Child care properties are a popular option for many new entrants into the market and seasoned owners looking to expand. These businesses have special property requirements, so you should consider the following elements before signing a lease or purchase contract.
Child Care Site
Does the site already have a land use designation allowing for child care? If not, you may need to pursue a zoning variance or use permit first. If the property already has the designation, what are the conditions, and is the permit transferable?
You will also want to ensure the site has adequate indoor and outdoor space. May communities maintain specific square footage minimums per child, which are often based on state laws.
Other factors to consider include the official facility inspection reports. These reports may provide information about needed repairs that the seller wishes to pass on to the new buyer. These upgrades may not be a deal breaker, as you can use this information as a negotiating tool.
If the seller has a business plan, try to obtain a copy during due diligence. The plan may give you crucial information about the business model, operations, legal structure, staffing plan, management, finances and planned expansions. You may also be able to obtain information about operating subsidy contracts, track records with their funding source and tuition receivables.
Market demand is a key element to determining future success. Seek out information on current capacity, current enrollment and the length of the waiting list. Ask about the monthly vacancy rates. You may also be able to obtain information about how many child care facilities already exist in the immediate area and how many families are estimated to be in the geographic region. This information will give you a good idea of the current competition.
Child care properties can be a great investment, and you should consult an experience commercial real estate advisor to help you navigate to details, laws and regulations. At Menlo Group Commercial Real Estate, we use our proven processes to ensure a smooth transaction. Meet our child care real estate specialists and request a complimentary consultation to get started on your lease or purchase.