Latest / Own More Doors / #74 We Made $1M in 8 Months… Should We Sell or Keep Our Laundromat?

Transcript

#74 We Made $1M in 8 Months… Should We Sell or Keep Our Laundromat? · Own More Doors

• 0:00
  SPEAKER_00: For the last eight months, we've been remodeling this beautiful laundromat.
• 0:04
  SPEAKER_00: It's we've poured our blood, sweat, and tears into this place.
• 0:06
  SPEAKER_00: We're so proud of it.
• 0:08
  SPEAKER_00: I want to keep it and operate it and be a laundromat owner.
• 0:12
  SPEAKER_00: Jack, I want to sell it.
• 0:14
  SPEAKER_00: So what should we do?
• 0:16
  SPEAKER_00: Tune into the show while we discuss all these options.
• 0:18
  SPEAKER_00: Alright, everyone, so we're back.
• 0:20
  SPEAKER_00: Jack and Juan.
• 0:21
  SPEAKER_00: We did this several months ago, and when we were here, we had dirt floors because we had dug out all the cement.
• 0:29
  SPEAKER_00: We poured all new cement, all new plumbing, all new electrical.
• 0:33
  SPEAKER_00: We have 28 washers, 30 dryers.
• 0:36
  SPEAKER_00: We are ready to go.
• 0:38
  SPEAKER_00: Now something interesting happened.
• 0:40
  SPEAKER_00: Of course, in every situation, the city came in and they said, You pulled some permits, but not all the permits.
• 0:47
  SPEAKER_00: And so, right now, for the last month and a half, we've been at a stalemate while we're pulling plans and additional things the city said we didn't have.
• 0:56
  SPEAKER_00: Not the end of the world.
• 0:57
  SPEAKER_00: Uh, we got to roll with the punches, but here's where we're at today we are close to opening.
• 1:04
  SPEAKER_00: We have all these projections on how much money we're gonna make.
• 1:07
  SPEAKER_00: The the um the world of businesses, you know, creating wealth, creating passive income.
• 1:14
  SPEAKER_00: Here it is.
• 1:14
  SPEAKER_00: This is like we're in it.
• 1:16
  SPEAKER_00: Jack is suggesting that we should possibly sell it.
• 1:21
  SPEAKER_00: So, Jack, where where are those thoughts coming from and what's the logic behind why, after we've done all this work and it's ready to go and ready to cash flow and passive income, you're thinking, Juan, let's just sell it now.
• 1:34
  SPEAKER_01: So I came up with this one day thinking about okay, I own a couple of businesses myself.
• 1:41
  SPEAKER_01: Operations one.
• 1:42
  SPEAKER_01: Everyone on Instagram or social media says, hey, laundromats are passive, you make money sleeping, you only got to work two hours a week.
• 1:50
  SPEAKER_01: We can both tell you we haven't even opened and we know that's not the case.
• 1:54
  SPEAKER_01: Um, I've met with a lot of other laundromat owners, actual owners, and follow them kind of day to day of what they're doing.
• 2:01
  SPEAKER_01: It's it's pretty intense.
• 2:02
  SPEAKER_01: Uh, we're we already are both brokers.
• 2:06
  SPEAKER_01: We have a full-time day job that is pretty strenuous on us.
• 2:10
  SPEAKER_01: So um, and the second thing is why can't we not take the equity from this and buy a bigger building or buy another opportunity?
• 2:20
  SPEAKER_01: So that's why I kind of came up with to Juan, like, hey, great, you know, we did this, we did a great job on this.
• 2:27
  SPEAKER_01: What about this idea of maybe we kind of throw it out there?
• 2:31
  SPEAKER_01: Let's see if we can sell this, use our equity from this building and this project, and possibly go buy a 30-unit multifamily building or maybe another bigger laundromat.
• 2:41
  SPEAKER_00: So a couple things have happened.
• 2:43
  SPEAKER_00: When we first bought the building, it was a dilapidation.
• 2:45
  SPEAKER_00: We showed you it was a dilapidated um commercial building.
• 2:49
  SPEAKER_00: All the equipment was rusted out, the pipes were gone.
• 2:52
  SPEAKER_00: Um, we needed to literally gut the building and build it from scratch.
• 2:57
  SPEAKER_00: That first week that we closed escrow, Jack said, Juan, you know we could sell it for more.
• 3:02
  SPEAKER_00: We for more than what we just paid for it.
• 3:04
  SPEAKER_00: And for a night, I thought about it.
• 3:06
  SPEAKER_00: I'm like, you know what?
• 3:07
  SPEAKER_00: We could make some money, which is good, right?
• 3:09
  SPEAKER_00: We're we're uh our channel is teaching people how to build wealth through investment real estate.
• 3:14
  SPEAKER_00: So we would check that box and I thought about it.
• 3:17
  SPEAKER_00: But here's the part that kept me from doing it.
• 3:20
  SPEAKER_00: We didn't really have the time to spend remodeling the property.
• 3:26
  SPEAKER_00: We knew it was going to take months.
• 3:27
  SPEAKER_00: Um, it really took us six months, but the delays with the city has now extended out to eight.
• 3:32
  SPEAKER_00: But realistically, for having no experience, we did pretty good.
• 3:35
  SPEAKER_00: We did really, really good.
• 3:37
  SPEAKER_00: Um, we went above but um budget, but everyone goes above budget.
• 3:41
  SPEAKER_00: It wasn't the end of the world, so we're still fine.
• 3:43
  SPEAKER_00: Um, so when Jack suggested early on, you know, we don't have to build it, we could just sell it, make some profit.
• 3:48
  SPEAKER_00: I thought if I did that, I would always have a regret.
• 3:52
  SPEAKER_00: A regret that I never operated it, a regret that I never tried it, a regret that maybe, maybe this is my calling.
• 3:57
  SPEAKER_00: I don't know.
• 3:58
  SPEAKER_00: Now here we are again, where we have this beautiful building.
• 4:01
  SPEAKER_00: Uh, I'm gonna let Jack go through uh all the numbers, what we're into it for, and more importantly, what we could maybe sell it for.
• 4:10
  SPEAKER_01: Right.
• 4:10
  SPEAKER_01: So we bought this building for$450,000.
• 4:14
  SPEAKER_01: Um, it was completely dilapidated, dilapidated as Juan said.
• 4:18
  SPEAKER_01: Uh we put in with all the infrastructure in here, as you can see, with the plumbing, the electrical, the concrete, new uh HVAC system, that was about$320,000.
• 4:30
  SPEAKER_01: And then we spent the machines, which we got a loan for, was about$430,000.
• 4:36
  SPEAKER_01: So about all in, we're around$1.25 million.
• 4:41
  SPEAKER_01: Um, what we're thinking we can sell this for is a probably about$2.2 million.
• 4:48
  SPEAKER_01: So we're thinking we can possibly make a profit about$1 million on this property.
• 4:53
  SPEAKER_00: So not bad for eight months' work, right?
• 4:56
  SPEAKER_00: Not bad at all.
• 4:57
  SPEAKER_00: And so that's where this time around, where last time I said we're not gonna consider it.
• 5:02
  SPEAKER_00: This time I am considering it.
• 5:04
  SPEAKER_00: Now, our projections if we operate it and keep it, Jack.
• 5:08
  SPEAKER_00: How much money are we gonna make monthly gross uh from fluff and fold from from the machines behind us?
• 5:15
  SPEAKER_00: How much could we make being conservative?
• 5:18
  SPEAKER_01: Being conservative, so again, we're both new at this.
• 5:21
  SPEAKER_01: So I asked our couple of vendors that help multiple laundromats in the city of Long Beach with equipment and day-to-day uh stuff like that.
• 5:31
  SPEAKER_01: So I asked them in with the demographics and what they've seen with other operators, what can we expect with this square footage and what we have in machines?
• 5:39
  SPEAKER_01: So we got on a conservative number, would have been 22,000 a month.
• 5:44
  SPEAKER_01: This is includes the self-service operation, which means the the clients that come in use the laundromat for themselves, you know, wash dry.
• 5:52
  SPEAKER_01: And then there's a component of fluff and fold where you drop off your laundry, have it wash, fold it, dried, folded, and ready to go for you.
• 6:00
  SPEAKER_01: You can just pick it up.
• 6:02
  SPEAKER_01: Between those two, on a conservative side, we say they told me that we can expect about$22,000 a month.
• 6:08
  SPEAKER_01: On the high aggressive side, we can see about$38,000 to maybe$40,000.
• 6:13
  SPEAKER_00: Yeah, so on the low end, um, which I from the very beginning, my the the way that I looked at this, and again, we're not open yet, so it's not like we know yet.
• 6:22
  SPEAKER_00: And we're not pretending to know either.
• 6:23
  SPEAKER_00: Okay, so I always thought if we could make a thousand dollars a day gross, okay, a thousand dollars a day gross, um, that puts you at 30,000.
• 6:32
  SPEAKER_00: This is before the fluff and fold, is what I thought.
• 6:35
  SPEAKER_00: Okay, and so someone would say, Great, what's the take home?
• 6:38
  SPEAKER_00: So these are actual numbers from the industry, a third would be net, so a third of what you're grossing should be pure profit.
• 6:46
  SPEAKER_00: Um right now, in this type of situation, we're in a unique situation.
• 6:51
  SPEAKER_00: We're the landlords, so technically we're gonna be paying ourselves a lease fee.
• 6:57
  SPEAKER_00: And so um in the good month, if everything worked out, if we this is just an example, if we did grow, say, 30,000 a month and and a third of that stays with us as profit, we now have$10,000.
• 7:13
  SPEAKER_00: $10,000 a month passive income.
• 7:17
  SPEAKER_00: Now it's not really passive because you are gonna have to be working it, taking calls, things are gonna happen.
• 7:22
  SPEAKER_00: Um, but regardless, we're in the world of business, we're entrepreneurs, and so um, so just so you know, for anyone thinking, well, in order for me to compare, do we you know, do you guys sell it or do you operate it?
• 7:34
  SPEAKER_00: Here's some numbers, you guys decide if you think having the cash flow is worth it, or maybe just starting uh uh from scratch and selling.
• 7:42
  SPEAKER_00: So here's what's happening today in a few minutes.
• 7:45
  SPEAKER_00: Um Jack had Jack had a great idea.
• 7:48
  SPEAKER_00: He said, look, there's these laundromat groups on Facebook.
• 7:51
  SPEAKER_00: There's Facebook groups dedicated to laundromat ownership, okay?
• 7:54
  SPEAKER_00: He he he put out an ad saying, hey, we just did a complete remodel on a laundromat in Long Beach.
• 8:01
  SPEAKER_00: If you're interested, fill out this questionnaire because we want to vet you.
• 8:04
  SPEAKER_00: We don't want a bunch of looky-loos coming through here.
• 8:06
  SPEAKER_00: And let us show you.
• 8:08
  SPEAKER_00: We're expecting eight people to come in.
• 8:10
  SPEAKER_00: They know the price of 2.2 million, which seems we thought it was we thought it was crazy, but but we did interview several uh laundry brokers.
• 8:20
  SPEAKER_00: We've done a lot of research, we've looked at uh prior sales, comparables.
• 8:24
  SPEAKER_00: We know how to price real estate, but the one component this has that real estate doesn't is a business component.
• 8:29
  SPEAKER_00: Yeah, and so we kind of you know had to learn as we go.
• 8:32
  SPEAKER_00: And so we have eight people coming, they're interested in it.
• 8:35
  SPEAKER_00: No one's telling us we're crazy, get lost.
• 8:37
  SPEAKER_00: Your number uh is unjustified.
• 8:40
  SPEAKER_00: They're coming to see it.
• 8:41
  SPEAKER_00: So uh today, I guess technically we're hosting an open house, and we will see is our number, is the$2.2 million figure um possible?
• 8:52
  SPEAKER_00: Is there really a buyer out there for the property?
• 8:54
  SPEAKER_00: We will see.
• 8:56
  SPEAKER_00: Um here's where we need your help.
• 8:58
  SPEAKER_00: If you were in our shoes, do you do you keep it and operate it or do you sell it?
• 9:04
  SPEAKER_00: Take that money.
• 9:04
  SPEAKER_00: Now we're not gonna take that money and go buy fancy cars and fancy watches.
• 9:09
  SPEAKER_00: That's not what we're gonna do.
• 9:10
  SPEAKER_00: We're gonna do a 1031 exchange, most likely into an apartment building, which is the one product we know how to own and operate.
• 9:17
  SPEAKER_00: Laundromat, not so much.
• 9:19
  SPEAKER_00: Right.
• 9:19
  SPEAKER_00: So that's where we're at.
• 9:20
  SPEAKER_00: I I'm still kind of torn.
• 9:23
  SPEAKER_00: Do we keep it?
• 9:24
  SPEAKER_00: Do we operate it?
• 9:25
  SPEAKER_00: Will this make more cash flow?
• 9:27
  SPEAKER_00: I think this will make more cash flow than an apartment building because there's a business component to it.
• 9:31
  SPEAKER_00: Right.
• 9:32
  SPEAKER_00: Um, the the one thing that's really important where we're at right now, if anyone's listening to us and says and saying or thinking to themselves, how can it be worth so much?
• 9:40
  SPEAKER_00: There's two things we're selling.
• 9:41
  SPEAKER_00: So I let's be very clear.
• 9:43
  SPEAKER_00: We have a business component, we have a real estate component.
• 9:47
  SPEAKER_00: Most times, if you're out there looking at uh laundromats to buy, it's only one component and it's the laundry business component.
• 9:54
  SPEAKER_00: You are not the owner, you're simply a tenant.
• 9:57
  SPEAKER_01: And we we found doing this research actually and being in the laundry business now, finding a bill a laundromat with the real estate is pretty tough.
• 10:08
  SPEAKER_01: Yeah.
• 10:08
  SPEAKER_01: Yeah.
• 10:10
  SPEAKER_00: So a couple things.
• 10:11
  SPEAKER_00: Since we've started this eight months ago, we've been like thrusted into this world of laundry.
• 10:16
  SPEAKER_00: We realize there's lots and lots of influencers who tell you to invest in these types of businesses.
• 10:23
  SPEAKER_00: They call them boring businesses, which I hate that term because there's nothing boring about this.
• 10:28
  SPEAKER_00: Every business is gonna have overhead, it's gonna have expenses, it's gonna have income, you're gonna have employees, sales, marketing, customer service.
• 10:36
  SPEAKER_00: How is that boring?
• 10:37
  SPEAKER_00: Why would you ever call this boring?
• 10:39
  SPEAKER_00: So I won't go there today, but there's a lot of influencers really getting behind this own laundry match.
• 10:45
  SPEAKER_00: This is the way to retire, quit your corporate job.
• 10:48
  SPEAKER_00: I was once a nurse and now I do this full time, and there's so much money.
• 10:52
  SPEAKER_00: Maybe there is, and maybe deep down inside, I want to give that a chance.
• 10:58
  SPEAKER_00: But at the same time, I gotta respect what Jack is saying.
• 11:01
  SPEAKER_00: He's probably right.
• 11:02
  SPEAKER_00: We don't have the time.
• 11:03
  SPEAKER_00: Operations is gonna be is gonna take a lot of our time.
• 11:06
  SPEAKER_00: And he says, one, it's gonna cut into your real estate business career, which is super successful.
• 11:10
  SPEAKER_00: So what do we do?
• 11:12
  SPEAKER_00: Comment below.
• 11:13
  SPEAKER_00: Are you Team Juan operate the laundromat?
• 11:16
  SPEAKER_00: Are you Team Jack sell it and and run away and buy fancy cars and watches?
• 11:22
  SPEAKER_00: Let us know your thoughts on what you would do if you were in our shoes.
• 11:26
  SPEAKER_00: Thank you for watching.