Comments on: Doing Your Small Phoenix Multifamily Laundry http://arizonaapartmentinvestor.com/2008/06/23/doing-your-small-phoenix-multifamily-laundry/ Greater Phoenix Multifamily Income Investment Sales, Properties & News Tue, 29 Dec 2009 01:47:38 -0700 http://realty-buzz.com/?v=2.8.6 hourly 1 By: Artur Ciesielski http://arizonaapartmentinvestor.com/2008/06/23/doing-your-small-phoenix-multifamily-laundry/#comment-21 Artur Ciesielski Tue, 24 Jun 2008 16:39:00 +0000 http://ciesielski.realty-buzz.com/2008/06/23/doing-your-small-phoenix-multifamily-laundry/#comment-21 @Mike, I just hinted at it: "There are some downsides to having your own units..." A more detailed analysis is in the works for a specific property as a case study. You're right Mike. There are additional costs to the owner when the units are property owned and in many cases the additional expense and time needed to maintain them is not worth it for the owner. In some cases it is. I have clients doing it both ways and some of my properties have leased equipment and others don't. In each case is was a conscious decision based on a balance of income and expense/liability. The upfront money in turn for a lower commission rate is important and I'm glad you mentioned it. It is of benefit to the signing party, maybe; but, there is no benefit to the subsequent owner of the property, especially if the lease is in place for such a long time. In fact, taking "up front money" probably hurts the resale value of the property because net income is reduced. @Mike,

I just hinted at it: “There are some downsides to having your own units…”

A more detailed analysis is in the works for a specific property as a case study.

You’re right Mike. There are additional costs to the owner when the units are property owned and in many cases the additional expense and time needed to maintain them is not worth it for the owner. In some cases it is. I have clients doing it both ways and some of my properties have leased equipment and others don’t. In each case is was a conscious decision based on a balance of income and expense/liability.

The upfront money in turn for a lower commission rate is important and I’m glad you mentioned it. It is of benefit to the signing party, maybe; but, there is no benefit to the subsequent owner of the property, especially if the lease is in place for such a long time. In fact, taking “up front money” probably hurts the resale value of the property because net income is reduced.

]]> By: Mike Jordan http://arizonaapartmentinvestor.com/2008/06/23/doing-your-small-phoenix-multifamily-laundry/#comment-20 Mike Jordan Tue, 24 Jun 2008 16:20:47 +0000 http://ciesielski.realty-buzz.com/2008/06/23/doing-your-small-phoenix-multifamily-laundry/#comment-20 Mr. Ciesielski, A good article, and some good points! However, you neglected to mention that an owner-operator of coin-operated laundry equipment has additional costs and liabilities over just the utility costs that he needs to factor into his profit analysis. Costs such as maintenance and repair of the machines, and collection costs. What about liability insurance and vandalism repair costs that might result from burglary attempts? However, one great point that your article makes is the importance of having the owner emphasize the monthly commission rate from the leasing partner, and the emphasis on the owner's actual NET return, after utility costs are deducted. Too many owners have a tendency to ask for up-front cash from laundry lease operators, and that up-front investment often requires a reduced commission rate to the owner. In almost every instance, the owner will receive much higher income over the duration of the lease term by negotiating a higher commission rate rather than taking money up-front. (Your example doesn't make mention of any front-money paid out, but that could be one of the reasons the commission was less than 50%.) A third point I would like to make... You mentioned the gross income at this 8-unit property was $260 monthly. That equates to $32.50 spent by each unit on laundry per month. If the vend price at the equipment is set at $1.00 wash and $1.00 to dry, or $2.00 per full-load, then each unit is doing more than 16 loads of laundry monthly, and the equipment is running 130 cycles per machine per month, 4.33 cycles per day. By industry standards, that's about 35% higher than average. The "wear & tear" on that equipment will create higher than normal service and repair costs. And, with that kind of usage, one might make a case that another pair of machines might be beneficial and provide more convenience to the residents, and might even increase revenue. In any event, I appreciate your insights, and wish more investors / owners evaluated the laundry revenue opportunity in as much detail as you have suggested! Kindest regards, Mike Jordan Vice President and District Sales Manager WEB Intelligent Laundry Systems A Division of Mac-Gray Corporation Mr. Ciesielski,
A good article, and some good points! However, you neglected to mention that an owner-operator of coin-operated laundry equipment has additional costs and liabilities over just the utility costs that he needs to factor into his profit analysis. Costs such as maintenance and repair of the machines, and collection costs. What about liability insurance and vandalism repair costs that might result from burglary attempts?
However, one great point that your article makes is the importance of having the owner emphasize the monthly commission rate from the leasing partner, and the emphasis on the owner’s actual NET return, after utility costs are deducted. Too many owners have a tendency to ask for up-front cash from laundry lease operators, and that up-front investment often requires a reduced commission rate to the owner. In almost every instance, the owner will receive much higher income over the duration of the lease term by negotiating a higher commission rate rather than taking money up-front. (Your example doesn’t make mention of any front-money paid out, but that could be one of the reasons the commission was less than 50%.)
A third point I would like to make… You mentioned the gross income at this 8-unit property was $260 monthly. That equates to $32.50 spent by each unit on laundry per month. If the vend price at the equipment is set at $1.00 wash and $1.00 to dry, or $2.00 per full-load, then each unit is doing more than 16 loads of laundry monthly, and the equipment is running 130 cycles per machine per month, 4.33 cycles per day. By industry standards, that’s about 35% higher than average. The “wear & tear” on that equipment will create higher than normal service and repair costs. And, with that kind of usage, one might make a case that another pair of machines might be beneficial and provide more convenience to the residents, and might even increase revenue.
In any event, I appreciate your insights, and wish more investors / owners evaluated the laundry revenue opportunity in as much detail as you have suggested!
Kindest regards,
Mike Jordan
Vice President and District Sales Manager
WEB Intelligent Laundry Systems
A Division of Mac-Gray Corporation

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