Being in the real estate business

thomas k house

After seven years at the Foundation there aren’t a lot of phone calls I haven’t had at least once before.  But six months ago I got a new one.  It was from an endowment chair at a local church vetting what he was trying to decide was an opportunity or a big problem:

A member wanted to give the church his home.

Now if this house would have made a great parsonage or if it was next door to the church and they needed the land it would have been easy.  But this member wanted to give his home, have the church sell it and put the proceeds in the endowment.  The home was in an inner-ring suburb of Cleveland and quite frankly it was tiny.

So he and I chatted a bit.  What would it likely sell for?  Any chance there’s radioactive waste in the back yard?  What will it cost to plow the driveway, mow the grass and pay the property taxes until it sells?  Any reason to think it wouldn’t sell in a couple of months?  Does the donor have realistic expectations?

Eventually we got to the bottom line.  The potential upside was somewhere around $25,000-$50,000 into the church’s endowment.  It would be the largest single gift this individual had ever made to the church and one of the largest the endowment fund had ever received.  The downside was if the house languished on the market so long that maintenance costs would exceed any profit.  We agreed this seemed very unlikely, especially if the church was willing to price it to sell quickly.

Two weeks later I got another call.  It was from the church’s pastor.  He wondered if I really had suggested that the church do this.  We had the same conversation and came to the same conclusion.

I got an update last week.  The church had cleared about $35,000 on the sale of this small home in a neighborhood without cul-de-sacs.  The donor was proud to have been able to make this happen.  The Trustees breathed a sigh of relief and decided it really hadn’t been that bad.  And most importantly the church’s endowment fund is now an even stronger tool for ministry.

This is the benefit of the church having some courage, being willing to think about taking some degree of risk.  The odds of the church losing money were slim, but it was still a possibility.  They certainly benefited from an open-minded donor who was not interested in dictating the minimum price or other things that could have soured the deal.

I don’t advocate blindly taking just any donation like a house, but by being willing to consider it carefully, the church may come out ahead.

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