Sustainable real estate development has carved out its own niche in recent years, and those that have adopted the trend are already reaping the rewards. It’s worth noting, however, that it’s not to late to jump on the bandwagon. In fact, those residential redevelopers intent on commencing sustainable practices may place themselves in a position to benefit for the next decade—if not more so. Sustainable real estate development is being heralded as the next step in investor evolution, and is something everyone in the housing market needs to consider if they want to remain at the forefront of their industry.
Sustainable real estate development is the practice of incorporating environmentally-friendly design techniques, materials and technologies into the building process. Instead of using materials and strategies which increase a home’s carbon footprint, sustainable real estate development aims to reduce the impact of a respective home on the environment, from the materials used to daily operations. Doing so enables homeowners to simultaneously reduce operating costs and help the environment.
“Green” real estate development projects, otherwise known as “greenhabbing,” are the sustainable equivalent to your standard flip, but with a substantial caveat: an emphasis on sustainable practices and materials. Outside of the obvious, the two strategies are indistinguishable from one another. You could very easily argue that both exit strategies share the same goal, which begs the question: how can sustainable real estate development set your business apart from the competition?
With an inherent focus on sustainable practices and reducing their carbon footprint, residential redevelopers (and even commercial redevelopers) are awarded a wide array of benefits, many of which offer improved investment results. Let’s take a look at some of the reasons you will defiantly want to implement sustainable real estate development practices into your business sooner rather than later:
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There is no doubt about it; sustainability is the future of nearly every industry, and residential redevelopers are no exception. The consumption of natural resources are at an all time high, and authorities around the globe are doing their best to reduce the use of those resources that are otherwise limited while simultaneously decreasing our carbon footprint. Environmental awareness has prompted a universal response, and initiations are being put in place—as we speak—to limit the consumption of natural resources. The U.S. government, in addition to local municipalities on nearly every level, has taken it upon themselves to be proactive and address the situation from a housing perspective. That means homes are going to be expected to meet industry standards that are otherwise sustainable and energy-conscious. Who wouldn’t want to implement a few energy efficient home improvements?
Those investors that start implementing the idea of sustainable real estate development into their current exit strategies should not only remain at the forefront of their industry, but at the top of buyers’ wish lists as well—for now and well into the future. In doing today what many will expect in the future, your current prospects should realize their full potential.
Shortly after the recovery started to gain traction and U.S. real estate started to crawl out of the doldrums of the recession, buildings certified under the LEED rating system initiated a trend that would stand the test of time: sustainable building practice and those home that implement them demand a premium. Quite simply, green homes tend to sell for more than that of their non-sustainable counterparts. In fact, studies have shown that sustainable homes can sell for as much as nine percent more than those that are less energy efficient.
What’s more, the U.S. Department of Energy acknowledged “researchers at the University of California, Berkeley, and the University of California, Los Angeles, studied 1.6 million homes in California to see if those rated with ENERGY STAR, LEED, or GreenPoint Rated labels sold for a higher price than those without energy-efficient labels.”
While the study conducted by the U.S. Department of Energy didn’t extend beyond the boarders of California, their results mimicked those of other states. Similar fundamentals were witnessed in cities like Seattle, Washington, where GreenWorks Realty identified an encouraging trend: energy efficient homes sold for more money than their less efficient counterparts. Taking it a step further, the Earth Advantage Institute in Portland, Oregon revealed that energy efficient homes sold for as much as 30 percent more than those that aren’t in 2011. With the way energy consumption has been trending, it’s safe to assume those numbers have increased.
Energy costs have risen year-over-year for more than a decade, and 2016 is no exception. While the retail price of electricity has dipped modestly in the last year, the U.S. Energy Information Administration (EIA) expects residential electricity prices to rise by as much as three percent in 2017. It shouldn’t surprise anyone to learn that electricity isn’t the only resource expected to increase in price as early as next year. The EIA has also forecasted additional increases to crude oil, coal and natural gas. If that wasn’t enough, energy consumption is expected to increase across the board in every resource including, but not limited to liquid fuels, natural gas, coal, electricity and renewables.
There is an obvious trend, and homeowners are looking to get ahead of increasing prices. As a residential redeveloper it is in your best interest to meet their needs; only then will demand follow suit. The next time you set out to flip a home, consider adding energy efficient upgrades to offset the increasing price of resources.
While contingent on the specific upgrades residential redevelopers decide to place in a home, they can save their buyers approximately $8,000 (in the form of rebates) and as much as $2,000 for being awarded a GreenPoint Rated label. The homeowners profiled in the studies above managed to reduce their energy costs somewhere in the neighborhood of $1,600 to $2,237 a year.
Sustainable real estate development is the future. More and more builders will look to green real estate development to simultaneously reduce their carbon footprint and build more efficient living spaces. It is worth noting, however, that the future is now. The idea that sustainable real estate development is years away is incorrect; it is currently being implemented in today’s new building practices. That said, anyone who isn’t currently implementing their own green strategies is effectively being left behind.
Anyone who has already implemented their own sustainable practices is already ahead of the game. However, it’s not too late for those who have yet to initiate their own sustainable real estate development projects. In fact, there are several things to do to get the ball rolling, not the least of which include:
Sustainable building products have developed a reputation for coinciding with exorbitant prices. If for nothing else, it does cost more to use “better” materials. It is worth noting, however, that while upfront costs will tend to be higher when using sustainable real estate materials, their inclusion in a respective project should actually save the owner money over time. Implemented well and correctly, sustainable materials can simultaneously reduce one carbon footprint, cut energy costs and save the environment. Proper insulation, for example, can easily save homeowners hundreds of dollars each and every year. Therefore, investors should account for the initial costs of sustainable materials, but that shouldn’t be a reason not to use them.
In order for a home to truly be recognized as a sustainable real estate development, it must be LEED Certified. Otherwise known as a Leadership in Energy and Environmental Design Certification, a LEED Certificate acknowledges that a respective property meets the highest standards for sustainability and eco-friendliness. Subject properties that are able to announce their LEED Certification stand out from the pack, letting everyone know it is of the highest quality and design. Of course, receiving a LEED Certification isn’t as simple as applying for one; investors will need to follow a very strict set of guidelines. As a result, the sooner one can prepare for LEED Certification, the better. Likewise, it’s better to know what will be expected of your home before you actually start any rehab projects.
Any attempt to build a sustainable property should be met with an appropriate marketing plan. It is not enough to simply market a sustainable real estate development without mentioning anything about its ability to operate efficiently. In fact, subsequent marketing efforts need to broadcast the home’s features, and how they will benefit the buyer. Great marketing efforts will be able to not only sell the home a lot faster, but also for a lot more money. Consequently, this is where the LEED Certificate comes in handy. Those who are able to market their home as a LEED Certified property can as for more money upfront.
It isn’t always necessary to start from scratch when considering implementing sustainable real estate development practices. If for nothing else, it is entirely possible to repurpose or renovate existing home features so that they may be considered “green,” or reduce a home’s carbon footprint. That said, take a good look at your project before tearing it down; look into renovating it first. Renovating an existing structure and retrofitting it with green real estate development features will save investors a considerable amount of money up front and achieve the same goal. Remember, every step in the right direction is a win for the investor and the planet.
It should go without saying, but each location will require unique improvements to fully optimize a home’s carbon footprint. The location in which a home is situated, for that matter, will determine the most important sustainable real estate developments to include. Dry areas (such as deserts), for example, should put an emphasis on water conservation. The lack of water should be taken into consideration before the home undergoes renovations. Secondly, it’s important to tap into the local geography for the home’s benefit. Sunny areas, for example, should consider installing solar panels. At the very least, sustainable real estate development needs to consider what the environment offers and doesn’t offer.
Technology is intended to make our lives better on a daily bases, and sustainable real estate development is no exception. Every year, new technologies are improving green real estate development, and this year is more of the same. Therefore, investors need to look into implementing the newest technologies if they want to be as eco-friendly as possible.
Sustainable real estate development isn’t a fad, nor should those interested in flipping properties relegate it to the garbage bin. If for nothing else, it’s the future of the industry, and something every residential redeveloper needs to consider in at least some capacity. Those that do will not only realize their full potential to do more business, but also increase their bottom line. I maintain that sustainable real estate development is the next step in investor evolution, and those who adopt the latest trends will surely reap the rewards.