If you’ve already reined in your association’s expenses as much as possible, you may feel like you have no choice but to tack on a hefty increase to next year’s assessment fees. After all, keeping your association fiscally fit is your primary responsibility as a board member, and no matter how you crunch the numbers you come up short.
But wait! Before you impose that dreaded fee hike, consider another solution that’s right under your feet – leveraging your community’s existing amenities to create revenue. If your board hasn’t looked into this possibility before, you may be excited to get started generating money. However, Sherman Britton, vice president of lifestyle operations for FirstService Residential, recommends doing some important groundwork first:
- Review your governing documents. “You need to know what you’re allowed to do and identify any restrictions,” says Britton.
- Perform a cost-benefit analysis to make sure the project will be profitable.
- Share your plan with your insurance broker and your association attorney, especially if you are bringing people from outside the community onto the property (either as vendors or clients).
- Check with your association accountant to ensure that your new revenue won’t fall under the category of “nonrelated income,” which could trigger an audit or have tax implications that will affect your operating budget.
- Get buy-in from residents for activities that could be controversial, especially if those that will bring in the public.
Perhaps you have some ideas already on how to create revenue. If not, here are some creative suggestions for turning your community’s existing resources into a stream of cash for your association.
- Rent out space for events. Both association members and people outside the community may be interested in areas that don’t get much use. “If you have kitchens, board rooms and meeting rooms available, people will pay to rent them,” says Marc Kotler, senior vice president and team leader at FirstService Residential. “It makes more use of the space and generates income for the association at the same time. There’s nothing worse than an unused space – it gets stale!”
- Share your outdoor areas. Does your property boast a professional-level golf course? Or maybe you have a great hill for sledding or skiing, or a river that’s perfect for tubing or rafting. You can create revenue by inviting the public to use your recreational areas for a fee. Smoke Rise lake club community in Kinnelon, New Jersey, is one association that’s done this. “At Smoke Rise, they stock the lake with fish each spring,” says Frank Peditto, senior vice president of lifestyle operations at FirstService Residential. “Then they issue a permit to anyone who wants to use the lake for fishing in order to cover the cost of the stocking,” he says.
Be aware, though, that who uses your community’s recreational areas matters. If it is only open to residents – even if your association charges a fee for its use – it is considered an amenity. Once you make it available to the public, however, it becomes a business that you are operating on the property.
- Invite vendors to your community. Fitness instructors, mobile pet groomers and other types of vendors and business owners are often willing to pay a fee to bring their services onsite for residents. You could also generate income by holding vendor fairs. “Companies will pay to be able to get in front of your community members, and you’re letting your residents know about valuable services they can take advantage of,” says Britton.
Financial planners, healthcare providers, wellness practitioners and insurance companies are among the types of vendors that may be interested in participating in a vendor fair. Consider incorporating lectures with the vendor fairs as a premium vendor opportunity.
- Transform and rent out space that’s not being used. Many properties have space that isn’t being used efficiently, if at all. Older condo and co-op buildings, for example, often have unused basement space that could be converted to storage lockers and rented to residents. A high-rise building’s rooftop may also be a source of income. Cell towers on unused rooftop space can generate between $2,000 and $3,000 for the association.
Want inspiration to really think outside the box? “The Morton Square Condominium leased a vacant commercial space in the building, and turned it into storage lockers for their residents,” says Kotler. Not only does the income cover the cost of the lease, but because the association didn’t utilize all of the space, Kotler says it is turning the rest of the space into a lounge area. “So the condo is increasing its revenue and enhancing resident’s lives all in one swoop!”
- Sell your building’s air rights. High-rise associations should also investigate selling their unused development rights, or “air rights,” to owners of adjacent lots. In areas with maximum density limits, adjacent landowners can exceed their limits by purchasing the unused portion of yours. In New York City, for example, that space could sell for $500 to $1000 per square foot!
These are just a few ideas. With a little imagination, there’s probably even more you could do with what’s already on your property. Not only will you be able to ease your budget woes by creating a new source of revenue for your association, but as an added bonus, your projects are likely to contribute to residents’ enjoyment of their community and even increase property values. Who can argue with that?