By Dave Milam and Jody Forehand
Searching out a new location for your church is incredibly exciting. If it’s your job to find that perfect property, however, it can also be an overwhelmingly daunting task. In fact, this may be one of the most substantial expenses your church will ever incur. Get it right, and the new location will fuel the mission of your church for decades. Get it wrong, and your church may never recover. No pressure.
Yet, in spite of the high stakes, many churches navigate the real estate gauntlet with the confidence and experience of a 15-year-old student driver. Often churches task a staff member (with no experience in real estate development) or a church committee (with one or two armchair experts) to find a property. What could possibly go wrong?
In light of the gravity of this decision, here are five steps to follow when looking for church property.
1. FIND THE RIGHT PARTNER
A seasoned leader’s first call is always to a commercial realtor who specializes in working with churches. But you’d be surprised how rarely happens. Instead, most novice leaders start by leveraging one of three resources: the most prominent church member who sells houses, the local commercial broker, whose name they discovered on a vacant property, or Google. All three have varying degrees of risk with Google being the riskiest.
Hiring an expert to help you navigate the journey will help your church discover possible new locations beyond the traditional internet search and will represent you well against that cutthroat seller who’s hoping to get rich. Good commercial agents have access to the information you don’t about every property in your community, even property that isn’t currently on the market, and can work anonymously behind the scenes on your behalf approaching property owners for real estate that fits your desired profile to see if they are interested in making a deal.
Now that your first, and biggest decision is behind you, what’s next?
2. ASK THE RIGHT QUESTIONS
In the real estate world, it’s rarely “what you know” that knocks you off balance. In fact, one of the biggest challenges that you may face is knowing what questions to ask in the first place. Again, this is where a good agent pays off, especially one that specializes in church real estate.
An agent that specializes in helping churches should help you ask, and answer questions like:
- What’s the minimum acreage or square footage you’ll need at the new location?
- Will you buy or lease?
- What’s your strategy for funding the entire project?
- What’s the timeline for completion of the project?
- Is the new location strategically appropriate for who you’re trying to reach?
3. COUNT THE COSTS
Many churches don’t often consider leasing and renovating existing spaces. The mindset of most churches is that they need their own undeveloped piece of dirt so they can build a new building exactly the way they want it.
On the surface, many people inexperienced in development think raw land is the cheapest option because the price per acre appears low compared to the purchase price for developed property. But typically, that’s not the case. For most churches, we recommend that raw land development be almost the last resort—especially in denser urban and suburban areas. Raw land often is the most expensive move.
When developing a working budget for a new site, it’s important to think broader than a price per square foot. A new site means you need to provide utilities: water (public or well), sewer (or septic), electricity, stormwater, and possibly others (gas, cable, phone, internet, etc.) to the site. If public utilities aren’t already present at the property you might have to extend them hundreds of feet down the road to your property.
You may also have to pay tap fees, and impact fees, and you will probably need to provide an environmental site assessment (often referred to as a Phase 1) and traffic studies. That might also mean you have to widen the road, provide sidewalks and a turn lane, or even add a traffic light. That’s more cost.
Is your site wooded? That’s beautiful, but it also means you will have to clear a large area for building pads, parking lots, ball fields, etc. That’s more cost.
Is your site hilly or rocky? It may be picturesque, but that also means lots of grading (cut-and-fill) and maybe even blasting or drilling rock to make areas level enough for parking lots and the building pads and foundations. That’s even more cost.
Okay, you get the picture. A site that is already developed (or even partially developed) should already have most, if not all, of this in place. Maybe you’ll need to expand parking, or expand the building, but in general, there has already been a significant investment made by someone else that you get to use from day one without having to take it out of your construction budget. The cost of purchasing developed land is higher than raw land, but typically not as high as doing all this infrastructure work from scratch yourself.
4. GET APPROVAL
Have you ever heard of “entitlements?” These are the approvals you need from the authorities having jurisdiction over the piece of property or building you want to buy. In many jurisdictions around the country, churches must beg for permission to exist by way of Conditional Use or Special Use Permits and approvals.
The dirty little secret is that most jurisdictions don’t like churches to buy property because churches don’t pay property taxes. As a result, officials often make the approval process cumbersome, costly, and time-consuming. So know what you’re getting into before you pull the trigger on a property.
5. ANALYZE THE OPPORTUNITY
Don’t forget the top mantra of real estate agents: It’s all about “location, location, location.” Reality is a little more nuanced when working with churches. People are willing to “hunt” for your church if you give them a good reason to come but the location still matters.
Ideally, you would have both accessibility and visibility, but if you have to choose, accessibility is generally more critical. A church with excellent visibility from the interstate might sound great until you have to go 5 miles past it to the next exit and then navigate back to it through a maze of country roads.
Pay attention to population density and market penetration. “Penetration Rate” is a retail term that looks at how many people “shop” at your store compared to other similar stores in your community. It sounds a bit crass to talk about ministry this way, but like it or not, your church has a penetration rate in your community compared to other churches.
If you’re looking at two “equal” properties (related to the quality and costs), and Property A has 200,000 people within a 20-minute drive radius, while Property B has 100,000 people within a 20-minute drive radius, then Property A is the better location, and your penetration rate will help your architect program your master plan accordingly to accommodate your growth at full build-out.
Also, don’t sell demographics short. If you’re looking at properties in different areas, analyze who you are reaching currently and who you want to reach. Will these people come to the location you wish to purchase? If not, it’s not a smart move to buy it, no matter how good the deal looks.
Maybe searching for property seems a bit more overwhelming than it did before you read this article, but the good news is that with the right team members, the right attitude, and the proper process, you can successfully navigate your church to the right location.
Jody is President of Visioneering Studios Real Estate, and he has been working with churches nationwide since 2003.