Should your church purchase more land than is necessary to accomplish its future expansion vision?
By “purchase more land…” we mean buying a site beyond what the church needs. This is done because 1) the church hopes to profit through development/sale; or 2) the perfect site’s seller won’t subdivide. These are legitimate desires that present a tempting option. But read on.
The real question this topic leads to is this: “Should your church get into the real estate development business?” In most cases, we think not.
We believe that every church should stay focused (with room for varied interpretation) on its primary mission of being the living, breathing body of Christ.
We’ve known churches to successfully buy excess land, sell a portion, and gain essentially free land for their new church buildings through the profits. But such stories are very few and far between. And those who’ve succeeded collaborated with experienced real estate professionals.
Sadly, we’ve observed some local churches, despite the best of intentions, have failed and severely burdened their congregations as a result. One local church had to stop construction midstream on their ground-up development project because they relied on the sale of a surplus land site for funding. The sale did not happen even though a large relied upon non-refundable deposit was in place. The general contractor left the site and the partially finished building sat unfinished for almost two years while the church raised more money. Another local church acquired approximately five times the land it needed to construct its envisioned new church in hopes of selling surplus parcels. After several years, precious resources remain tied up in undeveloped land that remains unentitled and without a single sale.
Why do these kinds of things happen? Too much is beyond foresight and control, including the cyclical up-and-down nature of real estate. Even an expert can’t tell you everything. And typically church leaders do not have particular real estate expertise or acumen.
A church has several hoops to jump through when it comes to selling excess lots. For example, under 501c3 law a clear separation of pursuits is necessary, divided into separate entities, so that for-profit activities don’t void tax-exempt status.
Meanwhile, of course people want to help, so there’s rarely a shortage of amateur advice aimed at leaders. Thus it is not surprising that lots of mistakes are made when a church ventures away from its core pursuits.
For these reasons substantiated by life experience, we don’t recommend that churches enter the for-profit real estate business. We hesitate to douse vision flames and big ambitions, but we’ve seen too many try with unfavorable results.
All of that said and general advice aside, we recognize that every case is unique. And wise management for one church may look different for another. So if your church is pursuing an expanded real estate vision beyond the norm, we’d love to hear about it…and maybe to help you succeed.
Development Advisors provides A to Z services for churches seeking to expand their facilities. For more information about our church real estate and development services, contact Scott McLean at 303-534-3344 (x 103) or at scott@developco.com.