The #1 Secret to Generate More Income for Churches in 2021

By Kristen Alexander

Read time: 3 minutes

Churches and ministries are discovering a new strategy to bring in additional income — all while helping their community.  

The answer lies in sharing your current building and meeting space. Let's take a look at why and the details of taking this strategic route. 

Creating steady income for your church

Sharing space can be a great way to generate an additional stream of income and provide a place for like-minded organizations to come together. You can create more opportunities to generate revenue for your organization while strengthening the kingdom by hosting smaller events or organizations looking to make an impact. 

Churches can experience slow seasons of offerings, especially during the summer vacation months. Renting out your building can provide a steady income stream with regular tenants, padding those months that you expect attendance to be lower than usual.

Anyone who has ever rented a home knows that some aspects will require maintenance and can cause additional expenses. Staying within market pricing in the community and taking into account anything that would cause additional maintenance costs to increase should be considered when settling on any final charges.

Saving for a specific purpose, such as improvements on the building or additional locations, is also an easier goal to reach with regular income in the budget. You can create extra savings with minimal effort on the church's part, lessening the time and stress of organizational goals. 

A great way to start tracking your financial budget is with a StartCHURCH Bookkeeper! In fact, over the past year, we have seen a significant percentage of our bookkeeping clients experience growth in their finances. We want to help you put the best financial practices to work for you to see your financial management go to the next level. Give us a call to learn more and get started today! 877-494-4655

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Providing for God's kingdom

There are many additional benefits to renting out your unused space or making areas multi-purpose.

You can:

• Provide smaller organizations with a place to launch while they save for their own building.
• Host events for nearby community programs and nonprofits.
• Double the advertising for your own organization by getting the name of your church into groups that typically wouldn't be associated with your location.

You are also increasing the chance that God's Word reaches even more people by touching the communities and programs you host. How great is it that such a regular thing could change the lives of so many people?

Protect your ministry's assets

It's important to note that there are legal aspects to consider when renting out your building.* You want to make sure that you are fully protecting your church from any challenges that may arise. This often means making sure that you have a contract or formal agreement in place that helps to protect the church and its assets. A best practice is to make sure your ministry’s agreements are tailored to the type of rental offered. Is it a temporary rental for a specified event covered by the other organization’s insurance? Or is it a long-term rental contract that excludes the host church from liability if anyone is hurt on the property? The actual details matter!

Legal contracts should be reviewed by an attorney representing the church, instead of a lawyer representing the property if you are currently renting and sub-letting. There will also be other forms and documents to review throughout the process since you need to ensure that your organization’s contract allows any type of renting or subletting. These questions are a great starting point to bring to a lawyer for legal advice. Keeping your church in the forefront of these matters will keep you safe from issues that may come up when want to assist your neighbors.

*StartCHURCH does not provide legal advice.

How does the IRS view the income from rentals?

The income from an area or property rental can be considered unrelated business income by the IRS and could be subject to unrelated business income tax (UBIT).

IRS Publication 598 defines unrelated business income as: “The income from a trade or business regularly conducted by an exempt organization and not substantially related to the performance by the organization of its exempt purpose or function.”

The way the IRS views the income coming from a property being rented out depends on whether the church owns the property outright or debt-financed.

A great resource with additional information on debt-financed property and unrelated business income tax can be found here.

Best Practices

Here are a few best practices to consider when renting your location:

• Make sure that there are no overlaps between when you have events or service times and when the rental party will need the property. 
• Leave some "transition time" if the same day is scheduled for both organizations. This will prevent any miscommunication of who will be where and when.
• Create a policy for set-up and tear down, as well as cleaning guidelines for renters.

Embrace the benefits 

Don't be hesitant to help another organization if this is on the docket for discussion in your church!

Mixing contracts and formalities with religious organizations can be a little nerve-wracking, but it doesn't have to be! Seek advice from organizations that have done this before and check it against any legal advice you have at your disposal. Have faith that God will provide the resources and people you need to align your responsibilities with your values and needs.

We would love to partner with you and help your ministry grow in this season. Call us today at 877-494-4655 to discover how StartCHURCH can help your church succeed!

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