What’s the most lucrative rental property upgrade you could make to your existing real estate portfolio right now? Would you believe it’s most probably the addition of a Coin-Op Laundry Room?
That’s probably not the answer you were expecting, but believe it or not, increased returns from installing coin-operated washing machines in rented property is a hotly debated topic among landlords right now. So, to help you get the information you need to make this business-critical and possibly lucrative decision, here’s our expert guide to the best upgrade for a rental property.
To install or not to install?
To install or not to install? Hamlet, Prince of Denmark asked himself a similar question. Although only Harvard professors of English understand the answer to this most famous Shakespearian question of all time, a decision on whether or not to install coin-operated laundry machines can be a lot less perplexing — provided you have the right information.
It might help to conceptualize washer-dryers as ‘doors’, setting rental levels so as to cover investment, repairs, interest, utilities, and profit (Can you see where this leads?)
Just remember from the get-go that if you’re going to install possibly expensive machinery you’ll want to make sure your buying the best — kit that isn’t the latter-day equivalent of an 8-track car stereo, a laser disc player or a Betamax VCR or any of the comparable technological flotsam that has washed up on the consumer’s shores over the last 20 years.
Economies of scale
Coin-operated machines will make you money, but only with economies of scale. Bear in mind that laundry machines have many mechanical parts, so you need to factor in operating costs. It’s hard to state the optimum number of machines you’ll need to buy to break-even, but an investment of fewer than four units in a single property is unlikely to lead to profit — at this level, you might not lose your shirt, but you might lose your initial investment.
For maximum earning power, go for top-quality washing machines — brands like LG, Electrolux or Maytag. There’s a good chance they will turn out to be energy-efficient, reliable and robust work-horses.
However, don’t let the need to invest in economies of scale to really make money dissuade you from putting a single washer-dryer kit in one of your properties. Just having a washer-dryer on site will attract renters. And rental agreements which charge tenants for services like water and electricity means you won’t lose out on any shiny new kit you decide to purchase.
Earning from coin-op laundry machines
A commercial washing machine can earn you money in two ways: through leasing or by outright purchase. Leasing works best for mid-size properties. Here you share any profits with your chosen manufacturer. You’ll have no outlay and your maintenance will be for the manufacturer’s account. In other words, your share may be considered straight profit.
Outright purchase of a coin-operated washer and dryer for apartments works better for larger properties. The machines won’t be cheap and there’ll be regular upkeep costs, but larger properties have the potential to make larger profits. Do your research: check local laundromats to see what they charge for the same size washer-dryer, then set your price at least 10% higher. If you need it, we can help by offering coin-operated laundry services for apartments—the ShinePay team is always here when you need them.
Why would anyone pay a 10% premium? In a word — convenience. We all know that you can rustle up a cup of your favorite Mocha Java at home for a couple of cents. The reason we’ll gladly pay Starbucks three bucks at a drive-thru for the same cup of coffee is convenience. Consider Coke: Convenience store Coke, $1.20. Same Coke at Walmart, $5. Yet all Walmart has done is add some ice.
Additional income streams
Profits gained through tenants’ use of laundry equipment needn’t be the only income stream from your on-site laundry. Install a dispenser that vends soap, fabric softener and dryer sheets, because although some tenants will supply such laundry accessories themselves these dispensers get well used. There’s not much of a risk in doing so either — they’re a low-maintenance source of passive income.
Actually, it’s hard to think of a better location for vending machines of all kinds than the laundry room. This is a place which effectively traps people for several hours at a time. And during this time people get hungry and thirsty. So make your laundry room a home from home for your customers. Put in a television set, and a WiFi connection so they can easily pay with an app like ShinePay. Create an environment that says please stay, encouraging your customers to enjoy the facilities (and use the vending machines, of course) while they wait for their laundry.
Going above and beyond
Owners of high-end properties might consider partnering with a local dry-cleaning service or laundromat to offer laundry services to tenants. Pitch this right and you’ll get a slice of the profit for attracting customers to them.
You could also consider investing in high-end, environmentally sustainable laundry machinery for your properties. A significant initial investment for sure, but this will allow you to charge higher rents, especially in high price areas. An in-unit washer and dryer is a powerful selling point for those in the market for a luxury apartment.
As a general principle, property owners should always be on the lookout for opportunities to squeeze more value out of their properties. Granted, the yacht you plan to buy will need to stay in the marina a while longer if you’re solely dependent on profits from the detergent vending machine in your building's laundry room, but don’t turn your nose up at small contributions — over time these add up, becoming significant sources of passive income.
Bottom line, your rental property is a business, so there’s no need to feel guilty about looking for new ways to make more money from it. After all, the services you offer add value to your tenant's lives.
Even if the entire neighborhood effectively boycotts your washer-dryer, you’ll still have your initial investment.
10% Tenant Usage
Your machines are there when wanted. You’ll have minimal wear and tear and your utilities will be covered (less than 20% of vend price). You’ll have the repair factor and a profit element covered too.
50% Tenant Usage
All of the above with more profit.
100% Tenant Usage
Down payment on another 4-plex.
— George Melcer, CEO ShinePay