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Red Flags For Buyers When Searching For A Laundromat

  • 1.  Red Flags For Buyers When Searching For A Laundromat

    Posted 08-27-2019 12:45
    Edited by LARRY LARSEN 09-06-2019 21:31
    I think it might be helpful to share some of my observations on how to avoid making a mistake in the purchase process of a Laundromat.

    1.  Well over half of the listings on the internet have doctored, inaccurate, puffed or outright fraudulently information on the income and expenses shown on the seller's or broker's sales summary sheet. Although we all love the internet, online searches are not your best option. Red Flag.
    2.  If the seller or broker asks you to sign a non-disclosure statement before he provides you an address your protection responsesvshould be raised. This practice would be like a residential real estate agent who makes you sign an agreement before he tells you how many bedrooms are in a house for sale. Non-disclosures are actually used to lock you into a relationship with the broker similar to signing you up as their customer. The broker may not even have a listing and the seller may not be aware of the broker requiring this agreement. Owners expect their broker to display their Laundromat to anyone who might inquire. When a non-disclosure is demanded by the broker, this is a Red Flag. Write above your signature "Only valid if broker has a written listing agreement with the seller at the time of my signing."
    3.  When the Laundromat address is not provided without a non-disclosure and in addition the broker requires you to make an offer to purchase before showing items needed for due diligence you need to tread carefully. An offer forces you to tie up money through an opening of an escrow. Any cancellation of your escrow will require the signature of the seller and may require a payment to the broker. Red Flag. Require the broker to hold the deposit check uncashed until you review the due diligence material and then deposit it into escrow when you have reviewed the records.
    4.  A seller or broker who tells you the Schedule C of the IRS business tax return is not available. It might show the seller cheating the government or planning on cheating you. Either way the Schedule C portion of a tax return will help you determine if you're dealing with an honest person. Red Flag.
    5.  Some brokers defy the normal principle of having buyer's brokers and seller's broker. This allows the fullest exposure of the Laundromat to the public looking for a Laundromat. Why would any seller insist that their broker earn both sides of a commission? You have the right to select your own broker to represent your interests. Refuse to sign away your rights by designating the seller's broker as your broker. Do you really believe this provides you with the best protection? Red Flag.
    6.  Certain immigrant populations who have grown up in cultures where business ethics are defined differently need to be carefully considered. There brokers and sellers who think tricking a buyer is accepted behavior. If anything seems strangle or unusual, trust your instincts. Red Flag.
    7.  Any seller or broker who tells you that coin counts and collection observations over several weeks are methods of income verifications are leading you on. All experienced brokers and owners know about "salting the mine." This is whete coins ate inserted into the coin boxes by the seller or the broker in evening hours. Red Flag.
    8.  Any broker or sellers who can only provide a few months of utility bills should be asked for an authorization level to inspect the utility bills for the past two or three years. Any seller or broker who won't produce records or authorization letters should be avoided. Red Flag.

    These are only a few of many Red Flags that potential buyers and investors should be aware of when looking into the purchase of a Laundromat investment.

    Larry Larsen
    Anaheim, CA
    Distributor - Insurance - Consulting
    Cell: (714) 390-9969
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  • 2.  RE: Red Flags For Buyers When Searching For A Laundromat

    Posted 08-27-2019 17:24
    Edited by CURT HARRINGTON 08-27-2019 18:02
    Thanks for those five. #6 is especially true in the area where you live. ​ They actually think they are better in business if they can cheat you. They actually believe this.
    If I wanted to spend a million dollars I would have someone there when the place opened until they were closed. Period. What machine did they use and how much did they put in the dryer. How much would this cost for a week? You are about to spend a million dollars! Even then they could have their friends come in but after looking at history of the gas and electric bills do they match?
    Curt Harrington

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  • 3.  RE: Red Flags For Buyers When Searching For A Laundromat

    Posted 09-06-2019 15:53
    Edited by RICH CRUZ 09-06-2019 15:52
    Very informative and helpful. 
    Thank you for sharing I appreciated the points.

    John Stephen Von Roue

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  • 4.  RE: Red Flags For Buyers When Searching For A Laundromat

    Posted 09-09-2019 16:38
    We are in the process of purchasing a laundromat in our area and the seller doesn't have any financial/bookkeeping records for us to review. He has been forthcoming with all the water, gas and electric bills as well as allowing us to have inspections done of the plumbing and electrical.

    Can you please offer advice on what documents we should ask him for to give us more insight regarding his stated revenue?  The seller is also the owner/landlord of the building and will offer us first option to purchase building when he is ready to sell.  He will give us a 15-year lease.  Thanks in advance for any advice you can provide.

    Lawanda Mills
    Sunnyvale CA

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  • 5.  RE: Red Flags For Buyers When Searching For A Laundromat

    Posted 09-09-2019 18:59
    That is not uncommon for someone to just write down their deposits. By the way along with that 15 year lease I would ask for 2 or 3 options. Take him up on the first right of refusal. As far as utility bills They may give you an idea of what to expect but may also be way off.

    Since there are no docs what can you ask him for? He doesn't have them. I would have someone there when the place opens until it is closed keeping track of every sale.  Anything other than that may be a problem? Even then the friends he has coming in may have been given money to do their laundry at his expense? But that will give you a real good idea. Do that for maybe a week? Then realize that June July and August people have nothing to wash. They are wearing shorts and a T shirt and no blankets at night along with going on vacations.
    This actually sounds like something you want to get into unless the machines are 15 years old.

    Curt Harrington

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  • 6.  RE: Red Flags For Buyers When Searching For A Laundromat

    Posted 09-10-2019 20:58
    Ask to see the bank statements for the past two years. It will give you an idea of the cash flow. Also, like Curt said, witness all coin collections for at least two weeks. Spend every hour you can there to make sure he's not salting the mine.

    The Washtub Laundromat
    Tappan, NY

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