Earning a Passive Income With a Laundromat

Earning a Passive Income With a Laundromat

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?

Monthly Income:

  • Washing and drying = $9,000 ($300 x 30 days)
  • Selling soap and other vending machines = $1,000

Monthly Expenses:

  • 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.

28 Responses to 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.

    • Hank says:

      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.

    • Hank says:

      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. The numbers certainly look good up front. I was surprised that the dryers cost that much more than the washing machines. I am glad it is not that way with the home machines.

  4. 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.

  5. Jon Rhodes says:

    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!

  6. James says:

    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.

  7. 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!

    • Hank says:

      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?

  8. Nick says:

    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?)

  9. 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.

  10. My grandfather owns a laundromat, and he used to own three around my home town. He makes a very comfortable living for himself and my grandma.

  11. This is great information about the possibilities of starting up a laundromat and who knew dryers were so expensive?

  12. This is a great one! If one could find turn-key business, this one could be really good. I really like this one.

  13. I have considered this business before but doesn’t know where to start. Is 18% APR typical on a business loan? That’s really high. I think credit cards charge lower rates.

  14. Jai Catalano says:

    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.

  15. 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.

    • Derek says:

      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.

  16. 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.

    • Hank says:

      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.

    • 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)

  17. Tracy says:

    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.

  18. Todd Garth says:

    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.

    • Derek says:

      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.

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