Don’t forget about them
Many years ago when I was first getting into the Industry I got a little aggressive and missed a few things.
After construction of my first store and opening in July of 2010 I looked at another store in Attalla AL.
This store was in a different county North of my first store. It was a small store that had been a laundromat years before.
The building owner called up the distributor he had used years before, they got together and a truck load of used equipment, a few months and the store opened again.
The distributor owned and ran the store, actually it was his son-in-law I believe that did most of the work and looked after it.
As the owners health faded and they all got bored of the 60+ minute drive to the store they put it up For Sale and we worked out a Seller Finance deal.
We closed in October of 2010 and I was now a multi-store owner. At the same time I was negotiating for 2 other locations and purchased one in January of 2011.
The route to drive from my house, North to Attalla, South East to Anniston and back home was a little over 2 hours total.
But moving on to the point of the story.
We all know County Property Taxes are sent out to all of our residences and commercial business properties.
What I didn’t know as a new business owner was that we also had to pay County Property Tax on the equipment we put in the store. All of it. Washers, dryers, tables, camera systems, carts and the list goes on.
The timing of property taxes always seems a little strange until you understand it as well.
The taxes are sent out in October to the owner listed and are due for the previous year.
The process continues where you have until Dec 31 to pay the amount, after that fees are added one.
At a point a few months later the property is part of a Tax Auction and the Tax Lien is sold to the highest bidder.
Depending on the State and Municipality what happens next varies a lot from the Tax Lien holder being able to immediately file for ownership of the property or there is a waiting period (sometimes up to 3 years) before they can claim the property, or at least begin the process.
Interest payments are due to the Lien Holder from the date they purchase the lien. Many times this is 1% per month which equals 12% a year.
So I purchased this store in October and the property taxes had already been sent to the current owner.
As a new guy negotiating my own purchase of the business ( nobody needs an attorney for this stuff right??) it was easy. I’ll buy this list of equipment off you, sign a new lease, and get the utilities turned on.
All the utility bills are sent to my house, Lease and Loan payments are on auto pay through the bank and I just have to collect the quarters.
January rolls around and I’m finalizing the deal on Store #3 that includes a WDF service. This store is purchased with Seller Finance as well (attorney’s? who needs them? I got this).
I get the Seller to work for me for 30 days to teach me about the WDF business. And also because the items on the shelves had tiny, little stickers with the owners names or some other identified written in Korean.
I work on some renovations, collect the quarters at the other 2 stores (as part of my 2+ hour drive on Fridays), and did I mention the WDF is attended from 7am to 7pm, 7 days a week.
Early February rolls around and I’m plugging away 12 hours a day, renovating store 3 while I fold laundry, and every Friday make the drive to Attalla and Store #1 before 7am.
Did I mention all the mail from the Attalla store goes to my house, no need for a mail box.
Well sometime in late March I get a call from someone a Etowah County or maybe the City of Attalla, heck it could have been the landlord, it’s kind of blurry.
But anyway the caller said ” Did you know you laundry equipment is up for auction in a couple of weeks for lack of payment on your taxes?”
I had no idea what he was talking about but I knew I needed to figure it out fast as Auction and Taxes are not words on wanted to be on that side of.
How, when and how much I had to pay is lost in my memory somewhere but I do know I got there fast with the money and “bought” my equipment back.
What can we learn from this?
#1: Hire an attorney.
I recently was working on buying an unrelated business and was working with a local attorney with experience in business sales and purchases. I decided not to complete the sale as I worked though the Due Diligence and he sent me a bill for about $500. That covered his time for 3 revisions of the Sales agreement. Of course prices may vary but any business has a lot of risks and rewards and a mistake during the purchase can cost a lot.
Without that one phone call I may have lost all of the equipment in my store, as once someone buys a Tax Lien the next one gets mailed to them.
Side note: When I bought store #3 after we closed the Seller realized they never required a lien on the equipment. I wouldn’t sign one after the sale was complete, mainly because I needed the equipment as collateral for an Economic Development Loan to renovate the store.
#2: Make sure you check with all County, and City offices to make sure you have the right licenses and they have the correct address for you. And that everything is paid up to date and you know when it’s due.
#3: Running a WDF by yourself 12 hours a day / 7 days a week, renovating the store, and doing repairs and collecting money at 2 other stores when one is 40 minutes away is not what my wife imported me for.
But that’s another story…..
I cover a number of other items that get overlooked by new owners here:
https://laundromathowto.com/ten-need-to-know-items-before-opening-a-business/
Ken
And I have to put the disclaimers in: This is not legal advise, please consult a professional.
