Allocation of Value

[MarkS]

Hello Team!
I am a newbie here getting ready to purchase my first location. I am getting ready to work with the seller on the allocation of value that has to be completed. I know this should be something my tax professional helps with but due to some circumstances, I am having to wait to connect with him.

Having said that the laundromat I am looking at has some relatively new equipment (half are 2015 and newer) some older equipment ( 1987-2002) that will need to be replaced in short order. I am curious how to value the older equipment if there is even value there.

Any suggestions on how you would approach this exercise? I appreciate any information or thoughts you all have.

Thanks
Mark

[Cleofas Quijano]

Hi Mark,

I’m in the same boat as you. This is odd that nobody chimed in on this topic? Maybe because we are all entrepreneurs here and we always rely on our tax professional resources on this topic? I don’t know. 😐

[greg williams]

Most laundromats are sold on a multiple of net income. According to some brokers that is regardless of machine age. That being said there is very likely no value to the older equipment you mentioned, fact it will become an expense to have them removed and taken away. Probably should try to get lower price given the aged equipment.

[Juan]

It would help if you identified the type and brand of equipment. TBH, some equipment has a life expectancy of a few years whereas some equipment with proper maintenance and oversight can go for more than 25 years. In this business there are brands that are very reliable, user friendly, and tested as such. There are others that are cheap but are not nearly as reliable or long lasting.

[Anthony Uva]

There is a laundromat valuation calculator on this site under resources. It take the age of the machines into account as part of the calculation.

[Ryan Campbell]

I am interested in this topic as well. I am looking at an opportunity in a small rural midwest town. The seller’s asking price is double to triple times the NOI value. There are 13 Speed Queen washers the seller says are bout 15-20 years old. Is there value in these? To establish an offer or just go with the NOI equation? Also, how do you determine how to estimate the cost of the life of the machines to predict getting investment back and putting it into new equipment? I know this is a gamble but the more info the better. I look forward to any responses.

[Author]

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