Seven Ways to Earn More Revenue for Your Community
It happens: Your community gets hit with an unexpected repair cost or rate hike, and you need to generate more revenue. While your goal may be to bring in some cash quickly, it’s important to look at longer-term revenue-generating ideas and options, too.
First, a word of caution: Before your community association begins any revenue-generating activity, it’s critical that you conduct a detailed cost analysis of the effort. Make sure that the effort and costs expended in generating the revenue are worth the investment. Unfortunately, money generated doesn’t mean profit realized. A detailed accounting of the effort’s expenses must first be factored into the equation (preferably, before you choose to enact the plan). Keep in mind that, as a not-for-profit association, you should always use additional revenues you generate to offset unexpected expenses in the budget.
Likewise, it’s smart to look at liability. If your planned money-making activity involves bringing nonresidents into your community or increasing the number of people using your facilities, you may be at risk of raising your insurance rates or needing additional insurance coverage. Talk to your insurance agent about any events you’re thinking about holding at your community. If there’s a change in your insurance premiums, those costs need to be factored into your cost analysis.
Now that we’ve laid the groundwork, here are some ideas we’ve collected to help you monetize assets and programs you probably have on hand already flow:
1. Get into the ad business. Your community is a desirable target for local businesses. Selling advertising space in your community newsletter is a great way to generate extra revenue. Manage expectations on this one. The newsletter isn’t going to generate a significant amount of revenue, but it can be one element in a larger revenue plan. You’ll need one or two well-connected, capable and reliable committee or board members to manage ad sales and act as client relations managers to keep ongoing business.
2. Lease your clubhouse for events. It’s right there at the center of your community. A beautiful facility, probably poolside, with expansive interior space for groups to gather is the perfect way to generate income. Before you take action, make sure to listen to any concerns or opposition from the board or residents. It is also important to review your community documents to confirm the parameters of this option. Additionally, you should discuss liabilities and potential increases in insurance costs at length with your insurance agent.
3. Rent unused space as offices. If you have unused areas in your community, consider converting it to rentable office space. This will provide a steady stream of monthly income for your association. Make sure that any conversion expenses or work done on the space is factored into your rental amount. Also make sure that your insurance covers such arrangements. Watch carefully for any unintended consequences of renting out space. For example, you may find that acting as landlords puts more strain on board members’ time and attention.
4. Go green. Your city likely has some kind of recycling program that can help you lower costs and generate revenue in the process. Not only can you recycle some materials (such as aluminum cans) for cash, but you also may be able to reduce your frequency of trash pick-up since there will be less waste to carry away.
5. Eliminate free parking. It’s a great space on the Monopoly board, but maybe the free parking option isn’t doing much to enhance the community. Many communities have earned revenue by limiting the number of spaces available to the residents and guests and then renting the rest to owners who need an additional space or to the general public. This, of course, works best if you live in a city where parking is at a premium or if you’re located near busy office buildings or commercial centers.
6. “Pool” your resources. Many communities find that they can leverage their pool asset for greater revenue by instituting a separate “amenities fee” to cover pool usage for owners and their guests. Charging a separate fee can help pay for the upkeep of your pool and perhaps even for enhancements to it, while also generating extra cash flow for the association.
7. Invest carefully. If you’re making investments with your reserves, above all else, you’ll want to do so conservatively. One avenue is to extend the maturity on your reserve portfolio. This could increase your rate of return by up to twofold.
Before you do this, however, take a look at the tax implications for increased investment returns in your state. Also make sure to set up the maturity in various tiered dates so that there is some liquidity available for emergencies. Speak to a member of your community management company’s financial team, or to a financial affiliate of your agent, to educate yourself on the topic before making a move.
If you need them, there are revenue sources you can exploit. The key in doing so is to make sure you proceed with a careful and well-thought-out plan. For more ideas on increasing revenue for your community, contact FirstService Residential, Arizona’s community management leader.