Man, 31, Wants to Borrow $200K to Open Laundromat — Dave Ramsey Says You’ve Been Lied To. ‘It’s Not a Passive Income’

A laundromat can look like the perfect business on paper. Customers bring the clothes, machines do the work and money comes in. But one 31-year-old Texas man learned that "passive" and "hands-off" aren’t necessarily the same thing.

Lionel, from Midland, called "The Ramsey Show" to ask personal finance expert Dave Ramsey whether it was the right time to open a laundromat. He planned to borrow roughly $200,000 to get it off the ground.

The Laundromat Plan

Lionel said he was drawn to the business because he viewed it as passive income.

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"Because it’s a passive income," Lionel said. "I know in the beginning of the business, I’m sure the first couple years I’m gonna have to be really… it’s gonna take up the majority of my time, but after a little while I wanna live a free life. I don’t want to be too tied up."

Ramsey quickly pushed back.

"You’re gonna hate this because you’ve been lied to," Ramsey said. "It’s not a passive income."

He pointed out that the machines can break, someone has to collect the money, the change machine needs to be managed and the property needs to be monitored.

"So it is actually running a business," Ramsey said. "It’s not passive at all. When someone says passive income and you have to work at it, by definition, it’s not passive." 

That distinction became even more important once Lionel explained how he planned to finance the operation.

The Debt Problem

Lionel said he wasn’t planning to use his personal savings. He wanted to take out loans and estimated it would cost about $200,000 to start the laundromat from scratch.

Ramsey’s answer was simple.

"I wouldn’t do it," he said.

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He argued that borrowing $200,000 for a brand-new business creates substantial risk, particularly when the financial projections are based on estimates.

"The numbers that you’ve crunched… I can tell you from having run businesses for 30 years, the numbers that I crunch are normally wrong on a brand-new venture," Ramsey said. "We don’t know what we don’t know."

His rule of thumb?

"It’s going to take twice as long as you think, cost twice as much as you think, and you’re not the exception," he said.

Rather than taking on six figures of debt, Ramsey advised Lionel to start a business with cash, keep it small and reinvest the profits as it grows.

Passive Income Without Running the Business

Social media can make passive income sound almost effortless, whether the pitch involves vending machines, car washes, rental properties or selling online courses. The reality is that many of those ideas are still businesses that require time, money and management.

There are, however, investments that can generate income without requiring the investor to operate the underlying business.

Arrived⁠, for example, allows investors to buy fractional shares of rental properties and certain real estate funds, with investments starting at $100. The company handles the property management, giving investors a way to participate in real estate without becoming the landlord handling repairs and tenants themselves.

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That doesn’t mean the investment is risk-free or that returns are guaranteed. Real estate values and income can fluctuate, and investors should understand the terms and risks before putting money in.

The bigger lesson from Lionel’s call is that owning a business isn’t automatically passive just because it can eventually require less hands-on work.

A laundromat could become profitable. But if the owner is responsible for broken machines, property issues, customers and a $200,000 loan, there’s still plenty of work attached to that income.

For anyone chasing passive income, the distinction matters. An income-producing investment may be able to put money in an investor’s pocket without requiring another job. A business, even one filled with washing machines, is still a business.

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