Reviewing a Laundromat Lease Before You Buy

Before you buy a laundromat, read the full lease and confirm four things: enough years remain to recover your investment, the rent and scheduled increases are sustainable, the lease can be assigned to you, and you understand which costs you carry. A great store on a short or unassignable lease is a risk, not a deal.

Contents

• Why the lease matters so much
• What to check in the lease
• How rent affects value
• Assignment and renewal

Why the lease matters so much

A laundromat is tied to its location and its built-in plumbing and electrical service. You cannot easily move it. That makes the lease one of the most important documents in the deal. If the lease ends in two years with no renewal, the income you are buying may not survive long enough to pay back your purchase.

What to check in the lease

Work through these items:

• Remaining term and options — how many years are left, and what renewal options exist
• Base rent and increases — the current rent and any scheduled or CPI-based increases
• Pass-through costs — taxes, insurance, and common area charges you may owe
• Use clause and exclusivity — whether the landlord can lease nearby space to a competitor
• Repair and HVAC responsibility — who maintains the building systems

How rent affects value

Rent is usually the largest fixed cost after utilities, so high rent lowers profit and therefore value. A common screen is the rent-to-revenue ratio; when rent consumes a large share of revenue, the business is worth less and the price should reflect it. Test it with the rent-to-revenue checker, and read how to tell if a laundromat is overpriced.

Assignment and renewal

Confirm the seller can assign the lease to you, or that the landlord will issue a new lease on similar terms. Get this in writing early, because a landlord who will not assign or renew can end a deal late and waste weeks. Once the lease checks out, finish the rest of your due diligence and compare other laundromats for sale.