the honest way…” I hate that phrase. To me, that means, “We like to work long hours for little pay because we’ve never looked into another way…” I love conversing with people like you because you get it! Thanks for reading.

  11. I don’t think I’d want to take on that much risk for less than $15K a year. However, this post did get me to thinking. I used to rent a stackable washer/dryer by the month. It cost a little over $30 a month and I rented it for almost 4 years! I could’ve just bought the darn thing. Either way, if you have the space to house a few washers and dryers, you may want to consider your own little rental business. Although I acknowledge it’s not without risk as well.

    1. Shawanda – I would not think about the risk like you are doing. What is your costs with this investment? $66k up front to earn $15k per year. That’s about a 25% return on your investment. You invest your paycheck in the stock market or mutual funds expecting an 8% or more rate of return.

    2. Shawanda, I like your idea. It’s actually another branch of the laundry business, which is managing/renting washers and dryers to small multi-family buildings. Landlords with a lot of properties don’t want to bother with handling the repairs on them and their maintenance people are busy with other repairs. These laundry management systems offer a really reasonable monthly charge to to rent out the machines and provide repairs on them. If you had 10 or more accounts, this creates a decent monthly revenue for a small investment and manhours (you would need someone to take incoming calls and schedule repairs)

  12. You could also try a website like fiverr in which you charge people 5 dollars for a service that you offer that will help or provide value for people. If their is something that you are good at, like dancing then you can sell that on fiverr but recording dancing videos that are instructional and then sell it for profit.

  13. I agree, nothing is better than earning a passive income. It’s so good to see someone else writing about passive incomes, as it can be quite hard to find authoritative, real advice out there.

    1. It is kind of shocking how little is written about passive income when it is the gateway to so many people’s wealth! Thanks for reading Todd. There’s plenty more to come.

  14. I work in the hospitality industry and most hotels don’t own the equipment in their guest laundry areas. They have companies that provide the equipment for a kick back of the total profit each month. I have also considered trying to get into apartment complexes and small colleges and universities. Cuts down on owning a building. I also would only consider leasing the machines for a predetermined time period to coincide the contract for placement and a maintenance agreement for the equipment. The key is going to be staturation. I would also only use machines with credit/debit card readers. Placing wireless internet cams to cut down on vandelism. The new washers can send a message when they need repairs. Opens up the possiblity to write contracts in multiple states.

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