I paid $0 upfront for a laundromat making $67K a year

[Music] we bought a laundromat for a hundred thousand dollars that did sixty seven thousand dollars in profit kind of passively although don't be fooled nothing but free lunches that doesn't exist what we're going to talk to you about today is how you can turn coin operated laundromats sudsy businesses into some real cash so if you're interested this might be a video for you all right passive income is obviously one of my favorite topics doing it with quarters is like a whole different thing so this is one of the first laundry deals i did do you guys want to see the numbers 67 000 profit a year we bought the business with zero dollars of our own money used a hundred thousand dollars in seller financing aka future sales go to pay off the owner of the business and we finance the rest afterwards with equipment loans that doesn't suck huh we're going to get into the how in the cash flow but first let's talk about why why oh why would i leave wall street to go start buying laundromats that sounds ridiculous and i'm sure my mom was not too happy i mean i don't think there were any young kids sitting there thinking one day i shall grow up and become a legendary tycoon in laundromat no but here's why i like them and maybe you will too kind of like six reasons one they're simple customers do the majority of the work washing and drying their own clothes that's awesome which means two there's little labor no training really onboarding labor's relatively minimal three upfront cash the customers pay you right away making accounting and tracking easier four recession resistant last time i checked people always need clean clothes it's probably a good practice overall five there's a good roi on laundry laundry industry has about a 20 to 35 return on investment and nearly a 95 success rate i don't know 95 sounds pretty high i don't know how those get those numbers that's from speed queen here but it is a simple business to run it's not easy but it's simple then there's a couple other ancillary reasons if those are our six main reasons the two other reasons i like it is in inventory unlike a restaurant or convenience store or grocery store laundromats have very little physical inventory and no seasonality meaning that you don't have your revenue go like this randomly and give you whiplash it's not that weather dependent now i'm not going to say that there are not cons the cons the biggest con the number one con is you or in my case my gent you gotta run a laundromat you know i don't think uh many of us hang out at laundromats on the day to day if we don't have to they're not exactly the ritz carlton huh and the second thing is you might be thinking a two hundred thousand dollar or a hundred thousand dollar price tag what do you think i'm made of money cody but the spoiler is i'm going to use seller financing in a small upfront amount to get this laundromat and we'll show you how to do it too if that's interesting to you low barrier to entry lots of laundromats out there no real moats besides build out costs i think that's a pretty easy one to get around but that is one another con is you got to get your hands dirty i mean do you know how to fix a laundromat are you an electrician a janitor a marketer alt plumber all in one or you could do what i do and you give some money to an operator run it for you and they find all of those people for you but regardless it is true someone is gonna have to show up late at night and fix something couple other things to think about set costs you always have to pay your utilities in rent we'll tell you how to do that intelligently but they're always going to be there and then customers you know this is a unique client set i have someone else do the coin collection security and oversight because well crackheads i think that there's a lot of normal people like you and me that use this but there are always those outliers so we try to provide an incredible experience for the normies and we try to make sure the crackheads i don't know do their crackheading elsewhere so over this whole period of laundromat in i think it's important to look at a few key financial metrics so for the financials for this laundromat this is what basically it looked like here's a high level of the balance sheet you can see here i requested over a five year period to see all of the financials that basically looked the same way and them to be expanded so i could see day to day week to week month to month the good thing about these financials is they were pretty tight there wasn't a lot of variability so from year to year they basically made the same amount of money now when i went to buy this laundromat they wanted 200k and would finance through seller financing 125k and i said that's cute i also want bloomberg's balance sheet uh although not his political campaign for president anyone else see those weird dm's he sent but sadly since he won't give me all of his money i also won't give the price always to the business seller that they want and here's why because there are 2.5 million businesses for sale out there in the world today so if i can't get the right deal on this laundry mat i can probably get the right deal on a different one so here's what the seller looked like this was the offer for me and the detailed information is it was in phoenix arizona they wanted this 125k down they also wanted this business to be worth a little bit more than i want to and they were retiring now we negotiated the price because you know the world was burning and gave them a small down payment and structured a deal to do the rest of the payment over three years there's lots of ways to get the seller to do this it's called seller financing we talk about it all the time and unconventional acquisitions i like to structure them so the seller wins too on the upside oh shameless plug if you want to learn more we talk about that at unconventional acquisitions all the time you can probably get the link below now for this deal here's what the breakdown was we make about five thousand five hundred and eighty three dollars a month as a buyer we got a good multiple of one point eight six acts then i am break even in three months for my initial cash down and my cash on cash return is 268 percent now read that again we'd make 268 in one year and here you could insert like you know my rad dance moves what i do when i can find a deal like that every once in a while and here's the way that it goes the exact breakdown you're looking at revenues of 113 000 profit of 67 000 that purchase multiple of 1.8 per 6 which leads to a valuation of 125k all in with the business assets that was 135 000 we raised zero funds because we got a loan we put down 25 000 and that gave us future payments of a hundred thousand dollars over three years we had to pay back the seller with a personal investment of twenty five thousand dollars that's how we get to that five thousand five hundred and eighty three dollar amount super interesting now you could do this deal lots of different ways you could get an equipment loan on it although the sba loan has to be at the top of the stack firstly in position is what it's called aka mama sba gets her money before anyone else gets their money or you could do it through seller financing like we do and then what you do is you go find another one and use the proceeds as the cash down on the next one my friend mike nerby this is him isn't he cute he used the same process to buy one that netted him 900k but that's a different story for a different video the devil is really in the details in these when buying a small business are sort of 10 steps here they are to buying a small business with seller financing or creative structuring this is kind of two of them maybe one of those steps you've got to find the deals you got to analyze them this is called due diligence if you want to be fancy but my main job here in this video today is to open up your mind open it to the things us on wall street make billions on that most people on main street never do and you know if you want to see how private equity heads become billionaires they don't do it by buying financial firms they do it by buying main street firms boring businesses they turn them around and optimize them and then cash flow off of them it's a triple sided win business owner gets to retire you get to cash flow and employees get jobs as we optimize and grow and this is the main difference between trading stocks where someone else has to lose for someone else to win while building businesses all can win i'm not saying they always do there's some pretty gnarly private equity guys out there but you theoretically can't and you know truthfully that's not even what this story is really about do you know why i invest in small businesses well look what's happening here in this world there's no politics known tech workers complaining about how their sleeping pod isn't warm enough no crying circles these are normal everyday humans just like you and me and i want to see them win i want our operator to have a better life the people needing to use this place to do it safely and with a little love thrown in if it's true that small businesses are the lifeblood of this country of ours if we buy them and invest in them and support them it's just one less walmart on the street and that is a story i can get behind [Music]

Channel: Codie Sanchez

Views: 1,008,210

Keywords: Boring business, laundromat

Id: phME03aJI-Y

Length: 8min 37sec (517 seconds)

Published: Wed May 04 2022