Our young NYC nonprofit was growing, and we needed space for our expanding operations. We found a home in the parish house of a 100+ year-old Presbyterian church on the Upper Westside that rented their kitchen to a caterer and their classrooms to a piano academy, daycare center and mission organization. The sanctuary was rented to a Jewish community on Saturdays and an Eritrean church on Sunday afternoons.
As a tenant, I learned first-hand the joy of sharing space with other small businesses in a warm, welcoming, safe church environment. I also understood how our rent was essential for the maintenance of this magnificent building.
Financial sustainability is one of the major benefits of renting your space, but there are also many more. Renting is not just about money – it can also be about mission. Welcoming tenants into your facility increases community engagement and can lead to mission fulfillment. Visitors entering your building provide an opportunity to introduce potential new members to your church family.
“Renting Your Church Facility” was probably not one of your classes in Seminary! And, so it may feel like sailing into uncharted waters. When working with churches that want to start a rental program, three initial questions always pop up:
Q: Will we lose our nonprofit status? Will we have to pay income tax?
A: If you hear someone on your team say, “We’ve always been told….,” or, “It’s our understanding” – please, sound the alarm! You do not want to make this important financial decision based on misinformation. My best advice is to consult with a CPA or attorney who is familiar with the churches nonprofit status and local tax laws.
Having said all that, I can tell you that the IRS is less concerned with who your renters are (nonprofit or for-profit organizations) and is more interested in what percentage of your total income is “Unearned Business Income.”
A good place to do some initial homework is the IRS site. Some specific references you might want to consult include:
IRS Pub. 557 – Tax Exempt Status for Your Organization
IRS Pub. 1828 – Tax Guide for Churches & Religious Organizations
IRS Pub. 598 – Tax on Unrelated Business Income of Exempt Organizations
Once you have done some preliminary research with IRS resources, hire that outside expert to answer questions that apply to your church’s situation specifically.
Q: Will a rental program strain our staff?
A: A well run rental program will be self-sustaining. The rental revenue will cover the cost of the Rental Coordinator (the person running the rental operation) and any extra facilities management costs such as additional cleaning. These operational costs will factor into the rents you decide to charge and how you structure your fees.
Q: Is our facility rentable?
A: Every church has characteristics that make it attractive to the right renters! Is your architecture distinctive or in a location that makes it easy to find? Do you have rooms that are empty during the week? Or, Saturdays? Evenings? Do you have a parking lot? Outdoor space? A kitchen? By identifying those characteristics that make your property unique, you can begin to identify potential renters who will find it attractive. If there are improvements that need to be made to your property to make it rent ready, your Horizons Strategist can advise you on how best to fund them.
Like any good strategic plan, there are several steps you need to take to create your church’s rental roadmap. Praying for discernment is the first step. How does God want your church to utilize its facility? Assembling a great Task Force team is second. That team will do the homework necessary to create your Action Plan. This Action Plan will be the solid foundation upon which you can build a rental program that is both sustainable and scalable, one that will bless your church and your community, now and in the future.
ABOUT THE AUTHOR:
Bridget Johnson felt called to start CHURCH RENTAL SERVICES after leading the creation of a successful rental program for her own church. She can help your church with the nuts and bolts of creating an Action Plan that will ensure the success of your rental initiative. She can also help your congregation explore how space sharing ties into the mission and vision you have for your church’s future.
Bridget invites you to contact her for a free conversation about your church's goals for renting your space.
You can reach Bridget through her website, ChurchRentalServices.com
Or email her directly at Bridget@ChurchRentalServices.com