Investor Report: Energy Efficiency
Wondering What Your Home Is Worth? -- Let me show you.
For real estate investors buying houses at discount prices, it could be a hot new trend. Instead of simply doing the usual renovations, paint jobs and landscaping to turn around properties for resale or rental, growing numbers of investors are emphasizing energy efficiency improvements to increase market values and cut marketing times.
In Baltimore, A-Plus Neighborhood Homebuyers LLC is now acquiring central city rowhouses -- spending thousands of dollars extra on eco-friendly upgrades they'd never done before -- extra heavy insulation, bamboo flooring and high energy- efficiency appliances and lighting.
Three thousand miles to the west in Seattle, Aaron Fairchild of G2B Ventures is raising $50 million for the Efficient Real Estate Fund, the first limited partnership designed solely to buy urban houses at wholesale prices, perform major energy-efficiency retrofits on top of regular rehabs, then turn the properties around as rentals and for-sale houses.
In an interview with RealtyTimes, Fairchild said energy upgrades, documented by before and after audits, are a key new direction for investors, "even if it sounds like non-sexy stuff."
Research studies have found that houses with high energy-efficiency ratings sell at premiums ranging anywhere from seven to 14 percent over comparable, non-efficient houses, and take fewer days on the market to sell.
He cited a recent study on Seattle-area single family houses constructed in 2007 or later and certified as "built green," Energy Star and LEED (L-E-E-D), a top energy efficiency rating. "Green" certified properties of essentially the same size as non-certified units sold for seven and a half percent more per square foot and sold 24 percent faster - an average of 38 days versus fifty.
"It seems fairly obvious that if we spend two and a half percent extra" on renovations to achieve high energy efficiency," said Fairchild, "that we will recapture much more than that" when the houses are remarketed.
"When you can show people that the house consumes less energy" and emits much lower levels of greenhouse gases -- and you've got pre-renovation and post-renovation audits and operating numbers to prove it, "it only makes sense the property will have a competitive advantage in the marketplace." Fairchild's program is targeting houses in Seattle that can be acquired for 25 percent below current market value, primarily through short sales, bank-owned and pocket listing situations.
The renovations are intended to drastically lower energy usage and carbon emissions, and offer Energy Performance Scores from independent auditors.
Fairchild believes small and large-scale investors who ignore energy consumption and carbon emissions "are missing an important opportunity," not only for profit, but to do the right thing for the planet.
Written by Kenneth R. Harney