Making environmentally-friendly real estate choices can make investors big bucks.
As a real estate investor, you make myriad choices on a daily basis from selecting paint colors to determining listing prices. You are always looking for ways to improve your return on investment and save money over the long term while offering a safe, affordable home to tenants or buyers. Sustainable building holds massive untapped savings for your properties in addition to making them more competitive on the market and enabling you to charge more competitive rents or even list at higher prices than you otherwise would on a similar property in the area.
Green building, also called sustainable or high-performance building, started as an environmental trend initiated by investors, builders, and homeowners concerned about the long-term economic and environmental impact of “traditional building.” While there is nothing wrong with “traditional” construction, often there are ways to reduce environmental impact and reduce expenses associated with living in or maintaining a structure that developers or property owners may leverage in order to make a property more attractive to potential clients, increase ROI, and as a way to engage in what may be labeled “socially responsible” or “green” investing.
Since its inception, green building has enabled investors, developers, and property owners to responsibly reduce resource usage to benefit themselves and those in the surrounding community. They are definitely being environmentally responsible, but they are also reaping some practical, financial rewards as well. For example, spending about two percent more during the initial construction of a green building will yield about 10 times the initial investment amount by increasing property value and reducing energy use over the life of the home.
In a 2015 report on green building written by the U.S. Green Building Council (USGBC), the council noted that the volume of green building is already surpassing general building construction and will continue to do so through 2018. The USGBC also predicted that green construction will grow 15.1 percent year-over-year each year from the present through 2018. The council also expects annual projected spending on green building in the real estate market to increase from $150.6 billion in 2015 to more than $224.4 billion in 2018. By comparison, the industry spent just $10 million in green construction in 2005.
So how can real estate investors take advantage of sustainable building and the burgeoning attraction of the “green” house trend to directly and quickly affect their bottom line? For starters, green building could directly affect real estate investors over the next several years because some of the largest green construction contributors are working in some of the hottest markets for investors. California, Florida, New York, North Carolina, and Texas all report increased spending in the sustainable building sector, which likely means that the general population is becoming more attracted to green and sustainable building and that you can make your properties more attractive to renters and buyers by offering energy-friendly (and budget-friendly) options.
Worried that you will have to start from scratch with new construction in order to benefit from the green building trend? Don’t be! Real estate investors with existing homes for sale or rent can “go green” quickly by making sustainable and energy-efficient choices for existing homes and commercial spaces. A nice aspect of green building is that you can go green in stages. You may choose to use water-saving faucets or an on-demand hot water heater in your properties, which could save a renter, buyer or even yourself a few hundred dollars a year. The more individual pieces you use in your properties, the more financially and environmentally attractive and, by extension, competitive, your properties become while saving you and your renters or buyers money in the process.
Good, Green Numbers
Improvement: Solar Panels
Benefit: Homes with solar panels sell for an average of 17 percent more than comparable homes with conventional energy sources. (National Renewable Energy Laboratory)
Improvement: High-performance glazed windows
Cost: Highly variable depending on home size
Benefit: 60-70% ROI (Remodeling.com 2016 Cost vs. Value Report)
Improvement: Landscaping (specifically planting trees and shrubs
Cost: Variable based on volume of planting, but can be as low as $150
Benefit: Projected 284% ROI (HomeGain’s Green Home Improvement Survey)