Jordan Berry [00:00:00]:
You overpay for a laundromat or make the wrong offer, it can take years to dig yourself out of that hole. I know because that’s exactly what I did with my first laundromat over 12 years ago. In this video, I’m going to show you exactly how to determine the value of a laundromat. Make the right offer, including all the expensive lessons that I learned along the way, so that you don’t have to.

Jordan Berry [00:00:24]:
Learn them the hard way the way that I did.

Jordan Berry [00:00:27]:
Now, here’s the good news. This is actually a pretty simple process if you know what you’re doing. Not easy, but simple. And you can get enough information to value a laundromat with just four numbers. Why? Because laundromats are valued as a multiple of the net income. So if you get the net income and the other three factors that a multiple is driven by, that’s going to give you enough to make your pay. Valuation of the laundry. So, number one, agent and condition of the equipment.

Jordan Berry [00:00:59]:
Newer equipment means higher value, obviously. Number two, rents as a percentage of the gross income. High rate kills deals faster than almost anything else. And number three, how many years are left on the lease? A strong lease protects you, and a weak one creates risk. You want help running these numbers quickly and consistently? We’ve actually built over the [email protected] calculators where there’s an analysis calculator that’ll walk you through this exact process. But this is just the overview. It’s enough to get you started. If you’re itching to go take action right now, leave a like and go get after it.

Jordan Berry [00:01:37]:
But if you want to see exactly how we analyze deals of pressure, test them, and advise our clients whether they.

Jordan Berry [00:01:44]:
Should walk away or make an offer.

Jordan Berry [00:01:46]:
Let’s head back to the studio, and I’ll walk you through the exact process that we utilize to value a laundromat and to create a compelling offer for our clients.

Jordan Berry [00:01:58]:
Okay, I told you the four numbers that you need to be able to value a laundromat. Let’s go through it in depth so that I can show you exactly what to do with those numbers to determine the value and how to craft a compelling offer to give you the best chance of getting that laundromat deal locked up and. And getting in the game here. That’s the whole goal. Right? Okay, so let me explain to you kind of how this works, because it can be a little confusing and maybe even a little bit frustrating if you’re not Familiar with it. Generally speaking, this is not always the case, but typically when you go to buy a laundromat, a lot of times you’re going to get very little information upfront and then you get more information after you make your offer and get it accepted. So when we analyze a Laundromat deal, we kind of analyze it two different times. The first time, well, we analyze it a bunch throughout the process, but two main times, right.

Jordan Berry [00:02:52]:
The first analysis, we utilize the numbers the seller gives us to determine the value of the laundromat. Okay. A lot of times those numbers are very round numbers. A lot of zeros. A lot of times. A lot of times they’re, you know, they’re averages, they’re unverified numbers. And that can be a little scary to make an offer based off of that. But a lot of times that’s what you’re making your offer based off of.

Jordan Berry [00:03:19]:
And you don’t get more in depth numbers until after you get your offer accepted and start the due diligence, which will be the next video, by the way, of what exactly to do once you get that laundromat under contract. But before we get there, we’ve got to talk about how do we value it based on the numbers the seller gives us and how do we craft a compelling offer that also protects us from making an offer that turns out to be a bad offer because the information was bad or wrong or whatever? That’s what we’re going to talk about today. Let’s dig into this again. We’re using the numbers the seller gives us most of the time. Now, again, quick overview. We need four numbers to determine the value of a laundromat. There’s other things that play into it, but initially all we really need is these four numbers to be able to make an offer, a compelling offer. Okay, so we need the net operating income, we need the age and conditions of the machines, we need the rent amount, and we need the number of years remaining on the lease.

Jordan Berry [00:04:24]:
Now the question then is, what do we do with these numbers once we get them? How do we translate those into a value for the laundromat? Okay, so let me show you exactly how to do that, what to do with these numbers. To do that, I’m going to show you our analysis calculator that we have here@laundry resource.com so check out laundry resource.com, go to the calculators page page and go to the analysis calculator. We’ll link that if you’re on YouTube. That’ll be down below, if you’re on the podcast, we’ll have that in the Show Notes page. But again, lawnmoweresource.com navigate to resources and calculators. Go to the analysis calculator. This is what will pop up. It is our analysis calculator.

Jordan Berry [00:05:04]:
Now you can input information about a particular Laundromat. You can add a photo. Let me see if I have a photo even that I can upload. I have a picture of a Laundromat somewhere. No, but I do have a picture of this rainbow out in front of my house. I’ll put that there and just pretend like that’s a Laundromat. And you can put the business address and a Google Maps link if you want. The reason you might want to do this is because this calculator will spit out a an analysis of the Laundromat and you can actually download it as a PDF.

Jordan Berry [00:05:37]:
I utilize those PDFs for three in the calculator for three main things. Right. Number one, obviously, is to determine the value of a Laundromat. But that PDF, I will keep it for my own files just so I can keep track of the laundromats that I’m looking at. Again, I will upload this actually to the deals in the Laundromat DFY platform. We talked about that in the last video. If you’re not familiar, check out Laundromat DFY done for you, dfy.com and create an account over there. It’s absolutely free.

Jordan Berry [00:06:10]:
It’s the platform we utilize to help clients find laundromats. You can upload that analysis of the laundromat, the PDF up to that, your CRM over here at laundromat dfy.com keep track of everything. And also we. So that’s the first thing. Keep track of things for you. The second thing is we. If you have a business partner for us, it’s our clients. But if you have a business partner or somebody else at your work, a spouse maybe, it’ll have a breakdown of all the numbers.

Jordan Berry [00:06:41]:
I’ll show you one at the very end of this process. And that way you can present it to them and they can ask their questions. But I’ll have everything they need to determine the value for themselves. And number three is if you’re working with a lender, you can send this over to the lender and just say, hey, here’s a quick analysis of this, you know, from the Laundromat Resource Analysis calculator. So you can actually add a whole lot more Details here, too, to kind of keep track of all the stuff. You can actually include every single machine if you want to that we have a list of all that and all the info about it if you want. That’s. That’s there for you if you want to use it.

Jordan Berry [00:07:14]:
We’re not going to mess with any of that today. You just click add more, by the way, but you can put that in there and that’ll be on the PDF. Okay, so now we know the four numbers. So the first one is what we call the net operating income. Just so everybody’s on the same page. Net operating income is how much money is coming in the Laundromat minus how much money is going out of the Laundromat before things like loans, taxes, things like that. Okay, so that’s your net operating income. That’s the cornerstone of the value of a Laundromat.

Jordan Berry [00:07:48]:
And another way to think of it is that’s the performance of the Laundromat. That’s how the Laundromat’s performing and how we know if it’s performing well or not so good. Okay, so let’s do a sample deal. I’m just going to make it up. But it’s based on a lot of deals that we look at over here. So, you know, the numbers will. They’ll make sense even if they’re not the same numbers as your deal. That’s why the calculator’s here.

Jordan Berry [00:08:13]:
Okay, so let’s just say this one’s making $15,000 per month in gross income. That’s total income. And let’s say it’s expenses including everything like rent, utilities, any labor, insurance. Kind of all that is maintenance, you know, is about $9,000 per month. That would leave us with a monthly net operating income of 6,000 doll or annually $72,000 a month. Okay, so the question then is, how do we determine the multiple that translates this $72,000 into the value of the Laundromat? Okay, that’s where the other three numbers come into play. So let’s say in our target Laundromat here, we’ve got equipment that’s around six to nine years old. You know, it’s not new, but it’s also not old.

Jordan Berry [00:09:09]:
It’s pretty good equipment. You that. That affects the multiple over here a little bit. These multiples, we do adjust them here and there because the market fluctuates. So if, you know, use a calculator down the line, and these numbers are a little different, just know that the market, market has fluctuated a little bit, and that’s why the numbers are different. Okay. And again, we look at hundreds of deals every single, like, maybe thousands of deals every single month. So we’re.

Jordan Berry [00:09:40]:
We got our finger on the poles kind of across the nation, and even in Canada and Australia a little bit in Europe even. So we got our finger on the polls pretty good here on what the multiples are looking like. Okay, so. So that’s age of the equipment here. Again, during due diligence, we’re going to have this stuff inspected, make sure that it really is this. And the owner’s not just telling you it’s younger than it is or the owner maybe doesn’t know. Right. So we’re going to, you know, verify all this, and then we’re going to inspect the equipment to make sure they’re in good shape or to at least know what kind of shape they’re in so that we can make a decision going forward.

Jordan Berry [00:10:17]:
Okay, but that’s in due diligence. We’ll talk about that in the next video. Okay, now let’s talk about rent amount. Okay, so let’s say in our example, rent is $3,000 per month, right? Now the question is, is this a good rent for a laundromat or a bad rent for a laundromat? And I will say up front that a bad lease or high rent, that might be the number one cause of laundromat failure. So it’s really important that you get your lease. Right. Again, we’ll talk about that in the next video, but it’s really important. But for now, the question is this a good rent or a bad rent? Well, the way that we determine if this rent amount is good or bad is we want to look at this number, this $3,000 as a percentage of the gross income.

Jordan Berry [00:11:08]:
Okay? So you can see for our example here, it’s a 20% of the gross income. So now the question is, is that a good percentage or a bad percentage? Well, let me tell you, what we’re targeting is 25% of gross income or less. So you might look at this and be like, whoa, hey, we’re doing pretty good. We’re at 20%. That’s really good. Or, you know, maybe it was above that. You know, maybe the rent’s 5,000amonth, and, you know, now we’re at 33%. Does that mean we shouldn’t buy it? No, not necessarily.

Jordan Berry [00:11:47]:
But it does start to affect the multiple, right? That’s when it starts. The multiple starts dropping after about 25% of gross. Okay, now you can see we’re in pretty good shape here. However, many leases have one of two additional expenses as opposed to base rent. This is what we call base rent. This is what most people just look at, oh, my rent’s $3,000 a month. But a lot of times these leases have one of two different expenses in addition to that base rent. The first one being what we call the common area maintenance expense.

Jordan Berry [00:12:25]:
Or you might see, cam, common area maintenance expense is exactly what it sounds like. If your laundromat’s like a strip center or something, there’s some common areas that need to be maintained. And so the tenants split the cost of maintaining the common areas. Maybe there’s some lights, so there’s an electricity bill, and maybe there’s a gardener or snow removal or things like that. Painting stuff like that. Common area maintenance expense that’s included in your rent. Or you might what, you might have what’s called a triple net lease. Triple net lease.

Jordan Berry [00:12:57]:
If you’re not familiar with that. Greatest invention ever. If you’re a commercial landlord, kind of a downer if you own a business with a triple net lease. Because what this means is that the tenants pay the expenses of the. Of the property and the three expenses, the three main. The three nets, if you will, of the triple net expense are property maintenance, property taxes, and property insurance. Okay, so that means in addition to your laundromat maintenance, your laundromat taxes, your laundromat insurance, you’ve got to pay for the properties as well. And this number can vary quite wildly.

Jordan Berry [00:13:36]:
But let’s just say for our example, it’s $1,000 a month in addition to our base rent. So now you can see our percentage of our income has jumped up above that 25% target. Again, doesn’t necessarily mean that this laundromat is. You shouldn’t buy it or that it’s bad or anything like that, but it starts to affect the multiple a little bit as we go through the process. Okay, now, real quick on this percentage. Sometimes, I’d say semi often, actually, there’s an opportunity for some quick wins here because in order to get this back under, you know, the 25% mark, most of the time, it’s unlikely you’re going to negotiate a lower lease. I’ll just say I’m a commercial broker. I am involved in commercial real estate a lot.

Jordan Berry [00:14:29]:
I do this for laundromats a lot. I’ll just say it’s not impossible, but most of the time, it’s unlikely. You’re going to negotiate a lower rent, but you may have some quick wins to improve the gross income quickly. For example, maybe the laundromat. This happens a lot. Maybe the laundromat’s underpriced and you raise equipment, you know, event price by a quarter or more. Right. That could easily bring this up, this number up, which would then get this percentage in line again.

Jordan Berry [00:15:01]:
Right. Maybe there’s some improvements you can make. Maybe there’s some marketing you can start doing things like that to get this back in line. See, we also want to look at quick wins, but we’re buying it as it is now, not as we’re going to make it. Right? Because we got to put the work and take the risk into making it like that. Okay, so for our total rent amount here, we’re at $4,000, which, again, is 26.7% of our gross income, $15,000. That affects the multiple a little bit. And then our fourth number that we’re looking for here is how many years are left on the lease? Now, question I get asked all the time is, well, how much time do I need on the lease? Like, what’s a.

Jordan Berry [00:15:43]:
What’s a, you know, what’s the minimum? Right. And here’s my answer to this is, I would say bare minimum. Bare minimum, 10 years you need on the lease. But really, I’m feeling uncomfortable. Until you have at least 15 years on the lease. Now, that begs the question, hey, I’m looking at a laundromat. Everything’s checking out. I really like it.

Jordan Berry [00:16:10]:
But it has seven years left on the lease or three years left on the lease. Does that mean I shouldn’t buy it? The answer to that is no. And we’re going to talk about how to craft a compelling offer here. But what you would do in that case, if everything else is checking out so far and you decide you want to make an offer, we would add a contingency to that offer. We’ll say, hey, we want to buy our laundromat at X amount of dollars. One of the contingencies of buying this thing, though, is that we can add time to the lease. And so I get asked a question a lot. Well, should I try to get a new lease, or should I try to add more time to the existing lease? And I’ll say, my perspective on this, there’s some people who disagree with this, but I think they’re wrong, genuinely.

Jordan Berry [00:16:54]:
Like, I think they’re smart and they’re good, but I think they’re wrong. Generally speaking, it’s better to try to add time to the existing lease. We do that by adding five or ten year options to the lease. Right? So you’d say, hey, we have seven years left. We’d like to add two or three five year options to that lease. So we’d say, hey, we want to make an offer X amount of dollars contingent on, you know, being able to add two or three five year options to the lease. Right. So then we would have to negotiate that with the landlord.

Jordan Berry [00:17:28]:
The reason I say that’s generally better. Now, there’s nuance here. You want to understand the lease that you’re signing up for. There may be things on that lease that you need to try to get rid of because they’re going to cripple you. Obviously that would be a better opportunity to negotiate a new lease. But again, commercial real estate background, and I do this with laundromats all the time, what I found is that 97 top times out of 100, if you do a new lease, things are not going to go in your favor. Landlords have a lot of negotiating power right now, a lot of laundromats because they’ve had long leases, they’re under market. So if you do a new lease, they’re going to raise the price on you.

Jordan Berry [00:18:07]:
The terms are going to be stacked in their favor. So a lot of times it’s better to try to add five year options to an existing lease as opposed to doing a whole new lease. Now again, it’s not across the board and if you need help with that, you know, laundryresource.com coaching we’ve got, you know, a team that can help you kind of navigate that and look at your lease with you and help you make the right decision. But like I said, most of the time adding options to the lease is going to benefit you. So let’s say we’ve got, you know, 12 years left on the lease here that, you know, but we’re going to add a contingency to say, hey, we want, you know, one to two more five year options on the lease. Now real quick, before we move on from that, one question I get asked all the time is what’s an ideal lease? What am I shooting for? Or what if I have to do a brand new lease, what should I ask for? Okay, so here’s what I would be shooting for. If I was doing a brand new lease, I’d probably be looking for a 10 year lease with two or three five year options to renew. That effectively gives you 20 years to 25 years.

Jordan Berry [00:19:14]:
I would want to make sure, if at all possible, those five year options had the terms of those options spelled out. Nothing like market rent. Landlords want to do market rent on those five year options. Laundromat owners want to have a consistent, like, hey, they’re going to go up 2.5% a year or 3% a year. It’s called the escalator. Right. We want to know the terms ahead of time and be able to control those and negotiate those ahead of time. That’s what I would be shooting for.

Jordan Berry [00:19:42]:
And I’d also want to make sure that those options are assignable or assumable so that if I decide to sell down the line, the new owner could assume those and utilize those options if they chose to do so. So hopefully that gives you a quick rundown of that. There’s a whole lot that goes into that and I should say up front, like, or I guess at the end here, rent and number of years on the lease are not the only terms you need to pay attention to on the lease. Lease is very important. I always recommend three people helping you go through a lease. Number one, you, you should read the lease. I know it’s boring, I know it’s hard to understand they do that on purpose a lot of times. But you should understand it to the best of your ability.

Jordan Berry [00:20:25]:
You should have a lawyer probably look over your lease to make sure you understand all the legal gotchas that could be potentially hazardous to your business there. And then number three, I would recommend you having somebody who understands the laundromat industry read through that lease with you as well. Just looking for a laundromat specific gotchas and we have a team that can help do that if that’s something you need help with. Laundrymyresource.com coaching and then also I would utilize, but not solely rely on yet at least I to help you go through a lease. You can dump a lease into AI and say, hey, what are the pitfalls here? That can be a really good tool as well. Again, I don’t know that I would solely rely on that, but that is a tool that you could utilize. Okay, all right. The last thing that factor that might, you know, might impact the valuation here is where your laundromat is located.

Jordan Berry [00:21:25]:
So we’ve broken it down just to keep it simple. If you’re in a large metro area, if you’re in a suburb or town or a rural area, you can choose that. Again, I’m in like la, so I’m in a large market. What we found, again, we look at deals all over the country, all the time, all day, every day. Pretty much what we found is that in larger metro areas, L.A. new York, Chicago, some of the Texas markets, Florida markets. Right. Some of the bigger markets, there just tends to be more buyer competition.

Jordan Berry [00:21:55]:
And so that tends to drive the multiples up. And in smaller markets, if you’re out kind of in the middle of nowhere, there’s less buyer demand. And so that can drive the multiple down there. So you don’t have to utilize it. If you’re, you know, if you’re like, well, I’m not really sure, just leave it in suburb town, you know, and that won’t affect the multiple at all. But I’m in a big market. There’s a lot of buyer demand. So you can see that it pushed the multiple up for this specific location.

Jordan Berry [00:22:24]:
And you can see that, listen, the value of the laundromat, based on, again, this is the numbers the seller gave us a whole lot of zeros in here. These are averages based on all of that, the valuation of this particular automatic, 342,000. And again, it’ll give you a suggested range here. Now, it will say, again, we’re going to go through this in the next video, but I will say that if you have more detailed information, you can actually add a whole lot more detailed information like the monthly profit and loss or income and expense here for all the different categories of income and all the different categories of expenses here. It’ll give you some nice visual charts and stuff and the trajectory, which again we’ll go through in the next video. But you can get way more precise with this calculator. But for this first pass, typically these are the kind of numbers we’re getting and that’s what we’re going to utilize. So based on that, we can make an offer somewhere in this range, the 306 to $360,000.

Jordan Berry [00:23:28]:
Again, listen, you can make an offer anywhere that you want to. You know, any price point you can go under this 306, you can go over 360. If you feel like you’re in a super competitive market, it. But this will give you a pretty good range and a pretty good ballpark valuation based on the numbers the seller gave you. Okay, so now once we have that information, you know, the question is, what do we. What are we going to do with it? To make an offer and to make it compelling. Okay, so again, we want to make a strong offer. That calculator will help you with the valuation.

Jordan Berry [00:24:04]:
Oh, I should mention, and I didn’t Let me just show you real quick, the, Let me show you real quick the PDF that you can download. Okay? So you just click down download report. It’ll create an analysis report. And again, now you have all the information that you need right here at your fingertips. All the performance information, equipment age, all the lease information, the valuation, the offer, suggested offer range, any details you added in about the, and if you got more detail about the income and expenses, that’ll all be here on the PDF as well. And then you have it to keep yourself organized, upload it to the laundromat dfy.com platform, share it with a partner or spouse, share it with a lender, and you got it there for you just to kind of keep yourself organized. Okay. Okay.

Jordan Berry [00:25:03]:
Now the question becomes, once I have that information, how do I craft a compelling offer? So I’m going to point you to laundromatresource.com resources. There’s some resources over there to help you help you do that, including some templates for an loi, which is a letter of intent or a purchase agreement. If you’re going to do this yourself, you can utilize those templates to make those offers. There’s also, this is part of the pro community, but, but what you can join is pretty cheap and definitely worth it. If you’re in this part of the process and you’re trying to do it yourself, for sure worth it. It’s a no brainer. But there’s a sample list of contingencies that you might want to offer over there as well. So you might want to include some of those into your offer.

Jordan Berry [00:25:54]:
Okay? So to create a compelling offer, we want to make sure our valuation is a correct valuation, but also competitive evaluation. And you want to make sure that you have the contingencies you need in your offer, but not contingencies you don’t need. Okay. And the reason I say that is if you add a whole bunch of contingencies in your offer, it gets a little overwhelming. And the more contingencies you add, the less compelling your offer is. Okay. Now I say that to discourage you from adding all the contingencies in that contingency sample list into every single offer, because not every offer needs all those contingencies. However, I want to emphasize, do include the contingencies you need, and if you’re not sure, either get help, ask somebody, or default to including them and you can negotiate them later if you need to.

Jordan Berry [00:26:51]:
But again, crafting that compelling offer, making sure the valuation’s right, and also having the contingencies you need but not the ones you don’t need into that offer. And again, there’s templates over [email protected] resources you may, I can’t remember off top of my head. You may need to be a pro member to utilize those templates. I think maybe you do. But like I said, it’s a no brainer. If you’re at this part of the process and you’re trying to DIY this, go for it. If you’re out there and you’re like, hey, you know what? I want help finding a deal or I want help going through the analysis, head over to laundromatresource.com coaching. Sign up for a street free strategy call.

Jordan Berry [00:27:33]:
We’ll go through those with you and tell you what options we have to help you through that process. We do that for a whole bunch of clients already. We’ve done it for, I’ve done personally, I’ve done over 1500 consulting calls now in the last five and a half, six years. And so our team is super experienced on doing this. We’ve got our system down and can help you whether you want us to do it for you or if you want us to do it with you and make sure that you buy it right the first time. Check out laundrymyresource.com coaching okay, all that said, we’ll see you in part three where we’ll figure out what you’re supposed to do once you get that offer in and get it accepted. Now, how do we go about the due diligence? That part is the tricky part and we’re going to show you exactly what we do for our clients so that if you decide to do it yourself, you won’t get burned like I did in my first deal, which I’ll tell you a little bit about in the next video. See you over there.