This is a guest post from Hank Coleman who writes about money and investing on his blog, Money Q&A.
Have you ever noticed that a laundromat has a lot of people washing and drying their clothes but no one in the store running the business? I can remember telling a friend that I wouldn’t mind owning a laundromat because I thought that I could make $10,000 per year in profit with very little or no work making it a very passive income earning business. My friend was a little taken aback and asked how I could possibly live off of $10,000 per year.
That is the trouble with a lot of people. They do not see the power of earning a passive income and how little streams of income from diverse sources of passive businesses can add up over time. So, is it possible to earn a passive income with a laundromat and earn a profit?
The Necessary Costs
The average size laundromat is about 2,000 square feet. In a store that large, you can expect to be able to fit 20 to 30 coin operating washing machines and another 20 to 30 coin operated dryers. Purchasing all of the equipment for your new laundromat can require a huge upfront cost.
Top loading washing machines can cost about $500 each, and the dryers with one stacked on top of another that you typically see cost about $5,000 for the pair. So, a laundromat with 20 of each can find you footing an upfront cost of $10,000 for washing machines and another $50,000 for dryers.
A change machine will run you another $1,000 approximately, and the soap vending machine will add another $1,000 as well. Another factor that you must consider is the cost to connect all of your washing machines to the local sewer system in your town which can range from anywhere from $200 and up for each washing machine according to Entrepreneur Magazine. On top of all of these expenses, purchasing your own building can be a huge cost as well – most likely in the hundreds of thousands of dollars. While you could take a loan out with NatWest Mortgages, we will assume that you lease space in your local strip mall.
The Income Potential
Based on some of the common assumptions in the industry, you can expect for your washing machines to each run an average of four times per day. The average price per wash is $2.50 and the average cost to dry your load of laundry is $1.25 or typically 50% of your washing machine revenue. So, 20 machines x 4 uses per day x $2.50 per use = $200 and another $100 per day for the dryers.
Are We Turning A Profit?
- Washing and drying = $9,000 ($300 x 30 days)
- Selling soap and other vending machines = $1,000
- Leasing a building = $2,300 per month
- Loan repayment on 20x coin operated washing machines and dyers = $1,700
Note: $66,000 borrowed at 18% APR for 5 years = $1,700 monthly payment
- Hiring a person to collect the money = $300 (1 hour a day x 30 days)
- Utilities: (electricity, water, etc.) = $4,000
- Refilling the soap and vending machines= $500
- Total Expenses = $8,800
Potential Profit: $1,200 per month or $14,400 per year.
If you wanted to cut down on your labor costs, you can do things like installing
timer locks on the front door of your laundromat or consider keeping it open 24 hours a day. There are also laundromats that are not using coin operated machines any longer as well. You can now purchase machines that allow your customers to swipe their credit cards right on the machine itself, or you can purchase washers and dryers that operate on a refillable card system.
You have a lot of choices when it comes to running and expending your laundromat that can help you cut costs, increase the passive income potential, and even offer new services to your customers.
Have you ever thought about owning your own laundromat?
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.