Cap Rate
Cap rate, or capitalization rate, is a property's net operating income divided by its value. It is a real-estate measure, applied to the building rather than to the laundromat business operating inside it.
Why Cap Rate Matters in a Laundromat Sale
Cap rate enters a laundromat transaction only when real estate is included, and its main use is to keep the two assets separate. The business is valued on earnings after a market-rate rent; the building is valued on the income that rent produces. Blending them either understates the property or inflates the business, and lenders will unwind the blend during underwriting anyway.
Example
An owner-occupied store pays itself $2,000 a month when market rent is $4,200. Normalizing to market lowers business SDE by $26,400 a year and raises the building's net operating income by the same amount. At a 7.5% cap rate, that shifts roughly $352,000 of value from the business to the property.
What to Check
- Normalize rent to market before valuing either the business or the building.
- Value the two assets separately and finance them separately.
- Check how property taxes will be reassessed after the sale.
Where This Comes Up
- Valuing a Laundromat With Real Estate: Split the Business From the Building
- Buying a Laundromat With the Building: Two Underwritings, One Deal
- Selling a Laundromat and the Building: Two Assets, Two Values
- Laundromat Valuation: How Stores Are Priced and Why
Related Terms
- NNN (Triple Net Lease) — NNN, or triple net
- SBA 504 — SBA 504 is a long-term
- Multiple (Valuation Multiple) — A valuation multiple is the factor applied to normalized earnings to produce a business value
See the full laundromat glossary for all 78 terms.
The Next Step
This page is general information about laundromat transactions, not legal, tax, or investment advice, and not a guarantee of sale price, timing, or financing approval. Verify current rules with your own CPA, attorney, lender, and the relevant state or municipal agency before acting.