Seven Ways to Close the Revenue Gap and Make Your Property Work For You
With the unpredictable cost of some repairs, many community associations – at one time or another – find themselves in a position where they need to generate revenue. And though short-term needs may seem pressing, it’s important to look at revenue growth from a long-term perspective.
In this article, we’ll give you some ideas for increasing revenue in a measured, responsible way. But first, a word of caution: before your community association embarks on any revenue-generating activity, it’s critical that you conduct a detailed cost analysis of the effort. Some associations shoot from the hip when they see money coming in and they assume they’re in the black. 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). Lastly, as a not-for-profit association, revenues generated should always be for the purpose of offsetting expenses in the budget that were unforeseen or higher than expected.
Likewise, it’s smart to look at liability. If your income revenue generation activity involves bringing non-residents into your community, or increasing the number of people in your facilities, you may be at risk of raising your insurance rates. Talk to your insurance agent about any activities or events you’re thinking about holding at your community.
With those preliminaries in place, here are some ideas to consider:
1. Lease your clubhouse for events.Since it’s right there at the heart of your community and meant for use – a beautiful facility, probably poolside, with expansive interior space would be the perfect way to generate building income. Maximize use of this extra space by considering allowing local organizations to lease the space for meetings or events. Before you take action, make sure any concerns or oppositions from the board or from the residents are heard. It is also important to review your community documents to confirm the parameters of this option. Additionally, you should discuss at length with your insurance agent about liabilities and potential increased insurance costs.
2. Go commercial.If you have unused space in your community, consider converting it to rentable office space. This will provide a steady stream of monthly income for your association. On the flip side, be wary of the consequences of such a decision – you may find that board or committee members who are now acting in the capacity of landlords are enduring undue strain on their time and attention to the association.
3. Get into the ad business.Selling advertising space in your community newsletter is a great way to generate extra revenue. Just be sure to manage your expectations on this one...the revenue you see won’t be significant, but it could be part of an overall revenue enhancement plan. Also, you’ll need a capable and reliable committee member or board member to manage ad sales and act as a client relations manager to keep ongoing business.
4. No more free parking.It’s a great space on the Monopoly board, but maybe the free parking option isn’t doing as much to enhance the community. Many community associations have found success in limiting the number of spaces available to the community, then renting the remainder out to the general public or to owners who need an additional space. This, of course, works often times if you live in a city where parking is at a premium.
5. “Pooling” your resources.Many community associations find that they can leverage their pool asset for greater revenue by instituting a separate “amenities fee” to cover pool usage for owners. This is a good way to help enhance your pool amenity due to resources dedicated to its upkeep, while simultaneously generating an extra flow of income for your association.
6. A recycled idea.Your city probably offers a variety of recycling programs to help you lower costs. Not only can you recycle some materials for revenue, but also you can often reduce your frequency of trash pick-up since there’s less waste to carry away.
7. Make an investment.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 be sure to set up the maturity dates in various tiered dates so that there is some liquidity available for emergencies. Speak to a member of your management company’s financial team, or a financial affiliate of your agent, to educate yourself on the topic before making a move.
If it’s additional revenue you seek, it’s definitely out there. The main priority is to make sure you pursue it in a way that is careful and well thought out. For more ideas on increasing revenue for your community association, contact FirstService Residential, North America’s community association management leader.