A Primer in Campus Rentals
Rental income can supplement almost any school’s budget. While you do have to own your property, with some preparatory work and following important business practices, renting can be a great asset to your school. The initial goal is additional direct revenue, and rentals often bring the added benefit of opening your campus up to many others who wouldn’t normally have been there, potentially drawing students who otherwise may not have come to you. Large or small, your school too can have a rental income program.
When we moved into our new campus six years ago, deToledo High School (dTHS) decided to establish a rental program that built upon one that had already existed at the site. Our new six-acre campus included two educational buildings, an auditorium, gym and indoor pool, providing ample rental opportunities. With research, board guidance and policies and procedures, our school has developed a robust program that brings in approximately $350,000 annually from a swim school (70%), youth and adult sports groups (20%), and groups using our premises for Shabbat, High Holidays and Sunday school (10%). Additionally, at least twice a month, government groups such as neighborhood councils and the police department use our facilities at no charge.
Most important for dTHS is that school events, planned in advance, always take precedence over potential rentals. The key to this campus synergy is communication with all those who book school events. From time to time a last-minute school event or an “I forgot to calendar” event occurs. Our contract does allow for late cancellations, but this is something that we try hard to avoid since changing rental agreements can erode the success of the program and the trust of the greater community.
As you consider whether your school will undertake a policy of renting facilities, here are some important questions to consider. The first and most important questions to ask are, Is renting a valuable proposition, and what are fair expectations for the first year? You’ll need to know if your school has the initial foundation and services to support this venture that not only can be financially promising but also fun. If properly controlled by knowing your expenses, the school can make money even that first year.
Other key initial considerations include:
- Do you have a facility that people will want to rent?
- What policies should your school adopt?
- How do you set yourself up for success, not headaches and failure?
- What should you charge? What documentation is needed?
- Legally, what do you need to be concerned about?
- Do you have the staffing that can manage not only the process but support the actual rental?
Gathered from schools across the nation, here are some best practices and items to consider relating to school rental income.
Your board’s facilities and finance committees will need to verify the desirability of rental income and then adopt policies and procedures regarding the following: Which rooms are you going to rent? Who are going to be the key staff/admin in charge of rentals? Your school’s senior business officer and director of facilities together should create the policies and procedures that will be adopted by the board. Once approved, the responsibility for arranging rentals and officially coordinating time and availability should ideally be that of one staff person to allow for better controls.
Value. What is the perceived value of your rental? Your perceived value = your rates, what you feel are fair charges. Customer expectations are the room and maybe chairs and tables. Additional and important substantiation of what you charge can include how your facilities look and the customer service afforded to visitors. These can set you aside as a “preferred rental location.”
Mission appropriateness. It is important to establish the type of organization that you will/won’t/prefer to rent to. Are you renting only to Jewish groups? Educational groups? As a school, one of your preferred groups for consideration might be those who include, or know, prospective students.
Corporate status. Is there a governmental entity that mandates the renter must be a corporation? If so, obtaining proof of corporate status is important.
Taxation. Does your county, state or other governmental area tax your income or property if you rent to specific types of organizations? As an example, California nonprofit schools can only rent to other nonprofits or they will lose their property tax exemption. For this purpose, rentals must be an IRS 501(c)3 and not an organization that is in the process of getting this status, or what is sometimes heard, “Well, we don’t make any money so we are a nonprofit.” Organizational proof of IRS nonprofit status can be found at apps.irs.gov/app/eos/ or on the Guidestar website. Additionally, for revenue and taxation purposes, a “donation” instead of a fee is really the same thing. If audited, an agency can find that you were given money for services.
Insurance. A Certificate with Additional Insured status and endorsements is best practice. Your broker can provide a document to pass on to a potential renter that includes specific insurance limits and language.
Risk management. What risk is your board willing to accept in rentals? If your taxing authority allows non-corporate rentals, does your board wish to rent to a “pickup basketball” group, a birthday party using the gym or the beit midrash for a bar mitzvah? Are they willing to accept the risk and allow personal insurance policies? Your insurance broker can provide guidance on this important question.
Shabbat and holidays. Can an organization rent from you on Shabbat or Yom Tov? Can a synagogue have an event on Shabbat or hold High Holiday services, even though your school is closed on these days? How late can the renting youth basketball program stay on Friday nights? These questions bring up the issue of building hours and accessibility. Should you choose, you can have two separate groups of accessibility, one for rentals on Shabbat/Yom Tov and one for other days.
Use permit. Do you have one with your city or other governmental agency that allows (or doesn’t) rentals or certain types of events? Items that you may or may not have restrictions on can include specific hours you can be open, how many people can be on campus at certain times, how late activities can run, when amplified sound can be used outdoors, etc.
The Business Process
Here are crucial steps for managing the business of rentals.
Application. Renters need to provide basic information that includes the organization, information about them, and the time and space needs that are foreseen for the request. The application has great information to start a constructive conversation.
Contract. It is crucial to have a legally vetted contract for rental purposes including rules and regulations. Both organizations must sign this binding document. Best practices include a school attorney preparing this document or at minimum, reviewing someone else’s document to be made unique for your school.
Rates for renting your premises should be thought through and represent your school and the quality of your campus. What are the qualities of your grounds? How often do you take care of your track? Recoat your gym floor? Shampoo the classroom carpets? Do you have additional services to supplement athletic events or auditorium presentations? Do you cater? Most importantly, what charges are standard to the contract, and what is extra? The answers to these and similar questions provide backup to creating a fair rental fee. Your basic rental may include tables and chairs and, if needed, basic use of microphones. Consider using a specialist (lighting or sound technician) to assist you in developing fair rates for some of the specialized fees.
Discounting. If a group is renting for several dates or for many hours, consider finding a way to give them a discount, possibly 10%. You may wish to have discounted rates or for special groups such as other schools or “feeder organizations” (i.e., synagogues, JCCs). Consistency with discounting is important. When invoicing the renter, it is recommended to show the gross rental and anything discounted as separate line items. People feel great when they see they’ve gotten a discount.
Bartering: If appropriate, consider it. Your local Department of Parks and Recreation may wish to rent your gym and, in lieu of cash, give your school credit for rental of its premises (e.g., renting their soccer field as you don’t have one). Win-wins are the best!
Managing the process requires the right person who is a part of your school’s facilities and finance teams or works with them closely. A senior staff member should be on site during rentals, especially at the program’s beginning and at large events, which could mean evenings and weekends. The right person can make all the difference.
Security is always crucial no matter who is on site, and even more so if it is not your “normal community.” If additional officers are needed due to the rental to make it a safer experience, what is your policy as to who pays? Some organizations may ask if they can bring their own security. Best practice is to not have two different security companies together on the same campus. You should decide if extra security is necessary, not the renter. You should not charge for services already on duty. If the rental necessitates more security or if the rental goes beyond your normal operating hours, then charge extra. The charge should be a flat rate that averages all different pay levels of security officers at regular and overtime wages.
Maintenance is a crucial component of making a rental happen and should be treated similar to security. An organization needs to pay for more maintenance if there are extra needs for setup, cleanup and support during the event, or if it goes beyond the normal operating hours. If it will be a large event that may involve food, additional maintenance will be required and should be paid for by the renter. The bottom line is that the school should not pay for anything beyond the basic needs of a rental.
When to say no? Some organizations will draw all of your time and energy into negotiating a contract. Don’t decrease your rates, nor should you discount because the neighboring school charges less. Don’t discount actual out-of-pocket expenses such as security, maintenance or other support personnel. There is a reason other locations charge less and you charge what you do. Coming to a final agreement is not a bargaining game. It is ok to say no to a rental. Be polite and professional, thank the organization and wish them the best.
Lose money on a rental? And what does “lose” really mean (out-of-pocket costs or minimal/no revenue)? If controlled and reviewed, you may wish to rent to an organization that has been or can be a great feeder. As an example, a rabbi has been sending many kids to your school, and her synagogue wants to use your facilities for an event. Consider the big picture to the school as a whole. Discuss the situation ahead of time with the proper personnel.
You and the school are in charge. Renters need to be respectful of your grounds, rooms and all personnel. Rental income is useless if you’re paying for major damages, your school’s personnel have been disrespected or the renter’s guests won’t act in a safe manner on your property. Sometimes even threatening closing of an event is necessary; make sure, in a respectful format, the renting group understands clearly they are guests.
Consider engaging your faculty as part of your informal network of rental agents. Let them know your policies regarding rentals. Make sure they know to send you any potential leads without promising times and rates. Additionally, you may choose to advertise using both “conventional” methods in addition to social media.
Depending on your geographical area, there may be unique opportunities for rentals. If there are professional sports teams in your area, you may be able to attract them to some of your athletic facilities, especially during off and pre-season practices. Many parts of the country have TV or movie filming that can be a great source of revenue if your taxing agency allows. When considering a movie or TV shoot, there are many fine points to address such as size of crews, extra noise, times, potential disturbance to school operations and/or neighbors. What will you do for those who “can’t pay/don’t have a location budget”? Film students may call you with this situation.
The best part of rentals is when you hear a new student say, “I wasn’t considering your school until my basketball league used your gym. I told my mom I have to go to this school!”