Valuation for special purpose real property (e.g. Church)

4 Replies

Hello! I have seen many different ways to do a market valuation for special purpose buildings, such as churches or schools. Can anyone guide me as to:

1) the best way to properly value a special purpose property

2) factors the special purpose property owners should consider when deciding whether to sell their current building, and rent/buy another?

Hi, I don't know if there's any "best way to properly value" a special purpose property.  I suppose what I would do is look at the following

-  what the market is currently bearing for similar properties (that is, what's actually sold- not what's for sale)

- what is it zoned for? can it be repurposed into something more profitable (and does the owner care)?  For example, a church purchased for 350K 10 years ago just sold for $1M so someone could turn it into retail (but if the owner wanted it to remain a church they may not have sold, even at that high price).

- what is the jurisdiction planning (is anything is coming in the future to increase/decrease value)?  For example, was excited about paying $1M for a country ice cream shop and adjacent vacant lot with Comcast billboard on it, until I discovered the metro plan had them capping off the road it was on to turn the cross road into an expressway. In a few years that land and shop would have limited commercial value so it was no longer worth that price to me.  This also works the other way: if I find out that the metro plan is to turn a now-rural area into retail 10 years from now, I might start looking at buying there, depending on the needs of my congregation

- with regards to renting another facility, one thing to consider is whether or not the special purpose is welcome in affordable rental spaces. For example, a church might find another standalone building or church to rent but may have a hard time finding space in a storefront. I've helped many churches find storefront space and it can be tough because churches are not attractive from a retail standpoint (if Landlord X has to choose between a church or a UPS store, they'll probably put in the ups since it will be less likely to default, have significant revenue for percentage rents, and attract clients who will patronize other the other businesses of that strip mall

While I can't give you anything more definitive, I hope that helps.

Originally posted by @JJ Conway :

Hi, I don't know if there's any "best way to properly value" a special purpose property.  I suppose what I would do is look at the following

-  what the market is currently bearing for similar properties (that is, what's actually sold- not what's for sale)

- what is it zoned for? can it be repurposed into something more profitable (and does the owner care)?  For example, a church purchased for 350K 10 years ago just sold for $1M so someone could turn it into retail (but if the owner wanted it to remain a church they may not have sold, even at that high price).

- what is the jurisdiction planning (is anything is coming in the future to increase/decrease value)?  For example, was excited about paying $1M for a country ice cream shop and adjacent vacant lot with Comcast billboard on it, until I discovered the metro plan had them capping off the road it was on to turn the cross road into an expressway. In a few years that land and shop would have limited commercial value so it was no longer worth that price to me.  This also works the other way: if I find out that the metro plan is to turn a now-rural area into retail 10 years from now, I might start looking at buying there, depending on the needs of my congregation

- with regards to renting another facility, one thing to consider is whether or not the special purpose is welcome in affordable rental spaces. For example, a church might find another standalone building or church to rent but may have a hard time finding space in a storefront. I've helped many churches find storefront space and it can be tough because churches are not attractive from a retail standpoint (if Landlord X has to choose between a church or a UPS store, they'll probably put in the ups since it will be less likely to default, have significant revenue for percentage rents, and attract clients who will patronize other the other businesses of that strip mall

While I can't give you anything more definitive, I hope that helps.

 Thanks JJ, would you ever consider treating it like an income-generating commercial property regarding valuation?

@Obi E. The valuation method generally used with special buildings is called the cost approach.

It would take into consideration the cost to rebuild / replace the structure today, but then subtract the depreciation of your building and then add in the land value.

An appraiser should be able to provide such an approach for you.

Thanks @Lydia S. - I'm familiar with the cost approach method, but surprised that it would be used for this purpose. I think it makes perfect sense to though. It's always great to approach the same problem from multiple angles...thanks!

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