How Much Is My Child Care Land and Building Worth?

This is the question that child care owners asked just after, “What is my child care business worth?”

Commonly, the real estate – land and buildings associated with a childcare business- is often more valuable than the childcare business. This is due to the high land cost and the cost to construct a building specifically designed for child care.

So, how can you get, at least, an idea of what your child care land and building are worth?

1. You could hire an appraiser specializing in commercial real estate (typically has an MAI (Member, Appraisal Institute) certification. An MAI-designated appraiser will be skilled at appraising several property types, including industrial, retail, office, multifamily, and special-purpose properties like child care. Expect to pay at least $3,000 or more for such a report.
2. You could ask local commercial real estate brokers for their opinion. However, most commercial real estate brokers do not specialize in child care and may have limited knowledge of child care real estate or recent sales of other child care buildings and land. And, you risk the chance of a breach of confidentiality as most commercial real estate brokers do not understand that the marketing of child care businesses and associated real estate should not be public as with other commercial real estate properties. So, be sure to tell them you want the information for planning purposes and are not looking to sell. And given their lack of specialized child care real estate brokerage experience, the value estimate may be inaccurate.
3. Over time, you could watch the childcare properties offered for sale online through sites like LoopNet, CREXI, or larger commercial real estate firms in your state. A word of caution: the value of the real estate can be substantially impacted by the tenant’s creditworthiness. For instance, the national and regional child care multiunit operators often lease the child care building and land instead of purchasing. Given the multiunit operations’ size and financial capacity, investors are often willing to pay more for the childcare building and land as they would be acquiring a creditworthy tenant, usually for a long term, 10 to 20 years.
4. The best option is to contact a broker specializing in selling childcare businesses and associated real estate in your state. Like myself, brokers specializing in child care can often provide you with a quick value range for your child care real estate – often for free.