How nonprofits can build revenue by renting their facilities

August 26, 2022

Many NGOs often rely on more conventional fundraising strategies such as membership fees, raffles, and events. But there are other, less obvious ways to raise funds by leveraging physical assets; primarily, this includes collecting rental revenue.

It makes sense for NGOs to rent out their own facilities.

Non-dues revenue, often known as rental income, is a less-explored means of fundraising for charities, but if your organization has property, it’s a money-earning opportunity you should consider. Many nonprofit organizations own schools, buildings, office spaces, event spaces, and other assets they may not use daily. You don’t have to use it constantly, so renting it out while you’re not using it is a simple way to generate additional money.

Although it may appear to be a deviation from the organization’s objective, renting out your nonprofit’s space can help it accomplish greater good and influence its members and community.

Can NGOs lease property?

NGOs and other nonprofit organizations are permitted to lease their own properties. Before signing on the dotted line, you will need to investigate and comply with the regulatory obligations associated with renting your property.

The rental revenue earned by a nonprofit organization is not necessarily tax-exempt. The IRS normally classifies rental revenue as unrelated business income. If managed and reported properly, the proposed uses will not affect the 501(c)(3) tax exemption. For that reason, all organizations should meet with a tax adviser.

Since legislation and municipal rules vary from region to region, every organization needs to understand the restrictions that apply in their jurisdiction fully.

Options for producing rental revenue for nonprofits

Nonprofit organizations are not required to rent out huge rooms for major events merely. Also highly common are small offices, independent workstations, and meeting rooms. You may also rent your space to corporations, small enterprises, and community organizations, among others.

Special events

The worldwide events sector is valued at $887 billion and is predicted to more than quadruple by 2028, according to a recent forecast. Consider conferences, music performances, and exhibitions as examples of these large-scale events.

If you consider leasing to increase revenue, renting space for private gatherings is a great first endeavor. Organizations might charge a substantial price for event spaces that would otherwise be collecting dust.

Most businesses need venues for small gatherings and larger meetings. And because more firms have gone completely remote, fewer have owned premises to handle these recurring occasions. This implies that practically every business in your town will require a venue at some point.

Frequent corporate events include conferences, networking programs, board or shareholder meetings, trade exhibits, new business initiatives or celebrations, seminars, training, and holiday parties. Many of these events occur several times every year.

Common space for small companies and community organizations

Although business and special event rentals may be the most common, they are not the only ones. There are several groups in your area or neighborhood that might make good use of your organization’s space, including:

  • Consider renting your premises to small enterprises and people needing workspace. As the number of freelancers continues to rise, many need a workplace. By renting office space, companies may obtain a professional atmosphere at a low cost.
  • An auditorium with a stage or even a big hall for hire may be appropriate for amateur dramatics or performing organizations such as bands, comedians, or choirs seeking inexpensive rehearsal/performance space.
  • Small food producers: Depending on your location, caterers can hire a commercial kitchen on the weekends, or it can be made available to small businesses. In certain locations, small food businesses may hire commercial space by the hour to create food – such as pesto, salsas, and jams – in inspected, up-to-code conditions that a home kitchen cannot provide.
  • Book clubs, knitting courses, and other smaller community groups that require meeting space might rent space in smaller buildings and premises.

Consider the ways in which your venue may serve agricultural, business, educational, community, recreational, urban, and youth interests to generate even more prospects for renting your space.

Be sure to cover your bases

A few more steps remain on your to-do list now that you are aware of the abundance of alternatives for producing rental income as a non-profit. How do you entice appropriate individuals, groups, and corporations to rent the facilities? Here are some tips to promote your space.

Advertise: Take advantage of your local newspaper (both in print and online), the ads section of Craigslist or Kijiji, and social media to market your nonprofit space for rent. Although ads are only posted for one week, they can be relisted.

Provide your area for communal use: Ask your local chamber of commerce to publicize the availability of your nonprofit’s rental space as a community service.

Contact event experts: Contact event planners, wedding planners, and caterers in your area and let them know you have a location available for rent; people are constantly seeking for great, unique venues for events.

Lean on small business groups: Discuss the amenities you are offering with your local cooperative extension and small business networks.

Check your local regulations for charitable work: Make sure you’re aware of any applicable local restrictions governing your nonprofit’s operations, as state and municipal laws governing such activities might vary widely.

Research UBIT specifications: Do your research to ensure that you comprehend your nonprofit’s unrelated business income taxes (UBIT). Understanding these rules will prevent the IRS from penalizing your organization for collecting rental money. Learn more about UBIT from the Internal Revenue Service.

Leverage event and facility management software: Utilize all-inclusive event management software to measure event activity, advertise events hosted in your location, and monitor rental income.

Proceeding with rental revenue for nonprofits

Now that you are equipped with different options for renting your space and many best practices, you can enhance your nonprofit’s bottom line by renting your unused space.

With this information and the appropriate event management software, you can begin the process of generating rental money for your organization.


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