Many nonprofits typically lean on more traditional fundraising methods like dues, raffles, and events to raise money. But there are other, less thought of methods of fundraising that involve leveraging physical assets; mainly, it involves earning rental income.
Renting out owned space makes sense for nonprofits.
Rental income for nonprofits may be a lesser-explored method of fundraising (also known as “non-dues revenue”), but if your organization owns property, it’s definitely a money-earning possibility you need to be looking at. Many nonprofits have schools, buildings, office space, event venues, or other facilities they may not use on a day-to-day basis. You don’t need to use it all the time, so renting it out when you aren’t using it is a super easy way to earn extra income.
While it may seem a departure from the mission, dollars earned by offering your nonprofit space for rent will allow your organization greater opportunity to do more good and deepen your impact on your members and community.
More companies have made the full-time move to remote work in the wake of the COVID-19 pandemic — one 2021 study showed that 62% of employees aged 22 to 65 work remotely at least occasionally. And that number is only expected to grow with almost three-fourths (73%) of all departments forecasted to have remote workers by 2028. Many organizations no longer have owned spaces and will need to rent for occasional in-office work or meetings, special events, or other purposes. This is where nonprofits come in.
Can nonprofits rent out space?
Yes, nonprofits and other tax-exempt organizations can lease spaces that they own. However, renting your owned space involves some regulatory requirements which you’ll need to research and follow before signing the dotted line.
The income from renting out property as a nonprofit won’t always be tax-exempt. Rental income is generally considered unrelated business income by the IRS. If handled and reported correctly, the uses put forward here will not have an impact on overall 501(c)(3) tax exemption. That being said, all charities should check the specifics with their tax consultant.
Because the law and municipal regulations can differ from state to state and region to region, every charity will need to research the regulations that apply to their specific jurisdiction.
Options for generating nonprofit rental income
Nonprofits don’t need to feel stuck to simply lease out large rooms for special events. Small offices, independent workspaces, or meeting rooms are also quite popular. You can also rent out your space for corporate events, small businesses, community groups, and more.
According to a 2020 report, the global events industry is worth $886.99 billion and is expected to more than double by 2028. A majority of these events are large — think conferences, music concerts, and exhibitions.
Renting out space for private events might be the first function that comes to mind when you consider leasing as a means to raise funds. It’s popular for a reason: Organizations can charge a sizable sum for event venues that are otherwise just collecting dust. In Toronto, you can expect to lease an event space for somewhere in the vicinity of $50-$300 per hour.
Most businesses need a space for small events or larger meetings. And because more companies have gone fully remote, fewer businesses have owned space to accommodate these regular events. That means almost every business in your community will need a venue at some time or another.
Ongoing corporate events include conferences, networking events, trade shows, product launches, seminars, training, and holiday parties. Many of these types of functions take place several times a year.
General-use space for small businesses and community groups
Although company and special events might be the most popular reasons to rent your building or facility, they aren’t the only ones. There are many other organizations in your city or community that might make excellent use of your nonprofit space, including:
- Small or micro-businesses: Consider renting facilities to small businesses or individuals that need workspace. With an increasing number of people freelancing, many are in need of a workplace setting. By renting office space, they can get a professional environment with minimal financial outlay.
- Performers and musicians: An auditorium with a stage or even a large hall for rent can be suitable for amateur dramatics or performing groups like bands, comedians, or choirs looking for cheap rehearsal/performance space.
- Small food companies: A commercial kitchen can be rented to caterers on weekends but it can also be offered to small business initiatives, depending on your locale. There are programs on offer in some cities where small food operations can rent commercial space by the hour to produce food – think pesto, salsas, or preserves – under inspected, up-to-code conditions that a home kitchen won’t have.
- Miscellaneous community groups: Smaller buildings and premises can rent space to book clubs, knitting classes, and other smaller groups in the community that need a place to hold meetings.
To brainstorm even more groups that could rent your space, think about the ways your venue could serve agricultural, business, educational, community, recreational, urban, and youth interests.
Ensure you cover your bases
Now that you’re aware of the wealth of opportunities around generating rental income as a nonprofit, there are a few final items to tick off your checklist. How do you attract suitable people, groups, or businesses to hire the facilities?
To help you cross your Ts and dot your Is, we’ve compiled some tips to promote your space, ensure you’re prepared for all the logistics, and comply with all the appropriate regulations.
- Advertise your event space: Lean on your community newspaper (both in print and online), Craigslist or Kijiji classifieds section, or on social media to advertise your nonprofit space to rent. Even though ads only post for a week, they can be re-listed.
- Offer your space to the community: Ask your local chamber of commerce to promote your nonprofit space to rent as a community service.
- Reach out to event pros: Contact any event planners, wedding organizers, or caterers in your community and let them know you have a space available for hire – people are always looking for cool, new places to hold their celebrations.
- Lean on small business organizations: Talk to your local cooperative extension or small-business networks about the facilities you are offering.
- Check your local requirements on nonprofit activity: Regulations on nonprofit activities often differ from state to state and region to region, so make sure you understand all your local regulations that apply.
- Research UBIT requirements: Do your homework to ensure you understand your unrelated business income taxes (UBIT) for your nonprofit. Wrapping your head around these requirements will ensure you don’t get dinged by the IRS for collecting rental income for your nonprofit. Learn more about UBIT from the IRS.
- Leverage event management software: Use comprehensive event management software to track all event activity, promote any events hosted in your space, and monitor revenue for your rental.
Moving forward with rental income for nonprofits
Now that you’re armed with multiple ideas on how to rent your space and a bevy of best practices, you can build your nonprofit revenue streams by renting your unused space and increase your bottom line all at once.
With all this info and the right event management tool, you can take the first steps to generate rental income for your organization.