This is a transcript of a previously-aired segment of “Self-Directed Investor Talk” co-hosted by Carole Ellis, managing editor of Think Realty Magazine
Do you struggle with stargazing? If so, you are part of the 99 percent of the population who does according to a recently-published study by the journal Science Advances. And that is relevant to your retirement. That’s right. I said it: relevant to your retirement planning. And I’ll tell you how today.
Did you know that if you can see the Milky Way from your front door, the odds are decent that you’re standing on a front-door step worth about twice what the median cost of a home is in your area and, furthermore, that you are one of a very select few people who can do so. After all, 99 percent of the people living in the U.S. and Europe are stargazing compromised due to what the International Dark-Sky Association calls “light pollution.”
Now, when I first read the scientific article that has brought light pollution to your headlines and mine, I actually assumed it meant that most of us had it pretty good in terms of our overall environment: we only had light levels of pollution!
Actually, light pollution is the term used to describe the amount of light that escapes, for lack of a better word, into the sky at night and inhibits true darkness; the kind that would let you view the Milky Way, for example, or enjoying truly dazzling astronomical views.
I think most of us probably assume that there is a fair amount of light pollution in big cities, but I also think it’s fairly likely that if you look upward at night and see a few stars, you don’t think a whole lot about it. However, there is a nascent tourism industry developing around this concept and, further, if you haven’t already, as a self-directed investor, you’re probably going to encounter some opportunities to invest in dark-sky communities sometime. I’d say, in the next 12 months.
So there are a few things about this angle of self-directed investing that I’d like to talk about.
First of all, let’s understand the dark-sky concept specifically and then we’ll deal with environmentally-responsible investing pitches in general. According to the International Dark-Sky Association, there are presently about 15 communities worldwide that have adopted light pollution guidelines to preserve the night sky. Not surprisingly, most of them are located in the United States. These developments don’t eschew electricity or anything like that, but they have strict outdoor lighting and landscaping requirements. Often limiting municipal lighting to a few sparsely-placed streetlamps that aim only downward. Unlike regular lights that may “waste” about 30 percent of their light by shining outward and upward in addition to down. These communities may also feature special amenities to attract stargazers, such as public or semi-public telescopes.
A community near Denver called Summit Sky Ranch, for example, recently completed its first stage of development. Those homes will start in the $600,000s, compared to the Denver median home price of about $350,000.
Now at this point, I’d like to say, that if you’ve never been to a dark-sky park, please go. It’s incredibly beautiful. I’d absolutely consider retiring somewhere that offered me that every night! But we’re not talking about where I (or you) want to physically live when we retire. Right now we’re talking about what I’m going to dub dark-sky investing…
Dark-sky parks are not a new thing, but dark-sky communities are a relatively recent mainstream development, as is the opportunity to invest in them. When you hear about these development projects and many other self-described environmentally-responsible or socially-responsible real estate investing options, it can be really tempting to simply dive in because it feels like the right thing to do.
After all, you’re putting your money where your mouth is and supporting something important. Further, it’s a new (and often scarce) type of housing – good in real estate, right? Finally, in many cases you’ll be offered first dibs (of course they’ll call it something much snazzier I expect) on your own property in the area now or later on in the development process.
And that’s all wonderful if the following few things can hold up:
1. Is the Science Sound?
Is this place actually going to meet whatever scientific guidelines it has self-imposed? For example, Summit Sky Ranch is located about an hour from Denver. Is that far enough? Well, turns out thanks to local geography, really clever landscaping decisions that help block basic light from your nighttime activities from the sky, and some pretty carefully considered community ordinances and covenants, yep, it’s probably plenty far! But imagine if it was 15 minutes outside of Denver…I don’t think this would fly.
Also, any energy-savings statements will likely be taken by buyers as commitments, so make sure your investment can compete! For example, the U.S. Department of Energy said in 2011 that “bad” outdoor lighting basically equates to the amount of electricity you’d waste, per light per night, running a big-screen television for an hour. And by the time you work the numbers out on that, you can make those savings look pretty big. And that’s before you get into carbon emissions and credits.
But that doesn’t mean that every dark-sky development is going to save homeowners that money. So make sure that you’re presented with an accurate bill of sale that requires no assumptions in order to make the case for why the investment will be easy and profitable to exit.
2. Are You Okay With Investing in Private Funds?
One of the great things about being a self-directed investor is that you can invest in a private equity fund or a hedge fund if you feel like it. However, you need to be sure that the timeline for payouts is consistent with your investing goals and that you do your due diligence on the people managing the fund as well.
Funds are a great way to be involved with projects that are simply too big for a single investor. To leverage other people’s expertise in real estate in a very passive way, but you will want to make sure you read the fine print and make sure that the fund managers are either experts themselves in, not just developing, but selling this type of property or that they are advised by someone who is.
3. Is the Marketing Sound?
People who are willing to buy this stuff tend to want to confirm that they’re getting what they’re paying for. It’s like when Priuses first came out and Toyota discovered that if those cars didn’t let enough people know that their drivers were saving the environment, they weren’t going to sell.
“There was no financial reward for virtue,” wrote a New York Times columnist back in 2006, which led Toyota to quickly adopt a more distinct and highly recognizable design so that the “luxury” of owning a green car would help compensate for the fact that, at the time, the Prius did not distinguish itself substantially in terms of features, performance, or a timely payoff in the form of gas savings.
So if the promotional materials say that the development will “move as little earth as possible” (a common promise in just about any community billing itself as nature-loving and environmentally responsible) and it turns out you dug up an ancient burial ground (yeah, just a little Poltergeist reference for you movie buffs out there) to put in your clubhouse, that’s going to be a problem when prospective buyers find out.
And if they promise energy savings or carbon footprint reduction (no politics, just the facts, folks, there are people who will PAY big for that), then whether you give a fig about the polar bears or not, you better read the supporting research and make sure it backs up those promises before you put money into that development.
Now at this point, I know I sound like a huge skeptic. In truth, I’m kind of smitten with dark-sky development. It looks amazing. But here’s the thing. Before I invest in it (as opposed to move there personally), I’m going to make sure that it meets my personal criteria for being simple (in general, I give a good hedge fund an 8 or even a 9 for “simple” insofar as that once you’ve signed on the line, you not only don’t have to do anything, you can’t. It’s out of your control), safe (this can vary, Bryan once unofficially pegged it as a 4 or 5 of 10 because you’re speculating in a lot of ways, but I think if the investment is solid, like real estate, and your due diligence on the manager is EXCELLENT, you could go up somewhere between a 6 and an 8) and strong (back to due diligence and research before you invest, folks, if you want that 7-to-10 feeling!).
I get to the point where my personal assessment of these values is within my comfort zone AND the payoff appears to be worth it well, then I might invest. But not one second sooner no matter how beautiful the Milky Way may be at night or how much I want to save that night sky for my children.
About the Author
Carole VanSickle Ellis serves as vice president of research and analysis at the Self-Directed Investor Society, helping investors “declare independence from Wall Street.” Contact her at email@example.com or visit sdiradio.com.