Jordan Berry [00:00:00]:
Welcome back to our Battle of the Asset Classes series. In episode one, we put Laundromats up against single family rentals, and it was a nail biter. Today, we’re going to compare Laundromats with one of the most hyped investing strategies of the last decade, short term rentals, also known as Airbnbs. Which one makes more money, which one is easier to run, and which one actually holds up long term? We’ll break it all down category by category, and at the end, we’ll update our leaderboard. So let’s go. Let’s start with a typical deal. Not the outliers, not the cherry picked home runs, just an average base hit deal. So let’s start with Airbnb.

Jordan Berry [00:00:43]:
We got a purchase price of, let’s call it $300,000. You got a down payment of $60,000, and a pretty good nightly rate for something in that range is about $150. Let’s call occupancies 70%, which is about 21 nights a month. That’s a very achievable kind of average base hit Airbnb occupancy rate. With those numbers, a gross revenue would be about $3,150 a month. And when you subtract or when you add up all your expenses, your mortgage, your taxes, cleaning management supplies, utilities, that comes out to around $2,550 a month or so. Means your Airbnb short term rental base hit deal is cash flowing about $600 a month or $7,200 a year. That’s a cash on cash return of about 12%.

Jordan Berry [00:01:41]:
Now let’s take a look at the normal average base hit Laundromat deal next. To keep things consistent, we’ll use the same deal as we used in our last episode. So. So we’ve got a purchase price for a laundromat of about $400,000. That leaves us with a down payment of $100,000. For that average base hit Laundromat. The gross revenue of that kind of deal is going to be about $25,000 a month. And once you add up all your expenses, you’ve got rent, payroll, utilities, supplies, insurance, et cetera, et cetera, you’re going to be at about $18,000 a month.

Jordan Berry [00:02:21]:
So your profit before your loan payments is $7,000 a month. But then you got a loan, your loan’s probably going to be around $2,200 a month. Again, it’s going to vary depending on the terms and the interest rate and all that stuff. But we’re using just kind of average numbers here, which leaves you with about $4,800 a month of cash flow. You’re putting in your pocket for that $400,000 laundromat, which is $57,600 per year. That’s a cash on cash return of 57%. Again, this is an average base hit deal that’s leveraged. So Airbnbs can look good on paper.

Jordan Berry [00:03:02]:
But when you factor in seasonality, regulations and operations, Laundromats start to look like a very different animal. And I’m coming at this with so far in our series, I own single family rentals, I own short term rentals. So I’m coming this from a little bit of an impartial, you know, and obviously laundromats from an impartial place here. But let’s take a category by category. Let’s see how they stack up next to each other for each of our nine categories. Kicking it off with arguably the most important category, which is cash flow. Our Airbnb deal once again, $600 a month versus our laundromat deal, which was about $4,800 a month. Listen, this one’s not even close.

Jordan Berry [00:03:48]:
We’re going to give Laundromats five out of five laundry pods. In our Airbnbs, we’ll give them two out of five laundry pods. Let’s jump to our second category, tax advantages. Listen, both offer strong benefits here. Airbnbs qualify for accelerated depreciation if you materially participate. And you can deduct cleaning and management costs. Again, similar to any business, you can run some of those costs through there. And there is what’s called the short term rental loophole worth looking into for sure.

Jordan Berry [00:04:22]:
If you’re a high income earner looking to offset some of those taxes, look up the short term rental loophole. That’s definitely worth a look. Laundromats, they also, they let you depreciate equipment, write off business business expenses, and also benefit from 100 bonus depreciation on the hard assets. So I’m going to give rentals five laundry pods and I’ll give laundromats once again, four out of five laundry pods. Catego 3 is equity potential. Airbnb is benefit from property appreciation and loan pay down, just like single family rentals do. And Laundromats build equity through increasing net income and paying down debt. But they don’t typically appreciate the same way real estate does.

Jordan Berry [00:05:08]:
So in this category, I’m going to give Airbnbs four out of five laundry pods. And laundromats, I’m going to give them three out of five laundry pods. Category four is everybody’s favorite clickbaity word passivity, passive income. How passive are these assets? Let’s be real. Airbnb is marketed as passive, but guest communication, turnovers, cleaners, the occasional party guests can make it a second job. I’ll speak to this personally. Where problems happen, plumbing gets backed up, you get a bad review and you got to fix something. We’ve got cigarette burn marks on furniture.

Jordan Berry [00:05:50]:
There’s stuff that happens. It’s not passive. It’s a business. And there are no passive businesses. Don’t be fooled. Laundromats, on the other hand, are also not passive. They have equipment issues, staff management, but they can be a little more stable once they’re set up properly. So I’m going to give Airbnb 2 out of 5 laundry pods and laundromats 3 out of 5 laundry pods.

Jordan Berry [00:06:16]:
Now listen, you guys already know I’m a simple guy. So we gotta determine how viable are these asset classes when it comes to complexity? Here’s the reality. Both Airbnbs and the Laundromats require some skills. Airbnb hosts juggle pricing, guest communication, platform rules, navigating any problems that come up for their tenants. Laundromats require operations, equipment management, maintaining equipment, all that. I’ll call this one on complexity. Even Airbnb. 3 out of 5 laundry pods.

Jordan Berry [00:06:53]:
Laundromats also 3 out of 5 laundry pods. For some people, liquidity is important. So how liquid are these assets? In other words, how quickly can you get the money out of the asset if you should need it? Airbnb properties are houses, so they can usually be sold fairly quickly within a few months. Laundromats have a little bit smaller buyer pool and take longer in escrow. I mentioned in our previous episode when we compared single family rentals. Laundromats are actually a really hot market and can be sold pretty quickly right now. But overall, and in general, I’m going to give Airbnbs four out of five laundry pods. And Laundromats, I’ll give them a two out of five laundry pods on liquidity.

Jordan Berry [00:07:39]:
Category seven is, hey, if you’ve got big ambitions, you need to know how scalable the these assets are. Airbnb scales if you can acquire more homes, but lending limits and regulations can block growth. Laudermats scale pretty quickly with reinvested cash flow, but deals are harder to find. So I’m going to give them another tie. Three laundry pods each. Now here’s A big question for everybody. How risky, slash resilient are these asset classes? This is a big one. And I’ll start with the Laundromats, because they’re touted as being recession proof, but I’m going to call them recession resistant.

Jordan Berry [00:08:21]:
Nothing is recession proof fully, but they’re recession resistant. People will always need clean clothes. Airbnbs, on the other hand, in downturns or pandemics, travel gets cut, regulations can ban you overnight, and occupancy can tank. So I’m going to give Laundromats four to five laundry pods in Airbnbs. I’m going to give them two out of five laundry pods. And finally, a huge question I get asked category number nine, how much initial capital is needed for each of these asset classes? Airbnb entry can actually be a lower down payment because you can use more leverage. For an Airbnb, $60,000 down on a $300,000 property is pretty normal, pretty average, and you can even arbitrage leases. You actually don’t even own the Airbnb property to utilize.

Jordan Berry [00:09:18]:
The strategy lottery can usually require bigger down payments, although SBA loans can reduce this amount if you can find a Laundromat that qualifies for them. So when it comes to initial capital needed, I’m going to give Airbnb four out of five laundry pods. And I’m going to give Laundromats three out of five laundry pods. So how do these asset classes stack up next to each other? Here’s the final tally. We have laundromats at 30 laundry pods and Airbnbs at 29 laundry pods. It’s close, but Laundromats edge out Airbnbs thanks to stronger cash flow and being more resilient. If you’re looking for a lifestyle freedom today, Laundromats are the clear winner here. Between these two, if you’re banking on appreciation and don’t mind a little more volatility, Airbnbs can still deliver.

Jordan Berry [00:10:14]:
So let’s update our leaderboard. Here’s how our asset class leaderboard looks after two episodes. In first place, we’ve got single family rentals with 32 laundry pods. In second place, we’ve got laundromats with 30 laundry pods. And in close third place, Airbnb with 29 laundry pods. The battle is heating up. Laundromats are holding their ground, but real estate still has the edge on paper. But don’t forget, the most important thing is to align the asset class you you pursue with your goals.

Jordan Berry [00:10:47]:
The overall leaderboard is helpful, but also compare the categories that are most important to you, like cash flow, tax advantages, risk, or whatever your current priorities are. And just to be clear, I again invest in all three of these asset classes. I think all three of them are great asset classes. You should be investing in something, obviously. And hopefully as we continue through this series and we check out different asset classes like self storage, like car washes, like stocks and bonds, we’re going to see how they all stack up and help you figure out which asset class you should be investing in. So what do you think? Did Airbnb deserve to score higher or Laundromats the clear winner here? Drop your score in the comments. I read all of them. And don’t forget, this is episode two in our battle of the asset classes.

Jordan Berry [00:11:46]:
Next week we’re going to compare Laundromats to small multi family rentals. Be sure to subscribe so you don’t miss it. And if you’re ready to dive deeper into Laundromats, check out my free course on how to buy your first Laundromat. I’ll drop a link in the description below.