A house is literally the thing that holds a chapter together. Members have a consistent meeting place, an area for meals and accommodations — in short, members have a way to come together. If your chapter doesn’t already have a house, though, getting one can seem an insurmountable task. How will it be funded? How big will it be? Who’s going to oversee the project? To get you started, stick with this checklist.

1) Define Your Objectives
What’s the reason for a chapter house? Before beginning the process of getting one, ask yourself and the chapter two questions: Is chapter housing a necessity on my campus? And is chapter housing a feasible option at this time? Once you determine the answers to those questions, there are some guidelines and specific courses of action to follow.

2) Save Money
Even without a house, there should be an assessment for a chapter housing fund. A small assessment of $50 per man, per term, can grow significantly over time. As a general rule, you should hold 20-30 percent of the project cost in cash before conducting a review of other financing options. If you have not begun to save money, stop at this step before moving on. While you can move through the other steps in this process, you may be wasting your time without cash.

3) Form a House Corporation
The house corporation, a not-for-profit corporation formed under state law, supervises the physical plant or chapter house. It is a legal entity that holds the title to all real property and through which all loans are negotiated. This group, through an annual meeting or through mailed ballots, elects a board of directors. The board usually includes a president, vice president, secretary, treasurer and three or more members-at-large. The chapter offices of Eminent Archon, Eminent Treasurer and alumni chairman also frequently hold one seat on the board, though they always serve as resources. The chapter president may serve as an ex-officio member of the board.

A board of directors should:

• Provide general advice and guidance to undergraduate officers in managing the property.
• Supervise long-term housing, authority for financial details related to housing and direction of planning for future housing needs – including management of the chapter’s reserve fund.
• Coordinate general alumni activities, communications and reunions to encourage alumni to continue their interest and support of the chapter and the Fraternity.
• Meet regularly to review the rent, finances, upkeep and insurance coverage while providing input to the by-laws of the chapter that relate to the house corporation, such as capacity, room charges and reserve-fund allowance.
• A chapter house must be operated as any other commercial property and, at its best, provides a home away from home for students to learn and develop leadership skills throughout their college years. Many chapter houses are currently suffering from deferred maintenance and a lack of savings for future repairs. By managing the property as a business venture, the property can be enjoyed for generations to come.

4) Identify Needs and Capabilities

Ask the following questions to have better-informed construction plans:

• What is the chapter’s five-year average membership?
• What is the campus’ five-year average attendance?
• What have been the chapter’s recruitment trends?
• What has been the campus’ recruitment trend?
• What is the average fraternity-house capacity on campus?
• What is the average fraternity-house occupancy rate?
• What is the typical fraternity housing type?
• What is the potential amount of annual income as compared to what members would spend on university housing?
• What is typically spent for comparable fraternity houses for ancillary items such as utilities, trash service, taxes and insurance?

5) Begin a Patient, Persistent Search for Suitable Property
There are four different properties to research: Vacant land in a prime location, existing buildings to be demolished, existing structures and existing structures with needed improvements. Each brings its own challenges and advantages. Spend time with this step to ensure the chapter doesn’t end up with substandard property.

6) Research Zoning Laws
Some cities and towns have specific zoning laws for Greek properties. Check with your local planning and zoning office to determine if the property in which you are interested is properly zoned. Before singing anything, be sure every agreement states that the zoning allows fraternity use. Avoid, if possible, conditional use permits that tie ownership and sometimes occupant behavior to the right to use the property as a fraternity house. You should seek the permanent right to use the house for a fraternity.

7) Identify Property and Make a Game Plan
After researching your options and making sure of zoning requirements, determine which property is ideal of your situation by placing heavy emphasis on location, occupancy and feasibility.

8) If Buying, Tie Up the Property
If the chapter and house corporation have decided to purchase property, it is recommended at this point to use the expertise of a real-estate professional. Look at the following options:

• A purchase agreement, or contract, with contingencies
• An option by itself, which is money paid to have the right to buy at a certain price by a certain time
• The right of first refusal, or money paid to have the right to match any other legitimate offer made within a certain time frame of offer being received
• A lease with option to buy, if you don’t have enough equity on hand, which would require:
• A pre-negotiated purchase price
• The cost of repairs to pre-existing conditions able to be applied to the purchase price
• A portion of lease payments applied to purchase price
• A ground lease, which is common on university property when the school doesn’t want to own the building, which would:
• Enable financing in the long term and, therefore, enable a loan
• Recognition of equity to provide value in your rights in the lease
• The option to lease to another acceptable entity or sell or assign your rights in the lease to an other acceptable entity, should the chapter close or face hard times

9) Financing

This is the final key step in working toward a chapter house. The board should look at various lending sources:

• A local lender that would usually make up the bulk of the loan
• Seller financing, if applicable, to see if the seller will supply any of the financing
• A possible mortgage loan from SAE Financial & Housing Corporation
• Qualification for a commercial loan, which have different interest rates than residential loans

For all loans, that 20-30 percent figure comes into play as a down payment. In order to qualify, the corporation must demonstrate cash flow, as evidenced by an income greater than expenses. The cash flow should account for a 10-20 percent expected vacancy rate, a 5-10 percent contingency for uncollected accounts and a 5-10 percent contingency in variable expenses. Additionally, most lenders will require some form of personal guarantee from alumni — and the Fraternity Service Center cannot provide this. The bottom line is simple: Establish a good track record and credit record. Lenders will want to know the chapter’s five-year average size — and remember that a new house will have little long-term effect on chapter size.

For more information about the process of getting a chapter house, contact Associate Executive Director of the SAE Financial & Housing Corporation Gregory Somers at gsomers@sae.net.