The Least Expensive Time to Own a Church Facility

Over the years, I have been asked when the least expensive time to “build” a church facility…and 9 times out of 10, the answer is TODAY. The only exceptions to this have been when there was a recession like in 2008-2010.

Today, I want us to change the question and shift if from when to BUILD a facility to the least expensive time to OWN a church facility.

Strangely enough…the answer is nearly the same. The answer to the latter may not be “today” but it is definitely the day you finish construction and move in. Does that sound counter intuitive? Do you think I’ve completely lost it (you may be right in general, but not on this point)?

We have laid this out several times in the past in articles and blogs…but I am concerned that many church leaders still do not grasp this. Because our firm works on both the BUILD and OWN (what we call Sustain) spectrum, we see the miscalculations of church leaders that fail to plan for the long-term costs to operate their shiny new facility…as well as the nearly devastating results of churches that have been in their facilities for years with little to no planning for the inevitable.

Let me see if I can offer a simple example:

  1. Cost of new building = $4 Million (about 20,000 SF)
  2. First-year utilities – about $25,000 ($1.25/SF – the acceptable range for a church is $1.00 -$1.50/SF)
  3. First-year Janitorial, cleaning and paper products – $35,000 ($1.75/SF…which is the low side of average…but hey, the building is new)
  4. First year General Maintenance…you know…light bulbs, touch up paint, HVAC maintenance, clogged toilets, broken glass, etc – $40,000 – $2.00/SF…which is less than the national average of $2.50 – $3.50…but again, I am being gracious because the building is new.
  5. First-year Lawn/Grounds – $25,000 (assuming 5 developed acres)
  6. First-year Capital Reserve Contribution – $30,000 (the recommended range is $1-3/SF annually…so I picked middle ground)

TOTAL COST TO OWN THE BUILDING AFTER 12 MONTHS = $4,155,000.00.

That is a 4% increase over the initial cost to build.  So, let’s assume a 2 % inflation from year 1 to year 2, which makes the cost to operate the second year $158,100. So now, at the end of 24 months, my $4M building, costs $4,313,100 to own…which is about 8% above the initial cost to build.  And that does NOT even include the cost of:

  1. Interest on a mortgage
  2. Insurance
  3. Telephone
  4. Internet
  5. Security
  6. IT infrastructure
  7. Facility Management…the PROACTIVE part…not the nail driver/mop-slinger.

I am sure that some of you are saying, “why do we need a capital reserve account starting in year one?” There are several reasons:

  1. If you don’t get into the habit of doing it early, you are less likely to EVER do it.
  2. Systematic saving is done over a long period of time which means you need less incrementally as you have a long time to grow the funds.
  3. You WILL replace all HVAC…all the carpet…all the paving…all the roofing…etc. These are inevitable.  It is not a question of IF you will replace them, but rather WHEN and HOW MUCH. Just think of the big-ticket items such as:
    • HVAC – This size facility will have 110-120 tons of HVAC at a current value of $275 – 300,000. You will need money in 15-20 years to pay for new… at an inflation ration of 2+% a year, you will need $350-$400,000.
    • If you have 20,000 SF of flat roof, the value today is about $160-200,000 and it will need to be replaced in 15-20 years…at an inflated value…this could be $210-280,000.
    • If 50% of your facility has carpet at a value of $4.00/SF today, ($40,000) that will need to be replaced in 7-12 years at an inflated value.

Need I continue?

It costs more money to own and operate a church facility than to just build it.  Be Intentional.

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