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If you’re looking to diversify your portfolio in 2024, investing in ATMs should definitely be on your radar.
We all know that economic conditions have improved for real estate investors tougher in the past few years. Tighter profits, lower returns on investment and fewer investment opportunities have become a reality. This is not the case with the ATM industry. ATMs are a very resilient source of stable long-term cash flow, although still often overlooked, with minimal active participation and minimal risk, and a ton Opportunities for diversity within the industry.
Of course, there are some logistical considerations (which we’ll discuss), but you’ll need to do a healthy dose of planning do it yes Absolutely Worthy of reward. If you want a number, consider this: A typical ATM will give you a Return on investment within 12 to 18 months.
Impressed? Here are five benefits of investing in an ATM machine.
1. Cash is still widely used by unbanked and underbanked small businesses
according to Data comes from Federal Deposit Insurance Corporation (FDIC)As of 2021, 4.5% of U.S. households (approximately 5.9 million people) are underbanked or unbanked. many people depend on mainly or entirely Rely on cash to run your business and daily life.
Contrary to popular belief, underbanking is not necessarily associated with financial instability or poverty, although it does correlate with lower income levels, especially in black and Hispanic communities. The data set shows that 8% of households with incomes between $30,000 and $50,000 are black and 8.4% are Hispanic. family1.7% of white households do not have a bank account. When asked why they don’t use a bank, most people Those ones People either feel they don’t earn enough to meet their bank balance (21.7%); them simply Distrust banks with money (13.2%).
Many American households still use non-bank check cashing and non-bank money order services, which one This is especially important for immigrant communities because part of their income Has been sent foreign. 2021, Non-bank draft service users Accounting for 9.7% of the country’s households, this is a huge number.
besides a lot of arrive It is said On the enduring preference for cash payments in running a small business. There’s no getting away from the fact that small businesses operating on low profit margins have to pay a per-transaction fee every time a customer pays electronically.
These are more than just credit card fees: There are also processing fees There are fees charged by banks and processing companies, and even terminal fees charged by electronic card terminal providers like Square. this cost Up to 5% may be added to each transaction. That is main reason You’ll often see “Minimum Spend $5 with Card” signs at local small businesses.
It’s no wonder that with fees so high, many small businesses take every opportunity to accept more cash payments, or even just cash. An on-site ATM is invaluable to many of these businesses, allowing customers to easily withdraw money cash even if they usually Don’t bring anything with you.
ATMs are so beneficial to small business profit margins that many will weigh the trade-off between charging commissions on ATM withdrawals and having an ATM on their premises. In fact, 90% of the locations our company (ATM Investors) signs up with are willing to give up commission on the unit just to increase the cash disbursements in their business.
2. Considerable tax benefits
ATM is truly a unique investment opportunity: They may be classified as a type of real estate, but they are also commercial equipment. and Business equipment qualifies for very generous federal tax breaks.
First, if you buy an ATM (or multiple ATMs), you own the entire ATM. purchase cost Written off for tax purposes in the year of purchase. In 2024, write-offs are capped at $1,220,000 for purchases totaling less than $3,050,000. You can still get some tax deductions for purchases up to $4,270,000. this is called Article 179 Deductions.
you also will be able to If your total first-year purchases exceed the Section 179 cap but are less than the $3,050,000 cap, you are entitled to a 60% first-year depreciation bonus. Potentially, Although Rule 179 applies first, you can benefit from both in the first year of setting up your ATM investing business.
have Other potential tax benefits You can harvest because of both ATM equipment and ATM location contracts are considered depreciable assets for tax purposes. Of course, you should always consult a business tax professional figure out what it is You will be entitled to it.
The tax benefits associated with ATM investments are extremely valuable to any investor with long-term diversification goals. As time goes by, you can also Leverage these assets to lend and borrow based on asset value for Reinvest in the growth of the ATM business or diversify into other asset classes.
3. Long-term stable cash flow
One thing you need to know about is ATM location contracts. A location contract is a legal agreement between you, the ATM owner, and the business agreeing to: ATM machine installed on their premises.
There are various method These agreements can be structured, but it is most advantageous to structure the ATM contract as a lease agreement. Essentially, this template is similar to leasing real estate, but with specific caveats for ATMs. you will be able to Clearly Specify who is responsible for ATM maintenance and replenishment, and what transaction fees will be be dividedand protect yourself from possible revenue losses caused by competitors also Install an ATM on the premises.
Probably The most beneficial aspect of entering into a lease agreement with a small business is that it will provide for the duration of the agreement. ATM contracts have a standard term of five years, providing you with stable, long-term cash flow. At the end of the lease, if everyone is satisfied, it can be renewed in the same way Any other rental agreement. A typical ATM has a lifespan of 15 years, so if your contract has an automatic renewal clause, you may never need to worry about a functioning ATM again.
4. The ATM business provides the ultimate form of massive diversification
When you invest in real estate, your path to long-term success will require a certain level of diversification. If one of your properties is vacant a period of timeothers will make up for the temporary drop in cash flow – but only if you are truly diversified, meaning your properties are in different, located different Location, etc.
The same logic applies to the operation of the ATM business, and there are many opportunities for diversification within the ATM industry. Like other types of real estate, ATMs will experience a decline in cash flow, despite the risks This one Lower than traditional real estate investing. ATMs in the Pandemic Era: What Investors Learned hard road If all your ATM machines lie in in a restaurant, if the restaurant forced Temporarily closed.
Ideally, invest in a diversified portfolio of ATM machines lie in Covers a wide range of commercial and public facilities including airports, convenience stores, leisure or entertainment centres. Reliable ATM product portfolio Also diversified By region, among which better one Protects you, the investor, from local economic fluctuations that may affect the use of cash.
Finally, it’s a good idea Make sure your ATMs are diverse By business use case. People’s hyperlocal preferences can be hard to predict in advance.
In some places, cash-only businesses will offer you the greatest cash flow – especially if Place There is a high concentration of underbanked communities. In other aspects, enterprise Offer cash discounts Incentives for customers Will do better. You won’t know which one provides the highest performance Unless you’ve tried them all.
Don’t forget the ultimate advantage of an ATM: it’s a movable asset. If all else fails, you can always move the ATM to another location at minimal cost for you.
5. You can leverage OPM to reduce risk and operational complexity
OPM, or other people’s money, is a very good one Ideas to use if you are investing In the ATM. Actually, This is very common In the ATM industry, cash loading services (also known as third-party vaults) are utilized to service and load cash to machines.
this This is especially important if you have ATMs spread across the countrybut even If you only have a few ATMs in your local area, replenishing your own ATMs can be a logistical inconvenience. You must track all transactions that come into your business checking account and the amount they drain into the ATM cash bank. Then your responsibility is to supplement treasury, thereby “settling” transactions.
Ultimately, in order to maintain an effective supplement plan, you will need to track usage over the long term (usually over three and six months). obviously, The more ATMs you have, the more The complexity of these operations will increase. That’s without taking into account the risks that come with regularly transferring large amounts of cash to ATMs. You need to consider appropriate security measures.
For all of these reasons, using a third-party vault is a good idea for most ATM investors. Third party vaults use their my own Funds used to manage and settle transactions and replenish cash. this Make your life easier, leaving you with zero cash in circulation and more time for other investments.
final thoughts
Investing in a diverse portfolio of ATM machines can provide you with substantial, tax-efficient cash flow in a relatively short period of time. For investors who need to generate reliable extra cash within a tight time frame, there are few areas of investment that are relatively profitable.
However, like other forms of remote investing, ATM requires some logistical and legal knowledge, which is why investing through an ATM portfolio manager can be helpful. This is where we come in. We provide assistance with everything from assistance in drafting contracts to replenishment and maintenance of machines. Once we help you control these factors, you can benefit from this unique industry.
This article is provided by ATM Investors
ATM Investors establish, manage and operate ATM businesses on behalf of accredited investors. Their joint venture structure allows accredited investors to own the business and assets while benefiting from above-market returns, a 60% depreciation rate and a pre-planned exit strategy.
Notes on BiggerPockets: These are the opinions written by the author and do not necessarily represent the views of BiggerPockets.
