As a residential property owner operating in the UK rental market, there are many ways that you can supplement your rental revenue with additional income. The US rental market has capitalised on these types of opportunities for years, creating specialised departments called ‘Ancillary Services’, but this is yet to take place here in the UK.
What Is Ancillary Income?
Ancillary income is additional revenue that supports your main source(s) of revenue. In the rental market, this is essentially any type of income that is not included in the rent you charge your tenants. If you identify enough opportunities and capitalise on them, ancillary income can end up constituting 10-20% of your overall revenue.
In this article, we will explain some of the biggest ancillary income opportunities which apply to you whether you are a build-to-rent developer, a private residential landlord, or a student accommodation provider.
- Direct Selling (Bulked Services)
Tenants like to have access to modern conveniences such as lightning-quick broadband, so you could look to provide it for them. Given your position as a bulk-buyer, you will be able to negotiate on prices with suppliers, which means that your tenants will also enjoy cheaper prices. In this line of income, the owner buys services for all residents and then resells the services to the residents for less than they could buy on their own, but at a premium to the negotiated rates.
Note: These services should not be included in the monthly or weekly rent that you charge your tenants, and this is for several reasons:
- It will price your units higher than the competition
- You will miss out on some market traffic due to being higher than market pricing
- It will eventually become an operating expense that the next regional manager will want to cut
- If for whatever reason, the service goes down for technical reasons, you will only need to give tenants broadband credit as opposed to a rent credit
Therefore, we recommend that it becomes a new fee that is discussed and sold to all residents during the leasing process and is memorialised in a lease addendum.
Whatever you decide to offer, adopting this tactic and making it work for your business will result in a steady flow of ancillary income for you, and if the service is great it should also increase your popularity among tenants – thereby making them more likely to renew once their leases are up.
- Utility Rebilling
Like it or not, utility rebilling is coming to the UK (even PBSA). Our Earth has limited and dwindling resources, so greener living is just the right thing to do.
Utility companies, government agencies, investors, and even residents will actively push for green strategies. Studies show that billing utilities reduces usage by 25%!
- Referral Income (Commission)
Marketing to your residents is difficult. Your support as an owner, manager, or agent is powerful, and many companies will pay finder’s fees for your effort.
For instance, let’s say you’re a build-to-rent developer. You could approach service provider with the proposition that they become the sole provider of TV and broadband within your building. By bringing this business to the service provider, you are entitled to ask for a commission.
Similarly, you could approach an insurance company to see if they would be interested in becoming your building’s sole provider of renters’ insurance.
You could also offer concierge services such as cleaning, laundry, dry-cleaning, dog-walking, and more. Most partners would be happy to give a discount and pay a commission to be your exclusive provider with some marketing support from your team.
- Supply-Chain Rebates
If you have suppliers or manufacturers that you work closely with – such as furniture retailers or maintenance companies – you can leverage your position as a bulk-buyer in order to achieve rebates (or at least discounts).
Think about it: if you buy all of your building’s furniture from one company, or you send all maintenance work to one company, you are enormously benefitting these businesses – so shouldn’t you be rewarded for this? You should, and you can be if you make your case clearly and you know how to negotiate.
- Other Rent
If you are a build-to-rent developer or a student accommodation provider, it’s not just apartments and living quarters that you can make rental income from. You can rent other spaces out to various people and organisations.
Do you have roof-space that could house mobile-phone masts? Do you have parking facilities? Do you have communal spaces or conference rooms that you could rent out for functions or events? Do you have space for vending machines (which you will charge the providers rent on)? These are all big revenue opportunities.
Contact Fjeld Consulting
Need help in maximising the revenue potential of your property? Here at Fjeld Consulting, we can help you do exactly that. We will work with you to identify ways in which you can earn ancillary income to augment your rental revenue under a no risk model. Get in touch with us to talk through your options.