How to Buy a Church Building? - Griffin Church Loans

How to Buy a Church Building?

Buying a church building is an exciting, but daunting step in your ministry. Perhaps this is an expansion of your current church, building a satellite location; maybe this is an upgrade from a building you’ve outgrown; and maybe it’s a completely new church that you’re just starting. No matter which way you come to this project, there will be obstacles in your way–as there always are–but we’re here to help you get through the church buying process as painlessly as possible.

There are a number of things that you’re going to need to do to get into a new building and we’ve outlined the basics below. This is by no means an exhaustive list: you’ll want to check with a trusted advisor or a church broker for information, but we’ll get to that more below.

Get Community and Leadership Buy-In

This is the obvious first step. As the pastor of your church, you may have a great vision for a new building, perhaps with a larger chapel, or better community facilities, or a more central location. This is all well and good, but unless you can sell your idea to the church leadership it’s going to be dead in the water. Generally, you’re going to want to do a lot of research up front that outlines all the ways in which the church will benefit your congregation and your community. This isn’t just a vague and excited meeting where you lay out your proposed layout and estimated growth; you want to treat this like you’re creating a business plan. Imagine that you’re going on Shark Tank and that you need to sell the idea of a church to a skeptical crowd. You’re going to need to be prepared with real numbers, real studies, real data. Putting together a financial plan is an essential part of that.

how to buy church building

Create a Financial Plan

Until you have a plan for the new church’s funding and projected growth, this is all just pie-in-the-sky thinking. There are many reasons you need a financial plan, the first of which is to sway the church leadership, but also you’re going to need to present something concrete to your members when you begin to raise funds: you’re going to need a goal that is tough but achievable. You’re also going to need to have all of your financials in place for when the banks get involved–and they require a lot of documentation.

This financial plan may not be something that you can create on your own. It may require the hiring of a CPA to help put all your documents into order so that you’re ready to present. Yes, this will require a little up-front cost (unless your congregation has a CPA who will be willing to work pro bono). 

A financial plan is going to need to include such things as your historical financial reports: profit and loss statements, revenue reports, bank statements, and projected revenue forecasts.  You’ll need to have a good handle on any debt the church already has, and, in some cases, the credit score of the church’s leadership–whoever is putting their name on the paperwork (if you have good revenue, but don’t pay your bills on time, banks aren’t going to be enthusiastic about lending to you.) If you have any sources of revenue that aren’t just donations and offerings, such as a day care or a school, make sure to include those as well.

Start Fundraising Early

A loan for a church will be a commercial loan, and such loans generally require 20-30% down before they’ll loan you anything. This is where you get the congregation involved. When you’re funding a church, you’re looking at money from three sources: money in savings, donations, and commercial lenders. Most of your down payment (unless you’re running a very profitable church school or something similar) will come from donations.

You’ll want to start collecting money for the down payment a year before you ever think about starting a project. This will give you both the benefit of building a community groundswell that support the church building–a groundswell of both goodwill and also personal investment. When people donate to a church construction fund they grow stronger in their ties to the church and they want to see the project come to fruition. In fact when someone donates, the likelihood that they’ll donate a second time increases significantly. As they donate they want to see their money go to the new vision of the property, and they don’t want their money to go to waste. In fact, once you get a member who donates, they can become one of your best champions in recruiting others to donate.

It’s important to remind church members of the fundraising goals visually and often. Whether this means putting a poster of a thermometer in your foyer to give a visual and constant look at what the goals are and how farther you have to go, or some other easy-to-comprehend aide that will convey exactly how much more the members are responsible for.

And don’t forget, before you start fundraising, that you need to sell your idea of a new church to your members! The better case you can make for the construction of a new building (or purchase of an existing building) you will motivate them more to give.

Seek Commercial Funding

Next, inevitably, comes the lender. You’ve got cash reserves that you’ve built up over a good amount of time, plus your fundraising efforts, and now it’s time to borrow money. This is where all of the groundwork that you’ve been doing really comes to fruition: you have the financial documents, you have the down payment, now you just need to get together with the best lender and find a good rate and secure the money that you need for the church.

Right now, in the current economy, interest rates are at historic lows, but churches are on shaky ground. You’ll need to make a good case that your idea for a new building is the right one, and that you’re ready to shoulder such a load. Fortunately, if you’ve been doing all of the other work, this shouldn’t be too hard of a sell to the lender. Lenders like to see buyers who are prepared, financially and mentally, and having a clear set of financial statements and a substantial down payment proves that you’re on the right path.

Now there is more that goes into getting a commercial loan than just that. Some loans require collateral, and if you have a current church building, you may need to put that up as collateral (in some cases). You also need to have a good credit score (both for the church and for you personally). They want historical proof that you can make the payments on time, and that you deserve a low interest rate. The last thing you want is to be so eager to get a loan that you’re willing to accept poor terms which could cost you tens or hundreds of thousands of unnecessary dollars over the life of the loan. 

Use an Expert Broker

While this isn’t a requirement for buying a church, there are expert church brokers who are specialized in everything church related. The regulations for churches are different than they are for both residential properties as well as commercial properties, and you’d hate to buy a building only to learn that some miniscule zoning regulations keep you from putting together the facilities you want. You don’t want a commissioner coming to you after you’ve signed the paperwork and finding out you can’t pave the parking lot or put up a marquis. Expert church brokers will help guide you through this process.

They can even help you find properties that you might not have considered. Because of the non-residential and non-commercial nature of a church, many possible buildings are not even listed in MLS systems.

Locate the Right Property

Whether you are building from the ground up or moving into an existing building, you need to find the ideal property. As mentioned above, expert church brokers can help you find church locations that are perfectly suited for your congregation and community’s needs. But odds are you’ve already had your eye on a place for some time. You need to be flexible, because by the time that you’ve raised the funds to put down the down payment, that property may be off the market. It’s wise to have several places in mind.

It can also be a good idea, especially in fundraising, to purchase the land early on in the process and then get the loan for the construction of the building later after the land has been purchased. Having a plot of land that your members can drive past and think about–picture themselves going to church on that land–can be a strong motivator in seeking donations. This is risky, because if the economy turns and donations dry up, or interest rates increase, the loan you get to build your church on that pre-bought property is harder to handle. 

Negotiate the Sale Price

Negotiating a price is something that having a broker is especially good for, but there are benefits to being a church–it’s not uncommon for properties to sell for less money to a church because a good church building makes a good neighbor and will increase the property values of the area surrounding it. 

You can also get good benefit from volunteers in your congregation: if you have church members who are electricians and plumbers and contractors, you can get them to give you realistic (non-inflated) estimates of how much the project will cost, and you can use that to help you negotiate the price of the project.

Get the Required Permits and Licenses

Again, this is a good place for a church broker, but it can be done even without them. Odds are you won’t be the one dealing with this: there will be a professional of some kind who will get the permits for you, be they the contractor or the lender or the broker or the architect. You, of course, need to make sure that it gets done, but the burden of going into the requisite offices and dealing with their specific brand of red tape is not something you’ll likely have to do on your own. 

And with all of these things done, you will hopefully soon be in your new church building, with proper facilities, working utilities, beautiful music and artwork, and opportunities for ministry and praise. 

Fill out the Check Rates Now form

Share via
Copy link
Powered by Social Snap