Evaluating Multifamily Laundry Room Equipment Leases
Since the laundry room serves as a profit center for most multifamily properties, signing a new laundry room equipment lease is an important decision. Signing a lease with unfavorable terms, surprise fees, or hidden costs can directly impact a property’s finances. This is why property managers must closely compare and evaluate new lease proposals.
In general, multifamily laundry room equipment leases function very much like traditional commercial real estate leases. The apartment building acts as the lessor and the laundry vendor acts as the lessee. Terms commonly run between 5 and 7 years, however shorter and longer terms are not unheard of. Since a new lease will typically last 5 years, property managers need to be confident in choosing a new vendor. Here are important items to consider when evaluating multifamily laundry room equipment leases.
Revenue Sharing System
For most properties, the revenue sharing system is the most important aspect of their laundry equipment lease. This is because the laundry room functions as a profit center for many properties. While there are hundreds of laundry room equipment companies, most leases fall into one of categories: fixed cost or shared percentage.
More than anything else, a fixed cost lease is the simplest type of laundry room equipment lease. Properties pay a fixed cost to the laundry room company on a monthly basis and keep 100% of the revenue from the laundry room.
Unlike a fixed cost lease, a shared percentage lease does not require the property to pay a fixed monthly cost. Revenue from the machines is shared on a set percentage by the property and the laundry equipment vendor. When comparing multifamily laundry room equipment leases, property managers should determine whether a fixed cost or shared percentage lease is best for their property.
Quality and Condition of Laundry Room Equipment
In most cases, but not all, laundry room equipment will be brand new. Property managers must evaluate the condition of the equipment they are receiving. While used and refurbished machines can work perfectly fine, they are not the same as brand new machines. In fact, installing used or refurbished machines saves the laundry vendor money. One important reason property managers should demand new machines is because the equipment is being leased. Unlike equipment purchases, where used machines cost less, there is no savings to property managers to lease used machines.
Property managers should also compare the condition of replacement machines. If a brand new washer or dryer is damaged in year 2 of the lease, is it replaced with a brand new machine? If brand new equipment was installed, property managers should request replacement equipment is also brand new.
Equipment Service and Maintenance
What happens when a washer or dryer in a common area laundry room is damaged, stop works, or needs a repair? This is an important question for any property manager to ask vendors competing for their laundry room lease. When machines go offline, it creates headaches for both property managers and residents.
While machines going offline is unavoidable over a multi-year lease, how long they stay offline is all about service response times. When comparing multifamily laundry room equipment leases, property managers must evaluate the servicing of machines.
Maintenance is another important consideration. Regular maintenance is a great way to prevent machines going offline. Who is responsible for dryer vent maintenance or cleaning the laundry room equipment? Any multifamily laundry room lease should clearly state who is responsible for maintenance and what it covers.
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Contract Terms and Conditions
Evaluating multifamily laundry room equipment leases requires property managers to closely review the lease terms and conditions. In the past, commercial laundry equipment companies have imposed surprise fees on leases. As a result, laundry room revenue decreased at thousands of multifamily properties.
Since the right to impose the fees were buried in the terms and conditions, there was little property managers could do at the time. This is just one example of why property managers need to closely review the lease terms before signing with a new laundry equipment vendor. Here are a few of the most important multifamily laundry room equipment lease terms to evaluate before signing a new agreement:
- Mandatory revenue sharing minimums and payments
- Hidden fees and/or additional charges
- Coverage and liability for machine damage, wear, and tear
- Early lease termination fees and penalties
- Replacement policy for defective or broken machines
- Automatic lease renewal and first right of refusal clauses
While the laundry equipment lease will include additional terms, these are among the most important to review. If possible, property managers should have any leases reviewed by an attorney before they sign the agreement. This is the best way to ensure there are no unfair terms, hidden clauses, or substantial risks imposed on the property.
Smart Laundry Room Equipment
With modern technology, laundry room equipment has jumped into the 21st century. The days of hoping machines are available, loading prepaid laundry cards, and lugging around quarters are long gone. This is because of smart laundry room equipment.
Top vendors are leasing multifamily laundry rooms with smart washers and dryers. These machines pair with mobile apps to provide machine availability updates and process payments. Residents can make payments, get end of cycle alerts, and even report service issues all from their mobile devices.
When comparing lease options, property managers should evaluate whether they are getting smart washers and dryers. While the prices can be higher for these machines, they offer dramatic improvements to the laundry room experience to residents.
Multifamily Laundry Room Amenities
Property managers should compare the laundry room amenities covered in any lease. This section of the lease goes beyond the washers and dryers. Often, it includes and covers everything else the laundry equipment vendor is responsible to provide. Common laundry room amenities included:
- Folding tables and chairs
- Detergent and fabric softener dispensers
- Change machines and card re-loaders
- Drying racks and wire basket carts
Essentially, property managers should ask, what else is included with the lease? A turnkey lease supplying everything needed to operate a laundry room is often a better solution than a lease that only supplies equipment. These add on amenities improve the laundry room experience for residents.
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