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Action Academy | Millionaire Mentorship For Your Life & Business
They Sold Their Rental Properties To Buy 4 Laundromats in 2.5 Years w/ Justin & Ashley Eaton
00:40:12
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- [00:00]
A
I had a drug addict overdose and die in my mat.
- [00:04]
B
Why do we want to put, you know, 60, 70, 80 grand down on this duplex to make 300 bucks a month?
- [00:10]
A
We don't even look at businesses beneath a million bucks of revenue.
- [00:13]
C
With our 1 laundromat, we're going to do 32k in gross and our profit is going to be 16k.
- [00:21]
A
We try not to use the word passive income too much.
- [00:23]
C
If your business, you know, relies on you being in it, then you don't have a valuable business.
- [00:28]
B
Your second born kid on title, a drop of blood and then they still want a dog.
- [00:32]
A
Justin and Ashley Eaton, long time coming. Welcome to the Action Academy podcast. How you doing?
- [00:37]
B
Good man. I appreciate you having us on. Longtime listener of the show. I read your book when it first came out and nothing but good things that come from the show. We're excited to be on.
- [00:45]
C
Yeah, thanks so much for having us.
- [00:47]
A
I love having entrepreneurial couples on the show because you guys are able to add so much more depth of value to the listener because you have so many spouses or so many partners that maybe one person is super deep into entrepreneurship and investing in the other person's like, what the heck is going on? And so, so excited to dive deep into yalls entrepreneurial investing journey together. But first, let's start with the current portfolio. Where are we at today and what are we discussing on this episode?
- [01:15]
B
Yeah, absolutely. So we're heavy into the laundromat acquisition game right now. We are building our fourth store. We should be opening in the next month or two. We've been under contract for our fifth store since November that has yet to close. And so we're hoping, we're hopeful that that one's going to close sooner than later. But tbd and that's kind of where we're at at this point with the laundromats.
- [01:35]
C
And then we also have five rental properties and then we have our, our single family that we live in. So we own six properties.
- [01:42]
A
Beautiful. Now, Ashley, let's start with what got you guys into rental property investing and real estate investing in general? Because you guys have a very interesting perspective and really in, you're really in alignment with kind of what we talk about here about kind of like the exodus from single family. So what are your thoughts, both of you guys on single family versus this portfolio that you've built today? Also for the listeners in the last two and a half years, like you guys built up a four store portfolio in two and a half years. That crazy. So Give us your thoughts on real estate versus business.
- [02:16]
C
Yeah.
- [02:17]
B
Yeah. I would say the reason we got into laundromats was because we were buying rental properties, and we were putting 20 to 30% down on these properties, you know, through Covid. Even after the prices went up, we were still able to buy these properties with 20, 30% down and make a decent cash flow. Shortly thereafter, as everyone knows, the interest rates went up, and then the rate, the margins became super thin. So we're like, why do we want to put, you know, 60, 70, 80 grand down on this duplex to make 300 bucks a month? It really wasn't moving the needle for us. And so we were looking at laundromats. Like, Cody Sanchez was talking about laundromats all day, every day, in like, 20, 21, 20, 22. And the way we looked at it was we, you know, what's. What's the worst that can happen? Like, we buy this laundromat, the cash flow is going to be good. We didn't think that it was going to look like spiral into having four stores so quick, but we took the risk on that. First store, really had no idea what we were doing. And we didn't look at it as like a whole. Another business that was going to become, like, this big thing for us. We were like, all right, like, we're in rentals. Let's buy this laundromat. It was a small store. It's like a thousand square feet. We'll run that on the side. You know, it'll make better cash flow than the laundromat. We didn't expect it to do as well as it did. And that first store kind of spiraled and snowballed into these other four stores and.
- [03:34]
C
Yeah, yeah. And also in 2020, you. You could not win, you know, a bid. You're. You're putting a bid on a house without putting. Offering 20%, you know, 20% down. No one was going to even look at your offer. So. So it was just so much capital that was like, oh, my gosh. Like, what else could we put money into that would give us a better return?
- [03:57]
A
Yeah. And Ashley, for the listeners, break down the differences in Yalls cash flow. So, a, how long did it take you to build your rental portfolio today? Because it took you two and a half years to build your business portfolio. So how long did it take you to build your rental portfolio? What's that current cashflow? And then the same question for the business portfolio so that people can, like, be floored by this answer.
- [04:19]
C
Yeah. So I'll let Justin go with the rental. So it really started from his first single family and then he found our duplex. So I believe that was what, six years to get all of those properties.
- [04:31]
B
Yeah, I bought my very first rental in 2017. Was a single family. Did the brrrr method. Between 2017, 2022, we were buying, we bought a duplex, two duplexes, residential, and then a couple mixed use duplexes. A commercial building that was professional office space. And those five properties, cash fl. $4,000 ish per month.
- [04:53]
C
On a good month, our total rent, you know, is around. Okay. So our, our GROSS Rents are 21k and conservatively, we cash flow around 4k. And then with our one laundromat, we're gonna do 32k in gross and our profit is going to be 16k this month with just one. The one store. So.
- [05:13]
B
Yeah. And just for perspective, like, the capital needed to buy those five properties is estimated to be around 350 to $375,000 in cash out of pocket. That first laundromat, that's doing 32,000amonth. Out of 45 to 50% profit margin, we're only out of pocket 150,000.
- [05:32]
A
And I believe you raised capital as well for the remaining. Correct.
- [05:35]
B
That's correct. For second, third and fourth, we do have capital partners.
- [05:38]
A
Amazing. Dude, this is like my favorite podcast episode ever. I love every single part of this. Yeah, it's just cool when you like talk about stuff and then you see other people doing the same thing. You're like, oh my gosh, my people. Like, it's like a breath of fresh air. It's so much fun.
- [05:53]
C
Yeah. And when our, our, you know, our distributor who retooled our. Our whole. We got the equipment from when they first gave us. Hey, we think the store will do. They originally said 20k a month and we were like, there's no way. Like, this is so small. Like, if we hit 20K, you know, gross, we're going to be so happy. And now we're doing okay. And I just, I can't believe it sometimes.
- [06:18]
A
Yeah. So let's actually. So in this deal that you're talking about, was that your first deal?
- [06:22]
C
Yes.
- [06:23]
B
Yeah.
- [06:23]
A
All right, so I'm very, very familiar with the laundromat space because I was about to close on a portfolio of three of them and I actually backed out last week. We can get into that.
- [06:33]
C
Cool.
- [06:34]
A
And so in the business buying world, I actually haven't been the biggest, like, promoter of laundromats and I've actually been, if anything, probably a detractor for laundromats. And that's all said with a giant world sized grain of salt because obviously you guys are crushing it. Boys. With Jordan Berry, we got some people in Action Academy doing laundromats every single day. But what I really want to focus on here is for every story that you hear of you guys right now buying a great laundromat and having great cash flow, there's like 10 horror stories of people that bought zombie mats that didn't properly negotiate leases. The retooling process, the water costs. For me personally, I had a drug addict overdose and die and my mat right before we were about to. Technically it wasn't my mat, but I was like, oh my gosh, there's like poop in one of them that we had to clean out. And I was like, oh my gosh, like, I don't want to be in the game. So the question is, how did you guys, what did you guys do different to get a good mat and to have really good facilities versus what do most people get wrong in this game? And specifically for laundromats.
- [07:45]
B
Yeah. So what I would say, you know, as you're negotiating the agreement, the lease is the number one, you know, almost the number one thing. Because you don't want to go in and buy a business and spend 3, 4,500k on equipment. Your lease runs out in a year and a landlord's like, yeah, actually we don't want to loan them out here, be out in six months and then you like, you have to move all your shit. It just doesn't make sense.
- [08:04]
A
So the lease is important with this industry because there's so much water connection and everything. Like it's like a specialty location almost. Yeah.
- [08:11]
B
The mechanicals obviously are super expensive. So if you're going to fit out like a brand new empty commercial space into a laundromat, the mechanicals are very expensive. Secondarily around us. And this is different everywhere there's environmental fees and there's water and sewer tap fees which are usually charged like per washing machine. And so that might be two or three hundred thousand dollars just for you to get approved to put the store in there to the county and all that. And so when you buy an existing laundromat, you're bypassing those fees, at least near us. Like I said, that changes, I think in different locations. Sometimes there's no fees at all. But go back to your original question. We looked at this as a Value add. And it's not that different than real estate, right? Like you buy a piece of house, you fix it up, you force appreciation. We bought the worst laundromat in town
- [09:03]
C
in the best area in like a
- [09:05]
B
B plus area, B minus area. It the lights were flickering, there was a homeless guy sleeping in there. Smelled like piss. Half the machines didn't work. There was still people in there doing wash like and dry. As we were like buying the store, we closed it down day one, did a full rehab, made it look brand new in there. All brand new equipment. Laundromat. Laundromat card system. So we don't have coins. Automate as much as possible with door locking. You know it's unattended self serve right now. So we don't have anyone who works there. We have cleaners that go but we automate it as much as possible. So you monitor the cameras, you have the doors unlock and lock by themselves. You keep the store as clean as possible. You keep the equipment running. You run email campaigns through mailchimp and we're able to gather that data through our card system. So you know we're constantly keep in touch with customers. Ashley spent the first six months or so of the store being open. She was there all the time building the community, building the culture around the store. And that's super important too. You can't just open the store and forget about it because it's. The customers are going to run the show. You have to be as an operator, you have to. The customers have to know that somebody's there even if it's not attended like back behind the scenes. So like you know, if there's somebody comes in and they're sleeping in there or they're not doing laundry or whatever, like we would call the cops because we're constantly like looking at the cameras. We look at them less now but like when you're first opening a store you have to be on top of that because the other customers are going to get deterred by that. But if there's a homeless guy, you call the cops, cops come and the other customers see that that's actually a good thing. So eventually you kind of build this culture in this community and this little hub around that store and that's how you really make it successful versus some other people who might have not, you know, run it as successfully and look at it differently.
- [10:50]
A
I think that.
- [10:51]
C
Sorry, I'll touch on the lease real quick too that we got lucky with. So you know, you could have agree a gross lease or a Triple net lease for our first store. It was, it was a gross lease. So we're not paying any common area maintenance.
- [11:06]
A
Cool.
- [11:06]
C
As opposed to like a triple net lease. So I think we got lucky in that sense that we, we got locked in for before. They were smart. Because honestly, the cam is. It can get expensive. At our other store we're paying, we're paying almost 13,000 for the whole year in cam fees. And I mean that, that adds up. That's almost $900 a month added on to all your other expenses.
- [11:31]
A
Thousand percent. And I think that you guys said $1 million piece of advice there that everybody seems to ignore. Even in Action Academy where we help people buy businesses. We try not to use the word passive income too much and we use the word CA because I hate how things were positioned and marketed in the business buying space over the last five years where it's just like, oh, just hire an operator, just sit it and forget it. Like passive cash flow. Like tens of thousands of dollars. It that doesn't work like that. And so you guys aren't at the mats today as much as you were before. But you were there, Ashley, for six months building the culture, building the systems, making sure that the foundation was poured and built to build something on top of. Can you explain that process and then what Yalls conversations look like together as well? About like, okay, who's going to be there? How long are we going to be there? When are we going to. When are we going to kind of know that it's okay to step away a little bit. Walk us through that.
- [12:30]
C
Yeah. So it really was an entire year. And another big thing that is important is I, you know, I had my real estate license. I was doing real estate, I was managing our portfolio. But I had 100% control of my time. I wasn't trying to do this. And also doing a W2. It was very hard to be this successful as fast as we were. So for that whole year I was there every day, twice a day. We gradually hired cleaners to start. Our busiest days are always Saturday and Sunday. So that was the first thing I handed off. I was like, I'm going to get a cleaner Saturday and Sunday. Then it came to. And that was after that was gradually within the year. Then I was like, okay, I'm going to do a cleaner Friday through Monday. Then I'm going to do all seven days. So it took a whole year for us to get, you know, the whole week covered with the cleaning at least. But then even then we're looking at the cameras all the time. Like, making sure there's no one, you know, Took years ago. Yeah, it was. But no, and I love that the twin. Yeah, I love that I did that because I. I know this business, that store like the back of my hand. I know the cleaning and the procedures and what needs to be done and at which days they should be done and when our busiest times are. So that really gave me the, you know, the. The confidence to be so confident in what we were doing.
- [13:56]
A
Yeah.
- [13:56]
B
I would say that us being there so much in the beginning, like, you really have to learn the ins and outs. So, like, if we just had hired an oper, you said we wouldn't know why certain things would need to be done or that certain things needed. Even needed to be done at all. So spending time in the store, seeing how the customers interact with the machines and with each other and the flow of the store, and then optimizing around that is super important. So, like, back to your point. You buy a store from Austin, Texas, in California, and you're trying to manage it and the operator doesn't give a fuck, then they're not there all the time to see what's going on or what needs to be done. Then it's not going to be, you know, it's probably not going to be as successful.
- [14:34]
A
Yeah, yeah. A thousand percent. I mean, and I'll give a shout out to one of my business partners, Pearson, who we've got the kitchen hood cleaning companies with. He really rolled his sleeves up for the first year, and he was in the thick of that thing for a year. And now that we're on, like, year two and a half, going into three, and we're really scaling the locations. We're under contract on our third location there for that specific industry, vertical kitchen hood cleaning. Specifically. It's. He knows it back and forth. Like, he knows everything that you need to do. And so it's just like, I think I learned the difference between, like, abdication versus delegation because Ashley just said she was a big Layla Hormozy fan. And, like, I learned that from Layla. It's like delegation is actually teaching somebody how to do it because you understand it, you have context versus just handing it off to someone and expecting them to run the ball and something they've never done before. Can you guys share some examples of how you guys have properly delegated different sections and parts or automated different sections of parts of the. Of the laundromat business that you don't have to be at the store today?
- [15:38]
C
Yeah. So after, after that first year when, when we did get. We pretty much hired a cleaning company to run their, their whole crew, but I was still answering the phone and it was just. It was just not, not working. So then we did get a. An AI phone answering service. So, you know, pretty much we could train the brain to all. Any problems that I've had before and how they should answer it. So that was the first like, major thing to kind of off board was answering the phone. I was just getting so tired of it. But. But again, I knew everything that could go wrong to train that brain to say that. And then also I had like a checklist, a cleaning checklist every single day of the week for the morning shift and the afternoon shift. Everything that they're, they're supposed to do. And then also, you know, they could literally like check it off as they go. And then now that we're in what, year? Two and a half? Ish. We just hired a manager. So I, I take videos of how I want things deep cleaned. I take a video of everything just so I don't ever have to be there in person again. I can say, hey, I got a video for how you should deep clean the washers. How you should deep clean the dryers. Here you go. And she's actually now created a whole SOP book for everything, which is amazing. And it has all the QR codes. So if she's now ever training someone, she has those QR codes and videos to reference as well.
- [17:08]
A
I freaking, I freaking love you guys. Like all just. Man, y' all are good operators. Like, good operators are so rare. Like, it's just. This is freaking sick. So let's, let's take that same idea. And now let's, let's continue down like a V2 of this. So. So, Justin, So you guys, let's say somebody's listening to this or watching this and they buy themselves a zombie mat. So they buy this rundown, broken down, dilapidated equipment. You need a retool. Half the machines are down. A lot of them are probably top loaders, not front loaders. Everything's kind of broken and busted. No mirrors, no paint, no nothing.
- [17:48]
B
How do.
- [17:49]
A
What are. What's the checklist that you guys go through from taking a zombie mat to a fully functioning mat that you guys are proud of? What are like the top three to five things that you guys focus on in that renovation process?
- [18:01]
B
Well, I would say it starts with your purchase price. So we've gotten really, really, really good deals on, on all of ours. Our first store, we paid 25k for the second store, we paid 25, I think. And then the third store, we got for free by signing a lease.
- [18:15]
A
All right, back up. Let's pause. Pause. Screw that. Screw that question. Use your brain to remember that question here. Next. What?
- [18:25]
B
Yeah, so we. You know, once I saw Cody Sanchez, you know, talking about Laundromats, I just was on a Facebook forum, went down a little bit of a rabbit hole, and somebody recommended me to call, like, a local distributor. So, whatever. I gave him a call. We met for lunch. We talked probably power.
- [18:43]
C
Shout out to AC Power.
- [18:44]
B
AC Power and. Yeah, and pa. So we talked probably off and on for about a year and a half. So, like, you know, it wasn't something that happened overnight. I didn't call the guy. I have a deal for you. We can close in two weeks. Like, it took a year and a half before the right deal came about. He called me on a Friday, and I think I made the offer on Monday. He. You know, they were at. It was like, 10 minutes from our house. Zombie mat, full retool.
- [19:08]
C
Literally.
- [19:09]
B
Check all the boxes for us.
- [19:10]
C
Away from our house. Like, I. I didn't even know it was there. It was called. It had no online presence when you drove by. It was called Maytag. It didn't even say Laundromat. Like, people who I've talked to before, customers, they said they thought it was like an appliance store. Like, yeah, no, it was a Laundromat. So.
- [19:28]
B
Wow.
- [19:28]
A
Yeah.
- [19:28]
B
And so, you know, we. They had it up. The seller listed it on. I think it was Craigslist. Honestly, I think it came on through Craigslist. My distributor saw it. He's like, hey, like, this looks like a little deal that you might be interested in. They're asking 40,000, and I offered him 20. We settled on 25K. The environmental, like, the impact fees alone, if that was not previously Laundromat, would have been about 150,000. So I knew that going into it, the value I'm paying for is really in the impact fees that it would take to start a store from scratch in that same exact location.
- [20:03]
C
Yeah.
- [20:03]
B
From a mechanical perspective, a lot of the stuff we ended up redoing. But going into it, I was looking at it like, you know, 25k, I can't really lose here. Like, no matter what, I should be able to make this work. If not, then I don't deserve to be in the laundromat industry.
- [20:19]
C
Yeah. Yeah. But then we got the. You know, the machine loan equipment, what it was going to cost us per month. And that number, it's like 4300 is our, is our loan per month. But that was like triple what our mortgage was at that time. And I was like, oh my gosh, like, what are we, what are we doing? How are we going to cover our loan and our rent and all of this?
- [20:43]
B
Like, it was scary. Yeah, for sure.
- [20:45]
A
Walk through that process so somebody, somebody can conceptualize. You guys get in a really crappy store, obviously a really crappy store for 25,000. Because especially like laundromats today listed on market, like the biggest issue with ones that are listed is that they're so popular that the multiple is ridiculous and it almost doesn't warrant the purchase. You're like, you almost have to go off market. So if somebody's doing a full retool and they're getting an equipment loan, like a lot of people are unfamiliar with that. Walk us through that process of like, what does that loan look like? How many years is it? Like, how does that go?
- [21:19]
B
Yeah. So, you know, what we've done is use cash for the renovations and then the lender is going to look at that cash injection as your down payment. Right. So if you have a 500,000 doll equipment loan, usually they're going to require 20 or 30% equity in cash. And so the renovation numbers on our deals usually come in around that same amount. So we're able to get 100 equipment loans most times. Sometimes you got to come up with a little bit of cash. Those are typically eight or ten year terms through a specialized equipment lender. If you go SBA sometimes you can get 15. SBA is a pain in the ass. I don't really even want to talk about SBA because I'm mad right about it right now.
- [22:00]
A
I feel you, brother. We have a support group that meets
- [22:03]
B
on Thursdays, but sba, like we just had SBA deal fall apart. Our lending fall apart on a deal. But they were going to give us 15 years, but the other lender we use is 10 years. So yeah, really, you gotta just budget properly for the retool. And the mechanicals are typically the biggest thing. Like you got to make sure your gas line is sufficient for the dryers, your water line is sufficient for the new wash capacity. Your drainage has to be important. Something that people overlook is H Vac. Like we look, we overlooked H Vac on that first store. Yeah, it didn't have an H Vac system for five years. And somehow. And the landlord was like, oh, we'll put One in for you, no big deal. So like cool. Awesome. The landlord's putting in a new H VAC system. He put it in and we're like, you know, in the summer when the dryers are running, they're throwing off a lot of heat and the store, it's hard to keep the store cool in the summer. So you know, whether it's landlord's responsibility or tenants responsibility. Budgeting for an H vac, commercial H vac seems to be way more expensive than residential for whatever reason. So I say, you know, budgeting for a full zombie mat retool, you know, after you negotiate the purchase price is like the second most important thing in the whole process because you could easily blow your budget if you don't know what you're doing. We didn't know we're doing on that first store and we went over budget not terribly much, probably like 25 grand. Mostly mechanicals.
- [23:17]
C
Pretty much every old zombie mat you're going to have to. All the utilities will have to be upgraded because the newer machines are higher capacity, they're just better. So that's something that you definitely have to consider. And then the other, the lending. I'll touch on that. You know, when I was applying when I got my student loans, I had no issue getting student loans. But it's like now that we want to try to apply for a small business, it's like crazy. I don't, I don't understand.
- [23:45]
A
It's insane. Yeah, it's a great, that's actually a great video. I need to make one of those videos.
- [23:50]
B
They want all your, they want your, all your real estate equity. If you have partners, they're going to have all them people as PGs. They want your, your second born kid on title, a drop of blood. And then they still want a dog. No, we don't, we don't put the dog in there. That's one, that's the line right there.
- [24:06]
A
Yeah, but oh my gosh, so you get the first one for 25k. That's crazy because most of the time like, and I still feel good about this rule but I mean, but this just proves that there's nuance. Like there is no black and white rule of business. But like as a general rule of thumb for us, like we don't even look at businesses beneath a million bucks of revenue. And which makes sense like from a business and an SBA perspective it's like over a million bucks. You've got enough, you know, management team and stuff. But this is completely separate. I mean like you guys were able to get this as. As the laundromat that was self running, but you said you were able to get multiple like this.
- [24:40]
B
Yeah, I'd love to touch on that, actually. So I would too. But we bought that first store and we rehabbed it. We opened it. The landlord, he owns a couple small shopping centers over here in the northeast. He comes into this, and he knew this was our first store, so he was kind of unsure, you know, how good of a job we would do. He comes in there after we opened. We had like a grand opening party and all this stuff. And he's like, oh, my God, this is, like, beautiful. This is the nicest store, like, in my plaza now. And you have all these customers coming here. He's like, I have another. I have another shopping center out in pa I'm getting ready to kick the operator out because he's not paying rent. He's been there for however long. And this landlord just had bought that building in the last couple years. He's like, I'm gonna kick this operator out, go look at the store. I'm like, no, we just opened this one. It's 45 minutes away. I'm good. Calls me back like four months later, and he's like, justin, the operator's out, like, I really want you to put your store in there. I'm like, all right, I'll go look at it. I pull up to this thing, I'm like, I don't even need to go inside. I'll sign the paperwork, however much you want for it. Let me know that. I didn't tell what I said, But I pulled up and I was like, we have to do this. Dollar Tree, Dollar General. Oh, my gosh. Anchored by a grocery outlet.
- [25:53]
C
They're putting a Starbucks.
- [25:54]
B
They're putting a Starbucks.
- [25:55]
C
They're building a brand new Starbucks. I'm like, okay. They're building a brand new Starbucks. I want. I want this store and the. And then it's in Philadelphia. There's no parking in Philadelphia. This place.
- [26:05]
B
Shopping center is huge.
- [26:06]
C
The shopping center, parking everywhere. There's no other laundromat. Had that.
- [26:10]
B
Yeah. Check boxes. So basically I was like, listen, like, I'll give you 25 grand. Like, key money. Like he. It was. He was into it for nothing. Like he. He was the owner of the. You know, the real estate. So I gave him 25,000, you know, basically for the right to have a business there. And then we signed a lease for 20 years.
- [26:28]
A
20 years?
- [26:30]
C
Yeah.
- [26:30]
B
Yeah. So Laundromats, again, like, your Lease is important. So we usually do 10 years with two five year extensions. Because your equipment's going to last 20 years. It should last 20 years.
- [26:40]
C
Yeah.
- [26:40]
B
So you want to be able to have that equipment run its life expectancy, you know, while you're have a lease in place. So offer him 25. He's like, yeah, cool. We signed a lease and then we did our thing. We went in there, gutted it, did a full rehab, took us five months to get permits approvals. That was a whole freaking headache. But we got through it. There's a third store came through our distributor, which was less than 10 minutes from that second store. He's like, hey, you know, I have this other deal that came up through a broker. The store's been closed for about a year. They're not looking for key money, they just want some. An operator come in there and sign a lease and run the business. I was like, wow, free store. Sign me up.
- [27:16]
C
Smallest one out of all three of
- [27:18]
B
them, but small store, but we got it for free. We did do a full rehab. We spent about 75k in updates or upgrades, you know, within the store. And then we brought in SBA to finance the equipment, which was around 230 grand. So we're into it for around 300. That store will do around 20k, 20k. Stabilized. The fourth store, I'll just run through this whole thing. The fourth store, real quick came up less than a year after that through one of our partners on the second store. He happened to be talking to one of his family members at Thanksgiving, was like, hey, I invest. It was one of the people we raised capital from. He's like, hey, we happen to invest in this laundromat passively. And his aunt was like, oh, that's crazy. Like, I have my friend who's looking to sell his laundromat. And it happened to be 10 minutes, less than 10 minutes from the second store that we bought. That one was with real estate. So we ended up, you know, buying that deal with the real estate included. The seller was just looking to get out for the value of the real estate because he understood the mechanicals on the equipment had to be fully redone. It appraised for 645,000. We bought it for 595,000. We put down 90,000 to the seller. He's holding a five year note, interest only. And then we raise capital to renovate the inside, which is a big job. We're spending about 200k to renovate it. Then the equipment loan is going to Come in at about 800,000. That store should do around 45 to 50k a month in gross.
- [28:47]
A
All right.
- [28:47]
C
Yeah. Literally everything just was a trickle effect from that first store so fast. I always say I wouldn't recommend doing all these stores so fast at one time, but if that opportunity, you just can't say, say no. But, oh, man, did we learn.
- [29:05]
A
Yeah, but I mean, again, I want to. I want to, like, bring out, because people hear a lot of stuff on these podcasts, but, like, there's a few things operationally that I think are just worth pulling out. So, number one, it's like, I don't want to gloss over the fact that you spent the entire first year in the store, because doing that built the skill sets and the confidence to be able to take on these next deals. Another thing that I think that you guys crushed at was keeping up, like, your distributor relationships, your landlord relationships, like, your industry professional relationships. You guys kept tight with them because you kept getting freaking deal flow from all the people and anybody in the. In any industry. It's like one of the deals that we did for the hood cleaning company was just like, the person down the street that Pearson had met with, and then the other guy was from a conference. And so it's all relationships. It's all connection. And so you guys crush that, too. Like, man, it's just. It's. It's fun listening to this. This is freaking sick. And this is all two and a half years. Like, describe. Describe how this process of growth feels like. Because I know it feels like kind of getting kicked in the teeth a little bit, Right?
- [30:14]
B
A lot of it. Just to touch on your point there, the distributor, obviously, in that one area, knows all the operators, right? So he could have brought that deal to anybody, but we just had retooled the second store through him, and he's like, hey, like, you know, I wanted to bring you this deal because you guys move quick, you make decisions quick, and you guys do, like, the right thing. Like, you guys renovate these stores the right way. You're not cutting corners. So, you know, I think to touch on that. Yeah, the relationship and how you conduct your business and your ethics and morality, like, all that does factor in. Same thing with the first store, like, or the second one where the landlord came in and was like, wow, you guys did a really nice job. Like, if a store looked like shit, and he was kind of like, ah, like, he probably wouldn't have sent us that second deal, which wouldn't have led to the third and fourth so and
- [30:55]
C
the third, and the landlord of our first store, he saw how much traffic our laundromat it still brings in out of the whole shopping center. The most amount of people. Like I look at, I just looked at our trash cans this morning in the shopping center and ours was the only one in front of our store that was full compared to all of them. So it's a very big, you know, value for them to have good operators and the beautiful brand new laundromat for the. Their whole closet.
- [31:22]
B
Yeah. Plus you think about like you're spending so for that store. Close to 425k.
- [31:28]
A
Yeah.
- [31:28]
B
In their piece of real estate. So like, obviously they're going to be happy about it if you're doing it the right way because there is landlords that are scarred by bad laundromat operators and they don't want a laundromat in their complex because they get. The operator doesn't care. There's homeless people sleeping, there's crime, there's people doing drugs in there. So, you know, it is, it is super important. But back to your question about the growth. Yeah, we've, it's been a lot of growing pains. We're kind of figuring it out as we go. Honestly, like, we didn't have any SOPs until like a, like within the last six months or so when we really started to scale. We were probably listening to a podcast and it was like chaos. You know, chaos is chaos and system scale, something like that. I'm butchering it. But we're like, all right, we don't have a whole lot of systems here. We have a system for the cleaners, which is important. We have a cleaning checklist. If we're going to scale to multiple stores, we can't be the ones doing everything all the time. From an operations perspective, we have to think about hiring a manager. The store's making enough money. That first one to hire a manager.
- [32:24]
C
Yeah, yeah. Another thing that I like, a quote. It was like if, if your business, you know, relies on you being in it, then you don't have a valuable business. And that really struck a chord with me. So then I was like, okay, what, what, what do I have to write down sop wise for a manager, for an operator? Because I am removing myself from the day to day. Justin and I both want to remove ourselves from the day to day. And I did that with our rentals as well. I was like, I don't want to list our rentals anymore. I don't want, you know, I'm going To have an agent do that. I'm not going to be the agent to do that anymore.
- [33:00]
B
Yeah.
- [33:01]
A
Oh, my gosh. And all of this is amazing. And I would say that the last thing that I want you guys to hit on, kind of in closing, is that you did not raise capital until you really knew what you were doing. I think that's something that's very underrated, that people don't do correctly. So it's like your first deal, it's either you want to partner with somebody that's very experienced and take a smaller piece of the pie, or you do what you guys did, which is use your own money. Can you talk about the importance of that and how that translated to easier raise of capital later on?
- [33:35]
B
Yeah, I mean, it's, it's just that, you know, people know, like, and trust you. And for that first deal, we kind of proved the whole model, and it kind of proved, you know, what we could do in that industry through that first store. And we were sharing so much stuff on social media. Like, I wasn't calling my friends and being like, hey, the store's gonna do. We're gonna make 15 grand this month. Like, we were putting so much stuff out on social, where it's like people were just naturally seeing it, and then they were hitting us up, and then, you know, I had specific friends who were interested. So we raised capital through friends primarily on the first couple stores. So I think, yeah, I think, you know, having that experience, obviously, it eases their mind. And I mean, for me, like, I couldn't sleep at night knowing that I'm raising capital for something that I, I, I don't. Not super confident in. So, yeah, you're right. We took all of our. We spent about 140 or 150,000 of our own money on that first store, which was proceeds from a duplex that was only making us 800amonth. That Laundromat came up. We took the opportunity on that one. And then, yeah, after that first store, we kind of proved that model. We were familiar with turns per day and industry specifics, and with the right operations and build out how successful these stores can be and how much cash flow they can provide. And that was like, an easy sell to investors. And, you know, that second store, we're having some growing pains in that store in terms of the. The ramp up is a little slower than we expected, but ultimately, it's really not going to matter. Another year or two when it's fully stabilized, like, everyone's gonna be happy, dude.
- [35:02]
A
Yeah. The growing Pains. Like, we've just gone through so many ourselves. But then a mentor of mine told me, he was like, look, man, like, you only gotta go through these growing pains, like, one time for that level. It's like, if you're wanting to keep growing, like, you're gonna keep experiencing growing pains, of course, like, because you guys are gonna want to scale and scale and scale. But it's, like, now forever on, like, you know how to do this game. You can just repeat it because you know what's required now. So it's like, throwing pains doesn't mean that you're bad. It just is part of the game.
- [35:33]
B
Yeah, totally.
- [35:34]
C
Absolutely. And like, you said, I would. I would do it over and over again with, you know, the results that we've gotten. But it's. It's every day, it. Sometimes it feels like I got one problem after the next after the next. Like, is it ever gonna stop?
- [35:50]
A
Yeah.
- [35:51]
C
And my big thing now is, once we have a problem, what are we writing down? What are we doing so it doesn't happen again? So many people just, you know, a problem happens and, oh, it's gonna happen again. It's like, if you don't create a system around it, then it's just gonna keep coming back.
- [36:08]
B
Yeah, that's one thing that she's 10 times, like, that's her thing. Like, me, I would just be like, I gotta go do it again. Like, I'm not the great. I'm not great at systems. I'm more of, like, visionary. Find a store, run the numbers on the store, GC the whole project, and get the store up and running. After that, I'm kind of like, you know, peace out. Not be as involved. But that's just my zone of genius. And you've talked about this on your show a lot is like, knowing your zone of genius, knowing what you're good at and executing that, you know, that specific role is important. And that's when partnerships can be really valuable.
- [36:40]
C
Yeah. And, like, Justin and I were. We're very similar in some things. Like, I think in, like, the big picture, but in, like, a smaller picture, we're very different. And I think that's why we work so well together, is he'll see something and I'll see something else. And then that gives us two totally different perspectives to find that, you know, that common ground.
- [37:02]
B
And you mix in an argument every now and again.
- [37:03]
C
All the time. Yeah.
- [37:04]
A
Just to make it fun, just to feel alive again.
- [37:07]
B
Yeah. Yeah, that's right.
- [37:08]
A
Yeah, that's. That's amazing. So closing questions. What. What's next for you guys?
- [37:13]
B
So we really got a push to get to the finish line on this fourth store. This is a huge project. We raised 350,000 through friends on the store. We're a little bit behind schedule on it. Again, it's like a month or two now is nothing in five years when the store's like ripping the, you know, the, the investors are going to look back and be like, yeah, that extra two months for renovation and opening seemed like a long time at the time, but stores ripping now. It's cool. Let's do more. I would say, you know, what's next for us? Like, we do want to keep scaling and buying multiple stores or continue to buy stores. I would prefer them to be spread out a little bit because it's just, dude, since we bought that first store, it's been one after another. All right? We bought this one, opened it. Okay. Now there's another deal that just happens to come up and it's free. So I have to like, God damn it.
- [37:57]
C
So it's like, yeah, so we're like having our grand opening and then our one year anniversary and then we're having another grand opening and it just really has been.
- [38:04]
B
That's a close on the store. Lending falls apart here. So it's like, I don't know, we want to get this fourth store open, stable, you know, work on our systems more, stabilize it, close on this fifth store, hopefully sometime this year, but under contract since November. And then maybe some more deals will come up, maybe not.
- [38:21]
C
But I want 10 stores. 10 stores is my. Is my goal. And I want. I think I want more stores in. In Jersey. I think I'm done with Delaware county stores.
- [38:31]
A
Yeah, that's fair. Yeah, that's freaking awesome, guys. So if people want to follow along on your journey, they want to potentially invest with you. Where can they find you?
- [38:39]
B
Yeah, on Instagram is where we put out the most content. Justin Eaton. And we also have a coaching program@laundromatinvesting.com
- [38:49]
A
Badass domain.
- [38:50]
B
Great domain. Yeah. So luckily I didn't. Totally didn't expect that to be available. It was. We grabbed it.
- [38:57]
C
Yeah.
- [38:57]
A
We have Gordon Barry. If you're watching this, you're dumb.
- [38:59]
B
Dude.
- [39:00]
A
I can't believe you didn't get that already.
- [39:01]
B
So shout out to Rich Summers because he had HotelInvesting.com and I was like, oh, Laundromat. Like, see if Laundromat investing is available. Probably won't be, but it was.
- [39:09]
A
It's hilarious. That you say that? Because I said the same thing to Rich when he bought HotelInvesting.com I was like, dude, that's freaking sick. Yeah, how did you get that? And so, dude, game, great job.
- [39:19]
B
And she's on Instagram at Ash Griff. She has yet to change her handle to Eaton, so I'm still waiting for that.
- [39:25]
C
I'm trying, but it's Ashgriff underscore. And then, yeah, we. We have our. Our website in our bios there too. But luckily my best friend does all of our marketing for us, so she was able to, you know, get us that handle and everything. And she's one of our secret weapons.
- [39:41]
B
And our Laundromat brand is my friend's Laundromat. So if you go at my friends Laundromat on Instagram, my friends laundromat.com, those are the. That's a Laundromat brand.
- [39:51]
A
Super cool. Well, guys, thank you so much for coming on. This has been absolute freaking wealth of knowledge. Like, you guys are true operators through and through, so it's really cool to be able to, like, give, like, spread the good word of how to do this the correct way. So congratulations on this success and excited to see what you do next. Of course. Guys, it's been Brian, Justin and Ashley with the Action Academy podcast signing off.