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Generating ancillary income has long been a part of the business model for property owners and operators. Identifying opportunities to earn additional revenue by providing value-added services for residents is more important than ever in a market where operating costs are rising and rent growth remains challenging.
The multifamily industry has been battling flat-to-falling rents in many markets for the past two years. According to the latest data from Yardi Matrix, annual growth for asking rents as of November 2025 declined 0.2% nationally. On the expense side of the ledger, costs continue to rise with more outflows for essentials such as concessions, insurance, labor, and real estate taxes.
Ancillary income not only drops directly to the bottom line, but it also can have a significant impact on increasing valuation. Across the industry, the amount that ancillary income contributes to net operating income (NOI) can vary widely from a few percent to upwards of 10 percent.
For example, A 200-unit apartment community where 75% of residents participate in an amenity, such as a property damage liability waiver program, can generate an additional $10 per month per unit producing $18,000 in additional annual revenue. And that's just for one amenity. By offering residents the ability to select from various services that meet their needs, that additional revenue can quickly add up to make a bigger impact on NOI and property value.
Consider how that incremental income can impact property value using a capitalization (cap) rate calculation for profitability. (Cap Rate = NOI / Market Value). For simple math, let’s say that 200-unit property has a market value of $100 million and NOI of $8 million, resulting in a cap rate of 8%. Now consider the impact if the property generates an additional 1% in ancillary income of $80,000. Using the same 8% cap rate, the extra $80,000 in NOI translates to $1 million in additional property value.
What Are the Advantages of Ancillary Income?
The above example illustrates why ancillary income streams are a priority for owners and investors. Ancillary income is no longer viewed as a line item on a spreadsheet—it’s a key strategy to increasing asset value. Investors are digging into the numbers to see what is – or isn’t – included. They want to know how sustainable income streams are, and where they can find more opportunities to increase ancillary income to support asset strategy and long-term value creation.
Ancillary income strategies can generate both immediate and longer-term advantages that include:
- Boosting profitability by directly increasing NOI
- Increasing NOI from ancillary sources that can translate into millions of dollars in added property value at the time of sale or refinance
- Offsetting rising operating costs, such as labor, insurance requirements, and maintenance expenses
- Turning potential expenses from new amenities into income streams
- Increasing competitiveness by offering premium services, such as concierge services, housekeeping, or fitness classes
Offering additional services can improve the resident experience, create value for a property, and empower renters with the choice to select those services that work for them. Charging separate fees for a la carte services also gives residents the flexibility and control to personalize their experience at a community. At the same time, operators need to be mindful of navigating the downside of “fee fatigue” from residents and focus on those things that can enhance overall satisfaction—not create an added financial burden.
How to Optimize Ancillary Income Streams
According to a survey from real estate technology company Amenify, about two-thirds of multifamily operators already charge fees for extra services. However, there is ample opportunity for apartment owners and operators to start – or grow – ancillary income programs.
The key to building a successful ancillary income program is to know your market and your resident base. For example, residents of a student housing property have very different wants and needs compared to a conventional housing community. Additionally, operators want to avoid significant capital expenditures on expensive amenities that are rarely used.
As such, it’s important to do your homework on your resident base and the surrounding area. You may want to avoid duplication or look for a gap in the market that can give your property a competitive edge.
Key questions to consider include:
- What do your residents want, and what are they willing to pay for?
- What services are already offered nearby, and what is missing?
- What are your competitors doing?
Expanding Menu of Income Possibilities
The scope of ancillary services is continuing to expand well beyond the traditional options, such as parking, laundry, storage, and utilities. Property owners and operators are taking their cues from changes in lifestyle, such as adding more services and amenities related to health and wellness or pets. According to Zillow, nearly 60% of apartment renters report having at least one pet, which has prompted more operators to offer amenities and services such as on-site dog parks, grooming stations, and dog daycare.
Technology is expanding the menu of ancillary income sources. Not only can properties add value and earn income from technology, such as smart home features and faster Wi-Fi, but technology platforms for property management teams allow owners and operators to more easily offer add-on services, such as rent reporting or pet policy management programs, without creating more work for on-site staff.
Common income-generating sources of revenue include:
- Parking: Reserved spots, covered parking, public parking or event parking
- EV charging
- Bulk internet/wi-fi services
- Pet fees: One-time fees and/or monthly pet rent
- Co-working space or meeting facilities
- Storage
- Smart tech features within units
- Laundry
- Add-on services: Concierge services, package handling, housekeeping, fitness classes, etc.
Even a few modest ancillary income streams can add up to significant value creation. For example, Rentistry is a practical value-add service that helps residents build credit and improve financial health by automatically submitting their rent payments to top credit reporting agencies. For example, Foxen customer Harrison Street Real Estate saw 99% on-time rent payments and a 70%+ participation rate. Their residents averaged a 33-point credit score increase.
Key Takeaway: Take a Thoughtful Approach
The best approach to developing resilient ancillary income streams is to focus on delivering amenities and services that your residents want, need – and are willing to pay for. Other key factors to consider are adding income streams that can be easily incorporated and don’t create more work for on-site management teams or contribute to vendor bloat.
Property operators also need to be mindful of the balancing act of generating additional income that doesn’t result in fee fatigue. There is a fine line between offering additional fee-based services where tenants see the benefit and value – and alienating existing and potential new residents with excessive add-on charges. Cases where residents have pushed back on mandatory and “hidden” fees also emphasize the need for transparency on fees that are charged outside of their base rent, as well as the need to pair optional fees with value-add for the resident.
The potential for downside risks highlights the importance of carefully curating an ancillary income program that can benefit both owners and tenants. Building a successful, sustainable ancillary income starts with a simple focus on improving the overall resident experience. Empowering residents with the choice to select the services that work for them has the double benefit of creating value and maximizing renter satisfaction.
To learn more about how to boost ancillary income in your portfolio with flexible, value-add services, schedule time with the Foxen team.
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