Have you ever had a membership at your local fitness center? I have, and really, the business does not appear to be that complicated. Typically, there is one, maybe two, people working, and most of the time they really aren’t needed! Think about it. When you go to the gym to work out, do you need to go up to an employee and ask a bunch of questions? No, you just walk up to your machine of choice and start your work out! The employee is mainly there to keep things clean, refill towels, and check people in and out.
In my area (where things are cheap), you could purchase a 20,000 square foot factory building for only $250,000. The open layout would be perfect for a fitness center! A few alteration plus the equipment, and you’re probably looking at an initial expense of $350,000.
When you open up your doors to your customers, your expenses will obviously be your employee (you could probably get away with just one employee for a while), but besides that, it’s just a matter of keeping up with the utilities.
I never really thought about it much before, but owning a fitness center would really be a breeze. Once everything is set up and you find your members, all of the income is almost 100% passive. Each month, your customers pay their dues through your automated charge system and as long as they stay happy, the money keeps rolling in! If you were able to acquire 200 members at $30 a month, you’d consistently earn $6,000 a month, just in dues! That’s some pretty solid income – especially since it’s mostly passive.
Return on Investment
As with any business, you want to know how long it’s going to take to recoup your initial investment dollars. Assuming your gym cost $350,000 initially, and it costs $2,500 a month to maintain (employee + utilities), and your income is $7,000 a month (membership dues + product sales), it would take you nearly 6 years to earn back your $350k, and that doesn’t even factor in the interest that you’re paying on your loan! If you have interest payments, your payoff might be 10 years or more!
Since the business is quite passive though, you might not mind carrying your debt load. With a loan payment of $2,000 a month (including insurance and property taxes), you could still have a cash flow of $2,500 after expenses. That’s still not a bad income.
What do you think about this passive income idea? Thumbs up? Or thumbs down?