All healthy co-ops or condos possess healthy bank accounts. One way to make sure that financial glow stays bright is to infuse it with extra income, above and beyond the usual monthly fees and payments. There are a number of options for bringing extra revenue into the financial fold. The possibilities range from converting unused space into health club facilities, to turning your building into an advertising "star." The options are limited only by board member creativity (and a tax code or two).
Gene Andrews, owner of Andrews Building Corp., a property management firm in Manhattan, points out that all co-ops should consider their tax code status before delving into any outside money-making options. Co-ops are subject to Section 216 of the Internal Revenue Code, otherwise known as the 80/20 rule. Eighty percent of a co-op’s income must be obtained directly from shareholders, while up to 20 percent can come from outside sources. "If it goes to 22 or 25 percent and it is audited, a co-op will lose its tax status," Andrews notes. Which isn’t to say that a co-op should refrain from earning extra money; it just should be wary of earning too much.
A Tidy Little Profit
One of the first things to consider when looking at revenue options is what sort of assets are going unused within the building. Often common areas or basements sit stagnant, simply collecting dust and not being used to their full potential. The installation of storage units or bike racks, for example, benefits both the building and its residents by bringing in rental revenue and increasing the value of the space.
As a relatively low-cost investment, basement storage units provide substantial revenue with a minimum of fuss. Boards have the option of either renting or buying the units or even engaging in a profit-sharing arrangement with the storage unit service.