Brainstorm: Building a coin-op laundry route empire

[wadea]

I’m posting this little brainstorm to get feedback. I’m sure I haven’t yet thought of everything and maybe my estimates suck. Rip it up and save me some money and trouble. So far, this is semi-hypothetical.

My apartment complex just evicted the current provider of coin-op laundry machines, CoinMach, because the machines are old and bad and CoinMach refused to replace them. It sounds like they have not yet found a new provider. This got me to thinking about what kind of a business this would be to start.

Here's my thought process in bullets:

-Machines cost ~$750/ea. I assume this doesn't include tax or delivery, so let's call it $900/ea.

-Our old machines were $1.25/wash and $1.50/dry, but the dryers sucked and clothes were always wet after one cycle.

-The agreement with the building's management company a profit-sharing deal. No rent or utilities (dryers are electric), but a cut of the profit goes to the landlord. No word on the percent.

-Our building has 6 washers and 6 dryers for about 80 units with plenty of families. On average about 2 people/unit. So 160 residents. Assume two loads/person/week = 320 loads per week. Assume 70% of loads are dried. (320*$1.25)+(320*0.7*1.5)=$736/week. Average of $3189/month.

-12units*$900=$10800. A usable lifetime for a top-load washer is 5-8 years and a dryer is 15-20 years. I'll finance all over 5 years and consider financials for those five years, considering equity, etc. as a freeroll. $10800 at 10% over 60 months = $229/month.

-I'm totally guessing on the cost of repair and parts. In time, I assume I'll learn to do it if the cost becomes prohibitive, otherwise I'll continue to just hire someone. I'll guess $300/month for 12 machines on average. Maybe one could arrange a service contract or something.

-On a monthly basis, then:

Income: $3189

Expenses: $529
Loan repayment: $229
Repair & parts: $300

Profit: $2660

If I share 50/50 with the landlord (in lieu of rent), we each get $1330. Based on combined square footage of the laundry areas compared to our apartment's rent, I'd say that's about what the rent for that space would be anyway. Profit-sharing at 50/50 is probably about right. Maybe I'd try to get to 40/60.

Because this will start out as a spare time gig, I'll probably just hire an accountant, so knock off about $200/month. Since I'm hiring the repairs and accounting, I'm pulling down over $1000/month for collecting money, depositing money and calling the repair guy.

Over time, I would plan to expand into other apartment buildings. My strategy would basically be to grind it out. I would contact companies building new apartment buildings and call existing rental managers. I figure existing buildings already have laundry in place, but if I'm in their ear about once every three or four months, they'll think of me if/when they finally tire of their current provider. Obviously I would offer to undercut the current guy where possible. Over time, I should be able to get my foot into more and more locations.

As a note, I saw a posting of a similar business for sale in the LA area. Dude had 750 machines, two repair guys and a part-time secretary on staff. He claimed $560K revenue and $137K net profit. He claims he puts in 20 hours a week. I’d like to be that guy, but starting from scratch.

So, where are the holes 2+2? Can it be as straight-forward as it seems? Will I need insurance? What other expenses have I omitted? Is the financing realistic? Because people want non-old machines, is there a market for the used ones? At very least, one should be able to convert them to non-coin-op machines and sell as used, right?