build a building or not?
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Topic: build a building or not?
Posted By: Guests
Subject: build a building or not?
Date Posted: 10/20/03 at 2:33pm
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Any advice? Our community theater board has to the option to purchase the theater we currently lease for $1000/mo. In order to do so, we need to raise a $30,000 downpayment by December 30 and are half-way there. We have been trying for about 5 years to raise the money but haven't gotten much support. The deadline comes because the owner has received another offer on the building. The potential new owners say they will let us remain, but our future would always be less secure than if we owned the building. The total purchase price is $200,000 and the owner wants to carry the contract. My concern is that we have no reserve account or really any profit from our shows to carry over should we have a bad season or something major go wrong with the building or our equipment. Should we take the risk? Any worst-case scenarios someone has seen happen from a situation like this? Thanks.
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Replies:
Posted By: Guests
Date Posted: 10/21/03 at 4:14am
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It is alway nice to own your own property, and remember that the property ownership will allow you to grow Equity in your Theatre. In addition, ownership of the building may allow for additional fundraising activities (ie. selling seats, seat is refinished and labeled with a plaque etc), but, if you are having difficulties raising the down payment, and you have no reserves, you may want to have a financial planner or accountant go over your books to see if the purchase really is feasible. Right now you are paying $1000.00 a month, a great deal. Can your theatre afford a possible double in rent as a mortgage, plus the additional insurance cost. Analyze all the data, or look into a city/ state grant if your theatre is the only source of cultural entertainment.
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Posted By: Guests
Date Posted: 10/21/03 at 12:42pm
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The major downside to owning your own building is the constant expenses of a mortgage, upkeep, utilities etc. These constant expenses mean that you can not "take a break" whenever you like, you will probably have to run constantly to keep the money coming in. This can be a very stressful situation.
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Posted By: Guests
Date Posted: 10/21/03 at 1:14pm
I agree with Dan in that a big monthly payment may take all the focus away from doing good theater and make you do nothing but fight for money to pay your monthly bills. Of course this is true whether you own or rent the building.
You really do need to have a professional look at your operations and tell you if you can afford to buy the building. I think it is just a matter of using common sense - you wouldn't buy a house until you were sure you could afford to pay for it.
Besides building equity as the value of your building increases, owning your own building means no future rent increases. If you can swing it I would go for it. Remember when you bought your first house - how tight money was. As time went on and you earned more and your mortgage payments remained fixed, money to pay for your house wasn't so tight. Of course by then you had kids and . . . .
Don't forget all the expenses that your landlord now pays that you will have to pay in the future - fire and liability insurance, repairs and so on. What condition is the building in? What maintenance and repaires will you have to face after you buy it? How good is the roof? And on and on. Check the local ordinances and make sure that you can legally have a theater in the building (occupancy limits, zoning, code compliance).
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