Unlocking Value: How to Treat “Other Income” in Multifamily & Mixed-Use Appraisals—and Still Pass Underwriting

When it comes to multifamily and mixed-use properties, rent alone doesn’t tell the full income story.

Savvy operators and appraisers know that “other income"—from laundry and storage to pet rent and utility reimbursements—can unlock significant gains in Net Operating Income (NOI). And because multifamily assets are valued heavily on income, even modest additions can translate into six-figure increases in appraised value, especially in lower cap rate environments.

This guide focuses on residential multifamily and mixed-use buildings—where you often have the opportunity to implement income streams beyond base rent, but must also navigate stricter housing laws and building codes.

We’ll cover:

• Which other income sources are viable (laundry, storage, pet rent, RUBS, admin fees)

• How to structure them legally and operationally under Connecticut law

• Fire and mechanical code considerations that may trigger cost or liability

• Appraisal and underwriting standards to ensure the income holds up on paper

  
  

Our goal is to help owners and appraisers translate underutilized features—like basements, pets, and common services—into verifiable NOI while remaining compliant with both code and case law.

1. Storage & Laundry: Straightforward Income With Built-In Risks

Let’s consider a common case study: a 12-unit apartment building, each with a 2-bedroom layout and access to a shared basement. This underutilized space often sits idle or cluttered, yet it presents a major revenue opportunity. With light build-out and partitioning, a landlord can create secure storage cages and install coin-operated or app-controlled laundry machines, converting passive square footage into cash flow.

• If each of the 12 units is assigned a basement storage unit at $35/month, that generates $420/month or $5,040 annually.

• Assuming 1.5 laundry loads per week per household at $5/load (combined wash and dry), that yields $390 per unit annually, or $4,680/year for 12 units.

  
  

Total Other Income: $9,720/year.Even after factoring in a 5% vacancy and collection loss, the adjusted income is $9,234/year.

Now apply a capitalization rate of 8% to see the increase in appraised value:

This illustrates the multiplying power of income-based valuation. Small recurring charges in shared spaces can translate to dramatic value gains.

How to Price Storage & LaundryFor income to be included in the valuation and withstand underwriting scrutiny, it must be both market-supported and realistic. Overestimating laundry or storage income without justification often results in appraisal adjustments or lender pushback.

• Storage: Survey rents for storage units in nearby multifamily buildings. Online marketplaces like Craigslist and Facebook can provide informal comps, while self-storage facilities offer pricing baselines (though typically higher due to 24/7 access, security, etc.). Adjust your rate based on convenience, size, and exclusivity.

• Laundry: Research the going rate in similar apartment buildings—either by contacting other landlords, reviewing listing platforms, or speaking to laundry equipment providers. In Connecticut, $4–$6 per wash/dry load is common. Use real-world tenant behavior or service agreements to support your projections.

  
  

Making It VerifiableVerification is key for both credibility and compliance. Here’s how to back up your claims:

• Provide copies of leases or lease riders that show recurring storage or laundry charges.

• Include income from these sources in your trailing 12-month operating statements.

• Supply records from coin-operated machines, app-based software logs, or vendor servicing contracts.

• Include photographs of the amenities, labeled building plans, or invoices from recent improvements.

  
  

Clear, well-organized documentation makes it easier for underwriters and appraisers to underwrite the income, minimizing risk of it being discounted.

• Tenant-accessible basement areas require 1-hour fire-rated separation and may need NFPA 13 sprinklers if over 2,500 sq ft or housing ignition sources (CSFSC §8.3 and §9.7).

• Gas-fired boilers in basements must meet clearance and ventilation rules under NFPA 54, adopted by the CT State Building Code.

  
  

“Laundry and storage generate $14,400/yr across 12 units. Adjusted to $13,680 after vacancy loss. Subject to fire-rated construction and potential sprinkler upgrades (~$20–$40/sq ft), and boiler compliance with NFPA 54.”

What to Include vs. What to Avoid in Other Income

Income Type	Include?	Notes
Laundry income	Yes	Must be tenant-paid and supported by usage or lease terms
Storage units	Yes	Consistent, market-supported, and verifiable
Pet rent	Yes	Exclude service animals; include in lease or base rent
RUBS (commercial units)	Yes	Must be documented in lease agreements
RUBS (multifamily units)	No	Prohibited in CT unless units are individually metered
Lease termination fees	No	One-time and non-stabilized
Tenant fines	No	Typically non-replicable and unenforceable
Application/admin fees	No	Unless supported by lease
STR premiums	Yes	Only if permitted by zoning and lease terms

How to Handle One-Time or Questionable Income

Appraisers and underwriters are trained to strip out nonrecurring, speculative, or unsupported revenue. Including these can weaken the credibility of the report or trigger pushback.

Red flag examples include:

• A one-time lease break fee

• Charges for repairs billed back to tenants

• Unexplained "miscellaneous income"

  
  

How to mitigate:

• Move questionable items into a footnote or comment section

• Explain why they were excluded from the income approach

• Treat as upside or non-stabilized potential only if supported by narrative

  
  

Best Practice: Only capitalize income that is recurring, legal, market-based, and documented.

2. Pet Rent & Deposits: Small Charges, Big NOI Impact

Pet rent is one of the easiest and most underutilized forms of recurring income in multifamily properties. Let’s return to our 12-unit building example. If half the tenants have pets and pay $35/month, that adds $210/month or $2,520/year. If all 12 units have pets, that total jumps to $5,040/year—with virtually no overhead. This income can be collected as a lease addendum or, ideally, integrated directly into base rent to streamline accounting and reduce pushback from underwriters.

Pet rent is especially valuable in properties targeting young professionals or long-term renters, where pet ownership is common and accepted as a lifestyle norm. When market-supported, it capitalizes on a real tenant preference while enhancing NOI.

Pet deposits count toward CT’s security deposit limits under CGS §47a-21. This law sets the maximum allowable security deposit at two months' rent for tenants under the age of 62. For tenants 62 or older, the limit is reduced to one month's rent, regardless of how many pets they have or other lease circumstances. Any pet-related deposit must be factored into this overall cap. Violating this statute can expose landlords to financial penalties and legal claims, especially in small claims court or housing disputes.

3. RUBS: Use With Caution in Mixed-Use Properties

Ratio Utility Billing Systems (RUBS) can convert utility expenses into tenant-paid income. In commercial or mixed-use buildings, RUBS allows landlords to recover shared utility costs, such as water, gas, and electric, based on tenant occupancy or square footage. In our 12-unit scenario, this could represent thousands in cost recovery—but only if it complies with current law.

In Connecticut, RUBS is strictly prohibited for residential multifamily tenants in master-metered buildings unless each unit is individually metered, per CGS §16-262e(c). This legal restriction was reaffirmed by the Connecticut Supreme Court in Northland Investment Corp. v. PURA (2024).

For commercial units within a mixed-use asset, however, RUBS remains valid if clearly defined in the lease. Many landlords use this to recover costs without increasing base rent, improving NOI while keeping rent competitive. Proper lease documentation is key.

“RUBS included for commercial units only, consistent with lease language. No RUBS income included for residential units.”

4. Code Compliance: Fire Safety and Mechanical Risks

All shared-income spaces—particularly basements used for storage, laundry, or mechanicals—must meet fire and life safety codes. Failing to comply not only exposes ownership to liability but may invalidate insurance or render income non-qualifying in an appraisal.

Returning to our 12-unit example, consider a basement retrofitted for tenant storage. While seemingly minor, this creates a public access area under fire code. CT State Fire Safety Code §8.3 requires a 1-hour fire-rated separation between tenant-access areas and residential floors. Additionally, sprinklers may be required per CSFSC §9.7 if the space exceeds 2,500 sq ft or contains combustible materials.

If a gas boiler is present in the same area, clearance and ventilation must meet NFPA 54, ensuring safe combustion air and rated enclosures.

Even if the income opportunity is strong, these code triggers should be anticipated. Appraisers and underwriters may discount income if the amenity space is not legally usable.

Final Takeaways

Best Practice	Why It Matters
Use real comps and leases	Verifiable income stands up to scrutiny
Apply a vacancy factor	Makes income supportable and lender-friendly
Avoid one-time income sources	They distort stabilized NOI
Comply with CT law	Avoid legal issues (RUBS, ESA fees, deposits)
Document everything	Appraisers and underwriters need a paper trail

When done right, other income transforms underutilized spaces into real value—but only when grounded in compliance, market norms, and documentation.