By Laura Quirarte
Ancillary income, or income derived from non-rental sources, is sometimes presented as passive income or even “found money.” Nothing could be further from the truth! Each ancillary income source, whether it takes the form of fees, premiums, or amenities, represents a thoughtful strategy on behalf of the owner or negotiated contract. And, as many know, good negotiating can take a lot of planning and work.
As a Client Account Manager at RealtyCom, I’m focused on access, marketing and service partners providing Television, Phone and Internet products to multifamily housing. While each provider is different in how they choose to partner with owners, RealtyCom clients generally have a revenue-share model that creates ancillary income to the owner on a monthly or quarterly basis. The owner is incentivized by the provider to receive additional revenue, as resident subscriptions are increased via their marketing efforts.
The idea being the more Provider is marketed by the owner, the more subscribers and the more revenue to the Owner. Once an Owner signs an agreement, most providers will assign a local representative to work with the property team in an effort to increase subscriptions (at no cost to the property) by:
● being a resource for residents who have an issue that is not being resolved through a normal course of 800 numbers, emails, and texts
● providing marketing materials
● working with site teams to hold fun community events that market new products and promotions
It’s also important for Owners and Property Managers to know the type of agreements in place (Exclusive vs. Non-exclusive) so that they do not enter into conflicting agreements. For example, Owners could be in breach of contract if they’d signed an exclusive marketing arrangement with one provider; then years later, a Non-exclusive agreement with another provider. This can happen when contracts have not been audited or due diligence hasn’t been performed during a change of ownership, succession or management. It can also happen when an unauthorized person signs an agreement unbeknownst to others in the organization.
Needless to say, when and if a Provider notices that other marketing materials appear, or that there are conflicts at the logistical level, or subscriptions are declining, problems will arise that will likely require the involvement of RealtyCom or your attorney to resolve.
To keep such issues from occurring, it’s vital that the Property Management team understands which agreements are in place, exactly how they benefit your NOI, and what their specific requirements are. It helps to have:
● a clear line of authority for signing new Marketing Agreements
● a diligence protocol during changes of ownership and take overs, as these are most likely times for an oversight
● understand which providers the property team are authorized to market to residents on site.
Ancillary income is not exactly “found” money, but can be a great benefit if managed properly. Having the right partner who provides the amenities that residents want, boosts awareness of that service, and quickly resolves any obstacles that may occur, will limit your risks while ensuring your residents get the service they have come to expect.
If you ever find yourself wondering what agreements are in place, missing a revenue payment or in need of help with your marketing or access agreements always reach out to us and we can talk with you about our experience and I’m sure we can help!