Acquisition – Need Advice!

[Jordan Berry]

I am currently in the process of purchasing an existing location in a rent-heavy neighborhood. This location has a large parking lot, a 2-bedroom apartment, and another 500 sq ft store front. The main storefront is 1,500 sq ft, which the laundromat occupies. The current owner and his wife (both 73 and want to retire) attend the laundromat full time and operate a wash/fold service which makes about $1,000 a month. There’s about 20 machines and 30 pockets. It seems like a lot of equipment for the store size. The equipment is about 12-13 years old and he has a couple dryers out of order. According to his revenue sheet- he makes about $3,500-$4,000 a month. The building itself needs quite a bit of work. New floors, new paint, new exterior paint (or replace the old wood siding with vinyl), new fold tables, and NEW EQUIPMENT. My quote on new equipment from a Continental distributor was $280,000 for 16 washers and 26 pockets. Mostly bigger machines.

My plan is to buy the building with hard money, run it “as is” while rehabbing it, refinance it, and take the equity out for a down payment on machines. I have experience in multi families and flipping so I have a team of contractors for this scope of work. I am fearful that new equipment will cost too much with a monthly payment close to $4,000 a month. I have been told by a mentor/consultant of mine that I should seriously consider investing in the business first, opposed to the real estate because it will pay off faster. However, I am looking to keep my monthly costs low and get the real estate fixed up before the machines. I also believe financing is easier for machines as opposed to having $280,000 worth of equipment on my credit then going for a refinance. Banks may not like that.

The asking price is $215,000. I am going to offer $150,00 as the building needs a lot of work and obviously new equipment. My hard money loan will be for $200,000 which gives me $50,000 for repairs. I have cash as well if more than $50,000 is needed.

If anyone has any sort of experience on this, please feel free to share your strategy, advice, or any sort of input.

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