A church for $50k. Is it a good investment?

Question

Hello,

I came across this listing while searching for REO properties: http://www.oreoproperties.net/property/view/185.ht...

It's a 4000 sf church located in Baton Rouge Louisiana, for sale for $50k. The property is already under contract (not to me) so the deal is moot, but for educational purpose, I was wondering:

How would someone go about analyzing something like this? It's not a residential, office, or retail building, for which rent/sf and various metrics apply. Not being from the area, how would one determine the likelihood of a congregation renting this property, and how much rent they might pay? I'm assuming that once you had a congregation as tenant, it would be a pretty stable tenant?

Does one simply apply the same metrics as for a shopping center or an office building? It seems to me that the market for church renters is a lot smaller than general retail or business, so how would one make a decision about whether this is a good or not so good investment?

I'm just interested in learning some new valuation techniques, so I know what to do the next time I find a church for sale that's not already under contract...

Thank you!

Jean

Esaul Viramontes · Answer

I went to a club in Denver a few years back called the "church" ....guess what this building used to be before becoming a club? Lol.....so , theoretically speaking, it could be a good investment......

Sylvia B. · Answer

We bought a church building and remodeled it for our retail business.

We paid $85K (appraisal $110K) and put $40K into the remodel a little over 3 years ago. Two months ago a new appraisal came in at $240K. You could have knocked us over with a feather.

So yes, you can make money on a church, but I wouldn't count on it making money as a church.

Matt Carpenter · Answer

@Jean G.

We recently bought a church near downtown Tucson to remodel and turn into our new office, also sectioning off some space to dedicate as rental units.

A big issue to consider in evaluating an investment like this is looking into your city's ordinances on what would constitute it as a residential/commercial build. If it turns into a commercial build, there can be a lot of hoops you have to jump through to bring your project to life.

You can check out our church project and some of the numbers here:

https://www.biggerpockets.com/forums/522/topics/197693-1920s-church-conversion-in-downtown-tucson

Micki M. · Answer

@Jean G.

It's my dream to buy a church. As a commercial rental, you would analyze it the same way as any other retail-style space.  Churches tend to be large and purpose built so it can limit your end user options, but they can also be long-term tenants.  Churches, event planners, fitness classes, dance companies are all potential renters.  Get one to master lease it and share with other groups and you could have a solid tenant base.

I've seen churches converted into all kinds of retail and living spaces.  Depending on location and market building out high end condos can be a good money maker but is not simple or cheap.  How does the price compare to similarly sized commercial properties in the area?

Alexander Felice · Answer

That would scare me personally. Many churches are designed to look like churches, so while you can call it something else, it looks like a church.

So, assuming you want to own a church, how profitable is that? Well, statistics show that people are leaving not only church, but religion, in record numbers. Religion is a dying industry.

As Micki M. mentioned, I think you would have to be able to afford to convert it to something else for it to be profitable.

Jane W. · Answer

What others said above. Don't count on making a return by renting it to a congregation. Religious organizations usually have partial or full exemption from real estate taxes and their holding cost on real property is lower than yours. Could be interesting to turn it into retail if zoning permits.

Jean G. · Answer

Thanks for all the replies. What I get is a general consensus that it would need to be turned into something else, and that hoping to just find a congregation to use it as a church, the same way you rent a house or an office building, was not likely to happen. That's exactly what I wanted to know, so thanks for all your contributions.

Jean

A church for $50k. Is it a good investment?

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