How to Increase Ancillary Income from Apartments｜Income Sources Other Than Rent Such as Parking, Vending Machines, Storage Rooms, Base Stations
Rent is limited by the market rate and cannot be raised easily. On the other hand, if you utilize unused space on the premises or in the building, you may be able to earn income separate from rent (ancillary income).
This article explains the main types of ancillary income for owners of entire apartment buildings and condominiums, how to start, points of caution, and why ancillary income also affects the property’s valuation.
Ancillary Income Also Affects Valuation
The price of an income property is roughly determined by "annual net income ÷ yield." If ancillary income increases net income, not only does your annual take-home increase, but the valuation at the time of sale also rises.
| Ancillary Income (Monthly) | Annual | Impact on Valuation (Simple Calculation at 5% Yield) |
|---|---|---|
| 5,000 yen | 60,000 yen | Approximately 1.2 million yen |
| 20,000 yen | 240,000 yen | Approximately 4.8 million yen |
| 50,000 yen | 600,000 yen | Approximately 12 million yen |
In actual valuations, it depends on how stable the buyer or financial institution considers the ancillary income to be. Keep contracts and payment records to demonstrate that this income is continuous.
Parking Lots, Bicycle Parking, Motorcycle Parking
If there is vacant space on the premises, the easiest to start with is income related to parking lots.
- Rent out vacant spaces to outsiders: Rent out parking spaces not used by residents as monthly parking to nearby people. You can also rent out all spaces to a parking lot management company.
- Make bicycle and motorcycle parking paid: Change free bicycle parking to a registered system with fees. This also helps organize abandoned bicycles.
- Install car sharing: Rent spaces to car sharing operators, improving convenience for residents as well.
If existing residents use these spaces for free, suddenly charging fees may cause trouble or move-outs. Check the lease agreement, and apply fees gradually, for example to new residents first.
Vending Machines
Place vending machines in locations facing roads on the premises and receive a commission based on sales. The installation company handles the installation and restocking, and usually the owner pays electricity costs. Commission terms vary by company and location, so compare conditions from multiple companies.
Points of caution include choosing locations that will not disturb residents with lighting or noise at night, surrounding trash, or loitering. Also confirm whether net income after electricity costs is worthwhile.
Storage Rooms and Warehouses
Rent unused warehouses or long-term vacant 1st-floor units as storage rooms. Renting to residents adds value to properties for single occupants with limited storage.
If using residential units as storage, verify there are no issues with the Building Standards Act usage or the Fire Service Act requirements. Also limit stored items by contract and prohibit hazardous materials.
Utilization of Rooftops and Walls
- Mobile phone base stations: Conclude a lease agreement with communication operators and install antennas on rooftops. If the location meets conditions, contracts tend to be long-term, but prior explanation to residents and checks on rooftop waterproofing impact are necessary.
- Billboard advertising: Install billboards on walls or rooftops visible from main roads or stations and receive advertising fees. Permission under local government outdoor advertising ordinances may be required.
- Solar power generation: Install on rooftops, use electricity for common areas, or sell electricity. Check roof load capacity, waterproofing, and payback period for installation costs.
Reducing Costs Has the Same Effect
Net income is "income − expenses," so reducing expenses has the same effect on valuation as increasing ancillary income. Consider the following reviews along with ancillary income:
- Electricity for common areas: LED conversion, adoption of high-voltage bulk power purchasing services
- Fire insurance and earthquake insurance: Review coverage and premiums
- Cleaning, inspections, and management outsourcing fees: Whether fees reflect content and frequency appropriately
Utilizing Vacancies: Switching to Monthly Rentals or Minpaku (Private Lodging)
Vacant units that remain vacant for long periods can be used as furnished monthly rentals or minpaku (private lodging). To start minpaku operations, you must follow one of the following systems:
- Private Lodging Business Act (Minpaku New Act): Notification system. Operating days are limited to 180 days per year maximum, and some wards impose further restrictions by area and period through ordinances.
- Ryokan Business Act (Simple Lodging, etc.): Permit system. No limits on operating days, but there are conditions related to zoning and building facilities.
- Minpaku in National Strategic Special Zones (Tokku Minpaku): Available in areas such as Ota Ward in Tokyo, with conditions on minimum stay periods and others.
Which system applies depends on the property’s location (ward), zoning, and building fire safety equipment. If only some rooms in a building are used for minpaku, consider existing residents carefully. For details, please visit the Minpaku Management Service page.
Summary
- Ancillary income increases not only annual take-home pay but also valuation at the time of sale.
- Charging for parking and bicycle parking is easy to start but should be phased in for existing residents.
- Vending machines, storage rooms, base stations, and billboards require consideration of resident impact and legal and ordinance checks.
- Reducing expenses also has the same effect as increasing ancillary income in raising net income.
- For vacancy conversion to minpaku, check which of the Minpaku New Act, Ryokan Business Act, or Tokku Minpaku applies in each ward.
TLL’s property management services not only review rent but also propose new income sources such as charging for parking and bicycle parking, vending machines, base stations, and help reduce operating costs. For details, please see the Asset Management and Operation Services.
About this article
- Author
- Kurihara（PM Business）Qualifications: Real Estate Transaction Specialist, FP Level 2, Chief Property Manager, Rental Real Estate Management Specialist
Has more than 10 years of experience in the property management field. Across both rental management and condominium management, has handled a wide range of responsibilities including owner relations, tenant relations, contract administration, repair coordination, and the operation of board and general meetings.
View profile → - Publisher
- TLL合同会社宅地建物取引業 東京都知事(1)第108202号住宅宿泊管理業 国土交通大臣(01)第F03424号
Data in this article cite their source and as-of date. Market conditions and regulations change, so check the latest information and consult a professional before deciding. Translated from the Japanese original.
