Property managers would do better to lease laundry equipment or contract service companies than buy and manage the machines themselves. There are many problems that come with ownership. These include substantial maintenance costs, with a Sears maintenance contract for a coin-operated washer and dryer costing $219.99 and $199.99, respectively, every year. The cost of replacing worn-out or outdated machines is also a consideration since family-oriented buildings may need frequent replacements due to heavy use, while luxury properties may need more sophisticated machines to meet the demands of residents. Other costs the should be taken into account are lost income during down times and the cost of personnel.
Full Text :COPYRIGHT 1997 National Association of Realtors
If you've ever walked through your property's laundry room on a Saturday morning and heard those quarters jingle into the machines, the thought has probably crossed your mind: "Think how much more money we could make if we just owned the machines ourselves: they would pay for themselves in no time."
While the income from laundry rooms is an attractive revenue idea, many owners and managers forget the costs and headaches that can accompany ownership - maintenance costs, lost income during down times, and staff time to provide service.
"Whenever possible, we try to convince owners to lease equipment rather than buy," says Donna Barbee, CPM[R], of Griswold Real Estate Management in Las Vegas. "With the heavy use most machines get, we find that the repair costs are higher than the profits after two or three years."
"One factor real estate managers often overlook is the useful life of commercial laundry equipment," says Matty Spagat, president of Macke Laundry, a national laundry company based in Chicago. "When you depreciate a building, there is still something of value left at the end, but laundry equipment has a beginning and an end."
Maintenance costs alone can represent a substantial cost in the later years of a machine's life. Sears currently prices its three-year maintenance contract for a coin-operated washer at $219.99 a year and $199.99 a year for a coin-operated dryer. While this maintenance contract includes all parts and labor and an annual checkup of the appliance, it is important to note that Sears does not offer longer term contracts.
Spagat notes that even when machines still work, service quality and repair costs will eventually begin to rise. "Five years seems to be the threshold; the equipment may last 10 years, but after five, the income starts to go down and the costs start to go up," he says.
The tenant profile of the apartment is also a factor to consider in the useful-life equation. Luxury apartments will want newer machines to meet the expectations of residents. Family-oriented properties may require more frequent replacement because of heavy use.
The High Cost of Operations
"Apartment owners often underestimate the cost of running the equipment," says Bill Bloomfield, president of Web Service Company, a laundry systems provider based in Redondo Beach, Calif. Costs include not only actual repairs, but lost revenues when machines are not operating, time and money spent for parts inventories, and man hours spent collecting and accounting for revenues.
"At one time, we owned quite a few of our machines, but as they fail, we are replacing them with leased units," says William Lawler, who with his CPM-member wife, Delma, operates Lawler Apartment Management in Dallas. Lawler noted that he found that the investment expense was not justified by the return (see Figure 1).
A 1986 study by business professor Richard Johnson estimates that with a 12-percent ROI, a commission rate of 35 percent from the laundry equipment service provider, and revenues of $100 a month from one washer and dryer, it would require 18 months to break even before maintenance costs are factored in. With maintenance costs included, the breakeven period accelerates to 25 months.
Still, a well-run, property-owned laundry room can generate revenues equal to or even Slightly higher than income offered by a service provider, depending on the property.
"At a 44-unit property of mostly studios near the university, we probably net about $500 a year," says Barbee. "On a 100-unit mid-range property at which some residents have in-unit hook-ups, leased equipment is usually a breakeven proposition."
In the final analysis, why take on the headaches for the relatively small profit? Says Bloomfield: "Laundry service companies have the resources to invest in new equipment and new technologies such as the smart-card payment options. Managers have to ask themselves if they want to concentrate their efforts on laundry rooms or in running a good property."
RELATED ARTICLE: In-Unit Hookups: Amenity or Headache?
by Mitchell Blatt
A decade ago, when many laundry rooms were dark, dank, and poorly located, most apartment managers would have listed in-unit laundry hook-ups as one of the top resident amenities. Yet, a recent survey by the Multi-Family Laundry Association found that only about 50 percent of residents actually made use of in-unit hook-ups.
For site personnel, in-unit facilities often create headaches:
* Higher utility and water costs if units are not submetered.
* Greater potential for plumbing leaks, with resulting damage to carpeting and flooring.
* Nicks, scratches, and floor damage during move-ins and move-outs.
* Higher installation costs leading to higher per-unit costs.
Managers can make shared laundry facilities more appealing to residents with a few simple rules:
* Keep facilities and equipment spotless; check them daily.
* Decorate the laundry; even a fresh coat of white paint adds appeal.
* Make the laundry room a social center with bulletin boards, comfortable chairs, games, and a radio.
* If possible, move the location(s) so that residents have easy access, no matter what the weather.
If the site managers make laundry rooms attractive and accessible, they can avoid the headaches of in-unit hookups and still have contented residents.
Mitchell Blatt is president and COO of CoinMach.
Howard Franklin is a Chicago-based freelance writer.
Source Citation:Franklin, Howard, and Mitchell Blatt. "Inside your laundry room." Journal of Property Management 62.n4 (July-August 1997): 70(3). General OneFile. Gale. Alachua County Library District. 15 Sept. 2009
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