Buyer Beware

By Charles Pasquale, CLA Member posted 27 days ago

  
Eight Best Practices to Follow When Buying a Property

Buyer_Beware.jpgAs the old saying goes, “Let the buyer beware.” And never are those words more accurate then when purchasing a property to be used for a vended laundry business – whether you’re looking to buy an existing store or build from the ground up.

However, if you’re prepared, have done your homework and go in with your eyes wide open, you can navigate that financial minefield and come away with a successful, profitable self-service laundry business.

To help keep you on the right path, here are eight best practices to heed when looking for your next property:

1. Permits and zoning determine how long it will take to complete your project, or whether or not it’s even possible.

The very first item you need to check on is whether or not the property is zoned properly for a vended laundry, as well as anything else you may want to do with it. If not, what will you have to do to obtain zoning? For example, what are the procedures to obtain a variance, and how long will the process take? Or, you may discover that you simply cannot get the proper zoning for a laundry business.

To find out all of this, visit the town hall or the municipality’s headquarters. Next, find the permitting department and simply ask. Be patient because it may take a while to find the right person to answer your questions. Typically, there is the one person in every town who knows everything about the local zoning and permitting process – and your mission is to find that person.

Zoning will provide you with the rules to how you can build your facility and how you can lay out your property. It’s always best to follow the zoning rules as closely as possibly, because any change from the zoning guidelines will require a variance. And, when going in front of the zoning hearing board for a variance, you can be turned down for any reason. This can include where you place the building on the lot, the amount of parking available, the size of your signage, and other related items that involve the basic rules of site development.

In addition, looking into zoning prior to building your laundry facility is strongly advised because you may want to repurpose the building for something different in the future. When building, keep in mind that it’s about the entire lifespan of that property, not just what you’re doing at this particular moment in time.

Another good rule of thumb is to develop the land – or at least get it approved to develop – to its maximum. The reason for doing so is because, as time goes by, regulations will get tougher, building sizes will get smaller, parking lots will get smaller, and storm water retention will become a more serious issue.

2. Ample off-street parking is a key (unless the location has enough walk-in traffic).

Unless you’re building a laundry in a very densely populated, urban area (such as Manhattan, Brooklyn, etc.) and expecting all of your business to be of the walk-in variety, you must have ample off-street parking. Plenty of parking spaces will attract customers who drive to your store with huge bundles of laundry, use your large-capacity washers, and spend the most money with you – thus, increasing your revenue per square foot. As a general rule, plan for at least five to eight parking spots per 1,000 square feet of store – but, of course, the more parking availability, the better.

In fact, I can’t stress enough the importance of parking. Parking and access to your building are paramount when laying out a property. Also, having drop-off access at your door for a potential drive-through option is a great idea to research during the beginning stages of your project. Again, these rules and regulations can be found in your local zoning code.

3. Find the flaws in your building.

Just like buying a house, you will need a building inspector. After all, you need to know the condition of the roof, the HVAC unit, the water heater and so on. What are the flaws? Does it have termites? You need to find out the condition of the entire structure in general.

Also, are there any code violations? If so, what will it cost to bring the building up to all current local codes? What’s more, be sure to have your attorney conduct a lien search to assure that there are no liens on the property.

When purchasing a property, you receive a due diligence period to research that property’s buildings and land. While inspecting the buildings, pay close attention to the condition of its infrastructure. Also, because you’re looking at the building as a potential laundromat, it’s critical to inspect the water supply and the power coming to the property. During your due diligence, keep an eye out for any necessary alterations to the current utilities, in order to help facilitate your new laundry business. These changes or deficiencies in the building can serve as a negotiating tool with the seller.

4. Look for any environmental issues.

The potential of an environmental issue existing on your property is another important factor to keep in mind before deciding to purchase. In fact, most banks will require you to get a Phase 1 Environmental Site Assessment before going any further with your loan process. The Phase 1 is an inspection of the property’s history, including any deficiencies or issues that may come along with the property. Once the Phase 1 assessment is completed and analyzed, you can better decide whether or not to further investigate that particular property. Although one shouldn’t automatically reject a property that has an environmental issue, knowing what those issues are ahead of time is always important. Substantial savings and government funding can sometimes help clean up such properties and turn them into viable business sites.

5. Know what type of signage your township allows.

When investigating a property that already has existing signage, be sure to receive a copy of the signed permit for that signage. When you go to replace the current signage with your company’s signs, it will be important to use the same calculations and specifications that were used for the original signage.

For a new property or a new building, look into the township’s zoning regulations to find the exact signage requirements, which commonly are based on a property’s street frontage. Then again, some cities’ signage requirements are based strictly on the size of the letters themselves or the overall size of the sign at the extended points of the uppermost and bottom letters. Signage can become a rather tricky calculation, so definitely do your research as to what your particular township requires before purchasing a property.

6. Understand the water and sewer situation for that property.

This could be a deal-breaker. The local municipality may not allow hookups to the sewer at your location, or you may have extremely expensive sewer hookup (EDU) fees that can destroy your sale. Some laundry owners have successful argued that newer, more energy-efficient commercial washers will save the community millions of gallons of water, and these arguments have had the fees being reduced or eliminated altogether. However, in many cases, the local municipality just wants the money.

Remember that the vended laundry business is dependent on water in and water out. Knowing how much water you are allowed to take in and what it will cost, as well as how much you’re allowed to send out and that expense, is the basis for getting your laundromat started. Unfortunately, as our cities and suburban markets become more populated, the restrictions on sewage are becoming critical. In some suburbs, lawmakers are instituting sewer moratoriums, where only residential properties can hookup to the local sewer system. If you purchase a property that already has an existing laundromat and you plan to upgrade the equipment to more energy-efficient machines, you often can go to the township and use the benefit of energy-efficient equipment to install more machines within the smaller footprint. This process can be a lengthy one, but it’s winnable – and, in the long run, it can be a game-changer for your business model.

7. Good visibility is great advertising.

Basically, great visibility is the best advertisement for your business. No, it does not – and should not – replace a consistent and well-thought-out marketing and advertising program. However, when new families move into the neighborhood, they most like will see the laundromat with the best visibility first. Of course, good signage also helps with store visibility.

Everyone has heard the old real estate cliché that success is all about “location, location, location.” That’s a true statement, and I’ll add that the best locations can always be seen. Also, if potential customers are able to just walk to the property or be able to see it easily from a busy road, this could bring a great deal of extra business to your laundry. This also could be considered part of your marketing plan for the property.

8. The building price can cash flow with the pro forma.

If you’re buying a property that already has an existing laundromat, you know by the demographics that the store can generate only so much cash flow. Therefore, if you follow the cash flow forecast, you can pay only so much for the property, if you want a return on your investment. Also, keep in mind what you might do with the property if a laundromat weren’t there. You will require a sustainable cash flow to keep the property in good financial health.

OK, I know I promised you only eight best practices for buying a property. But here’s a bonus tip:

9. Above all, do not fall in love with a property to the point where you “have to have it” at any cost.

Clearly, that is a recipe for financial disaster.
0 comments
17 views

Permalink

Maximize Your Profits

Speed Queen Downloadable Guide

Click to download Speed Queen's new strategic guide for a proven formula to increase profits!