Child care properties represent a popular option for many new entrants into the market and seasoned owners looking to expand. These businesses have special property requirements, which is you should consult an experience commercial real estate agent prior to signing a lease or purchase contract. Consider these following elements that are critical to child care properties.
Does the site already have a land use designation allowing for childcare? If not, you may need to pursue that course of action first. If the site does have the designation, what are the conditions and is the permit transferable? Commercial property agents can help you determine these issues. Does the site have adequate indoor/outdoor space? Many communities maintain specific minimums per child, and many of those regulations are based on state laws.
Other factors to consider include the official facility inspection reports. These reports may provide information about needed repairs or upgrades that the seller wishes to pass on to the new buyer. This 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 will give you a good idea of the current competition.
Child care properties can be a great investment, but it’s important to hire a commercial real estate agent to help you navigate the details, laws and regulations. At Menlo Group Commercial Real Estate, we use our proven processes to ensure a smooth transaction. Contact one of our child care real estate specialists to get started on your lease or purchase.