Church w/ unused parsonage in Bath, MI. May need creative solution.

9 Replies

I won't go into too much detail because the details are not in stone yet and I have no numbers to use. I figured innovative strategies made sense as a place to post. If there is a better forum feel free to suggest.

A church is getting a new minister that already has housing in the area. Meaning this church has a parsonage that will go unused. It still has financing to deal with. They don't want to sell incase the minister to follow their new minister needs housing. They don't want to manage the property as a rental for obvious reasons. And they can't make profit on the building because it is not taxed as they are a religious organization (from what they, and I understand we could be wrong). My latest thought that I haven't ruled out for one reason or another is putting it under property management and the management fee would be any profit made after expenses were paid. This way the church retains title and isn't gaining profit. The only one benefiting financially is the property manager for dealing with the headache of helping this church retain title on something it can't afford without the help.

Any advice or ideas would be helpful. I'm not emotionally invested but my mother is involved and could use some guidance. She wants to sell but she only has one vote on the board.

The church is not prohibited from making a profit, they will just have to pay tax on it.  Look up the concept of Unrelated Business Income Tax and read through this information:

If the church isn't already filing a form 990, it will need to do so.  I think it's possibly the church could do a lot of good with the profits after paying a property manager, the tax and maybe a tax preparer.

Just because they aren't used to this type of activity does not mean that they shouldn't consider it.

I agree. You may become responsible for property tax on the property but rents would outweigh that. Check with the city to see how they figure /separate that. Actually the church may owe the tax anyway if the property is not being used. I can understand the hesitation about renting. There could be some liability consideration. The church May not want to be a plaintiff in an eviction. Don't rent to a member. That could get ugly too. A simple conversation with a lawyer may help. It's not a complicated question. A property manager may be the answer you need.

The legal side of things is certainly a factor. No church wants to und up in the local paper for evicting a single mother. Would property management make that situation more avoidable?

Another idea is for someone to buy the house outright with their heloc for the amount of debt the church still owes. which is about half the value (we have a person in mind and they are willing). Then he rents it out for a decent profit based on the numbers I've seen. If the church ever needs it back he can sell it using seller financing for whatever is left on his heloc plus closing costs. Any problems popping out to you here? My biggest downside here is if the church can't make the payments, which is not unlikely, and will this person be willing to foreclose? 

Why wouldn't the church just rent it to someone for the price of the mortgage plus maintenance? Then they keep the place without taking on expenses or making a profit. Just rent it to a church member who won't cause trouble and let the place pay it's self off. 

Board president says he will quit the board if they make him manage a property, no one else is willing to, and they worry about someone not paying to take advantage of a church. This church is too small and old so none of it's members rent.

Edit: Also, I would do it for experience, but I don't live in the area.

Well, there's an awful lot of ultimatums and "wants".

Church does not want to sell the property.  Church board does not want to rent property or manage the property in any way.  Church minister does not want to live in property.

I guess the only option left is to board it up, winterize the property and let it sit vacant.  Seems like a waste...

Does the church already have an area for Sunday daycare during church services and/or Sunday school?  Plenty of meeting space for Bible study, youth group, marriage classes, book club, whatever else your particular flavor of religion might do?  (AA classes, girl scount/boy scout meetings???)  If not, then they may be able to convert some or all of this house into meeting rooms, activity rooms, etc.  If they've already got plenty of space for their needs, then the inflexible nature of the board really does seem to lead to a vacant property, gathering dust.

I totally agree, Linda. I was hoping that there was some strategy I was overlooking, but I'm pretty sure there isn't. They have all the space they need, but don't have the money or people they need. 

I like the idea of renting it out for meetings.  Just charge money for the rentals.  So much for meeting rooms, additional if kitchen is used for lunch preparation or set up, etc.

Lots of small associations, like REI groups, networking groups, etc, have a very hard time finding space to rent that doesn't cost a fortunes, like hotels charge for their meeting rooms.

Holiday, anniversary, graduation, and birthday parties might pay for rental space.

You could set the fees to include paying a property/space manager to handle all the admin and clean up.

So they have decided what to do, at least for now. They are renting it to another pastor (same denomination) for a church without a parsonage. 

@Olivia C. The church already has a basement they rent to different groups in the area. There is either no demand for it in the area, or no one knows they do it. Any advice for advertising meeting space? It might not help the house situation, but if they can rent the church out more effectively they might not be in as bad a situation.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here