Understanding Daycare & Child Care Centre Appraisals

What is a Daycare Appraisal?

A daycare appraisal provides an independent estimate of the market value of a property used as a licensed or private childcare facility. This includes purpose-built daycares, converted residential buildings, commercial spaces with childcare tenancies, or mixed-use facilities. The appraisal considers real estate value, business operation potential, and regulatory requirements unique to childcare use.

Daycare appraisals are commonly used for financing, buying or selling the property or business, leasing decisions, tax assessments, estate planning, and legal matters.

Key Factors in Daycare Appraisals

• Zoning & Permitted Use – Property must meet municipal zoning and building code requirements for daycare operations, including safety, occupancy limits, and accessibility.

• Building Type & Layout – Interior space must be suitable for childcare (e.g. designated play areas, nap rooms, washrooms, kitchen, offices).

• Outdoor Play Space – A fenced, code-compliant play yard is typically required and adds value.

• Capacity & Licensing Considerations – Potential value is influenced by the building's capacity for children under local or territorial childcare regulations.

• Location & Demographics – Proximity to schools, residential neighbourhoods, and high-demand family areas.

• Comparable Sales & Rents – Includes other daycare properties or buildings with similar use potential.

• Physical Condition & Upgrades – Recent renovations, fire safety systems, and code compliance contribute to overall value.

• Ongoing Business Operations (if included) – May factor in the value of cash flow, enrollment levels, and reputation, if the appraisal includes business value or leasehold interest.

Approaches to Value in Daycare Appraisals

1. Direct Comparison Approach (Primary Method)

   • Compares the subject property to recent sales of similar daycare facilities or suitable commercial/residential properties.

   • Adjustments made for size, layout, zoning, licensing capacity, and improvements.

2. Cost Approach (Used when sales data is limited)

   • Estimates the cost to replace the building or convert it for childcare use, minus depreciation.

   • Includes cost of fencing, play structures, safety modifications, and interior alterations.

3. Income Approach (Used for Income-Producing Daycares or Investment Properties)

   • Based on net operating income (NOI) from leasing to a daycare operator or operating the daycare business.

   • Includes market lease rates and capitalization rate (CAP rate) analysis.

When is a Daycare Appraisal Needed?

• For Buying or Selling a Daycare Property or Business

• For Securing Financing or Refinancing – Lenders often require an appraisal that confirms value based on real estate and business income potential.

• For Leasing to a Daycare Operator – To assess rental value and support negotiations.

• For Tax Assessment or Appeal – Ensures accurate valuation for municipal property tax purposes.

• For Estate Planning or Dispute Resolution – Establishes fair value for division or settlement.

• For Government or Regulatory Requirements – Sometimes required when opening a licensed childcare facility.

What is Included in a Daycare Appraisal?

• Land & Building Valuation – Including interior layout, square footage, building condition, and upgrades.

• Zoning & Regulatory Review – Assessment of compliance with local childcare and safety regulations.

• Site Improvements – Outdoor play areas, fencing, signage, parking, and accessibility features.

• Comparable Sales & Rent Analysis – Based on daycare or adaptable properties in the same market.

• Income Analysis (if leased or operating) – Market lease rate or NOI used to support investment value.

• Final Market Value Estimate – Based on applicable valuation approaches and supported by documentation.

What is NOT Included in a Daycare Appraisal?

• Daycare Equipment & Supplies – Toys, art materials, movable play structures, and classroom supplies are excluded unless specifically appraised.

• Licensing or Permits – The appraisal does not guarantee or provide licensing; it only assesses suitability and compliance potential.

• Future Renovation Costs – Not included unless the cost approach is being used to evaluate improvements.

• Business Goodwill – Unless explicitly requested, the appraisal does not include branding, enrollment base, or business reputation.

Why is a Daycare Appraisal Important?

• Supports Financing, Purchase, or Sale Decisions – Ensures that buyers, sellers, and lenders have a clear understanding of value.

• Assesses Real Estate & Operational Viability – Confirms that the building is well-suited for daycare use.

• Protects Against Over- or Under-Valuation – Provides a transparent, evidence-based valuation.

• Aids in Lease & Investment Planning – Helps landlords and operators understand rental value and return potential.

A professionally conducted daycare appraisal offers an accurate, defensible estimate of value, whether for real estate, investment, or childcare licensing purposes.