Are laundromats really the perfect passive income business? In this reaction video, Matt breaks down the reasons often cited for buying a laundromat and offers a more balanced perspective. He’ll look at why “deducting all your equipment” doesn’t mean it’s a freebie, the hidden hassles of a “simple” business, and why there might be better, more affordable business options for you.
There are tons of people out on social media giving business advice. Some of it is good advice, but most of it isn’t good. In this series, watch CapForge’s owner react to different advice videos. He’s an expert in all things business and has 20+ years of experience under his belt. Some of the things he reacts to might even surprise you!
Video Transcript:
Business Advice Video:
Don’t buy a laundromat until you hear this first. Number one is for tax benefits. There’s a way that you can deduct all of the equipment on your one saving you hundreds of thousands of dollars in taxes. Number two is because of the cash flow, and any business you get into, you want to make sure that it’s flowing enough cash every month. And number three is because it’s a pretty easy business to run. Compared to a lot of other businesses out there you have a
lot of employees and a lot of overhead, it can be kind of confusing. With the laundry business, there’s not very many employees, and it’s repetitive, the same thing over and over.
Matt’s Review:
It’s true that if you buy a laundry business, you can deduct the value of all the equipment that you get in the purchase year one. especially with the new tax law that makes it very clear that you can do that. The downside of that is you’re still out the money for buying all the equipment. And if you’re in let’s say the 25% tax bracket, you spend $100,000 to buy equipment. You deduct it all, you would have paid 25% tax, now you’re not. You’ve saved $25,000. So you spent $100,000 to save $25,000. It’s not that the savings is bad, but that in itself is not a reason to invest $100,000. The business is simple to run, but there’s also a lot of people who lose money in that business. Equipment breaks, sewer lines back up, people steal from the machines, vandalize the machines, employees steal from you, all kinds of stuff happens. You pay a fortune to the landlord in rent. So, like any business, it has pros and cons. There are good reasons, good laundromats. There’s also bad reasons to get into business and bad laundromats. Nothing is ever all of one and none of the other. So if that’s what you want to get into, great. Just
learn a lot about it. Make sure you understand all the downsides as well as the upsides. Or if that’s not your thing, there’s lots of other businesses out there just as good or better than the
laundromat business you can get into. In fact, one of the big downsides of the laundromat business is you need a lot of money to get into it. Whether you buy one or you start one from scratch, you can’t start it without laundry machines, and those aren’t cheap. Whereas if you
started a web design business, let’s say, or a copywriting business, or a cleaning business, or a painting business, you can get into those for under 1,000 bucks, or maybe even as little as zero money, ’cause it’s just selling time and skill. There’s no equipment needed. Whereas if you wanna get into a laundromat, I would guess the least you could get into it is 20 or $30,000 if you bought had a small one and used financing, but you could easily be into it for over a hundred thousand or even a few hundred thousand. So it’s not for everyone to even be able to consider. So just anytime somebody says here’s three great reasons to do something, consider there’s probably also at least three bad reasons to do it.