Buying a Laundromat With the Real Estate vs. Leasing the Building
Most laundromat sales involve the business only, with the buyer taking over or replacing the seller’s lease. Sometimes, though, the building is available too, either as part of the same sale or as a separate purchase from the landlord. Deciding whether to buy laundromat real estate along with the business, or acquire the business and lease the location, changes the size of the investment, the risks and how the deal is financed. Our page on laundromat real estate financing describes how we help owners purchase existing properties.
This article compares purchasing an existing laundromat property with acquiring the business while leasing its location. It does not address construction or new builds. It is not legal, tax, real estate or environmental advice; buyers should consult qualified professionals before deciding.
Acquiring the Business and Leasing the Location
Advantages
- A smaller total investment and down payment
- Capital remains available for equipment repairs, working capital or future acquisitions
- Depending on the lease, the landlord may be responsible for certain building repairs
- More flexibility if the neighborhood changes over time
Risks
- Dependence on the landlord’s willingness to assign, extend or renew the lease
- Rent increases at renewal
- Limited control over the building and parking
- Lease terms that may limit financing options or the store’s future sale value
Our guide to the laundromat lease explains the terms buyers and lenders review.
Purchasing the Business and the Property
Advantages
- Removes lease renewal and landlord risk
- Fixed-rate financing can make occupancy costs more predictable than rent
- Control over the building, improvements and parking
- Loan payments build equity in the property over time
- Potential income from other tenants in a multi-tenant building, subject to the property and financing terms
Risks
- A larger investment and down payment
- Responsibility for the roof, plumbing, parking and building systems
- Property taxes and insurance
- Less flexibility to relocate if the area changes
Environmental and Property Review
When buying a property, buyers and lenders typically review its condition and history. That may include inspections, a survey, title review and, depending on the property and the lender, an environmental assessment. Prior uses of the property or neighboring sites, such as a former dry cleaner or automotive use, can raise environmental questions. Environmental requirements vary, and buyers should rely on qualified environmental and legal professionals to evaluate a specific property.
Financing Each Approach
Business only
Acquisitions of the business alone are commonly financed with SBA 7(a) or conventional business loans, with the lease term playing a large role in the lender’s analysis.
Business and real estate
When the buyer will occupy the property, owner-occupied commercial real estate financing may be available. Options can include SBA 7(a) business real estate loans, which can finance the business and the property together, the SBA 504 business real estate loan for owner-occupied property, and conventional real estate loans. Eligibility, occupancy requirements and terms vary by program and lender, and the property will typically be appraised separately from the business.
Use our conventional loan calculator to compare estimated property payments with current rent.
Questions to Ask
- How long do I plan to operate at this location?
- What are the lease terms, and how secure is renewal?
- Can I afford the larger down payment without straining working capital?
- What condition are the roof, plumbing and building systems in?
- What does the property’s history show, and what did inspections and any environmental review find?
- Would capital be better used for equipment or another location?
Ownership Structure
Many owners hold real estate in a separate entity that leases the property to the operating business. This can affect taxes, liability and a future sale, so discuss structure with tax and legal advisors before closing.
Making the Decision
Neither approach is universally better. Leasing keeps the investment smaller and preserves flexibility, while owning the property removes lease risk and builds long-term equity. The right answer depends on the location, the terms available, your capital and how long you plan to operate the store.
US Professional Funding works with buyers acquiring existing laundromats, with or without the real estate, and can help you compare financing options for each approach.
