Is It Better To Rent or Build?

Many decide to build based on an age-old phrase, “renting is throwing your money away.” But when it comes to making this decision for your organization, that may not be true. Get curious.  Don't get swept into the emotions of having your own place - a building with your name on it.  Building prematurely can end up costing our organization's mission, a detour, a delay, or the worst -destruction.

New buildings don't mean increased mission.

“If you build it, they will come well.”  I hope that is true – but don’t miss the doing the math.  Find your break-even point.  For-profit businesses make decisions about construction by measuring the increase in their income associated with every dollar they borrow.  This is different in a nonprofit because income is not directly increased by borrowing. 

Do the math – rent vs build

Calculate what you spend now versus the worst case of what you would spend if you built.  For example: consider a nonprofit that utilized a large conference space for one of their programs.  They rented a conference space for $2,000 per event.  At 10 events per year, they were spending $20,000. They felt like they were throwing their money away.  Their high-level due diligence revealed that a building of comparable size in their region would cost at least $500,000 with an annual mortgage of $45,000.  Bottomline: they would more than double their cost.  With a quick evaluation, they decided, for now, it's better to rent. And in that case, the business they were renting from was a great partner and was helpful by promoting them within the community.

Know the trap of getting caught up in the idea and making a long-term decision that will hinder your mission.  The answer to the question:  should we build, or should we rent?  It’s BOTH a mission and a money question. There is safety in a multitude of advisors -  don't make that decision alone.