As a real estate investor, what is your philosophy when it comes to construction?
Do you try to hunt down the cheapest bargains, going with the contractors who charge you the least to bring a new or rehab property in under budget? Or do you invest upfront in green and sustainable building practices that will raise your property's value in the short and long term?
Some considered sustainable building practices to be a fad a decade or so ago, but they are rapidly becoming the standard for new buildings and rehabs. As sustainable materials became more common, they dropped in price, making them both affordable and practical. Let's take a look at some of the pros and cons of investing in sustainable building practices!
What Are Sustainable Building Practices?
Sustainable building practices, also known as green building practices, refer to an environmentally-responsible way to both develop and build properties. It extends to all stages of the building process, from the initial designs of a building all the way to its demolition.
A rating system called Leadership in Energy and Environmental Design (LEED) is the international standard for measuring a building's efficiency. It grades buildings on four levels: Certified, Silver, Gold, and Platinum. Many developers use LEED certifications as a selling point to bring in both sellers and tenants.
What Are the Benefits?
So, why should you go with sustainable building practices?
● Energy Savings
Saving money on utilities means lower energy bills. As LEED-certified buildings are considerably more energy-efficient than older properties, this can save you, or your tenants, big bucks when it comes to monthly utility bills. Features like improved natural lighting and properly-insulated windows are not only attractive but are also practical.
Moreover, if you equip your property with other energy-saving features like solar panels, you will further reduce the strain on their pocketbooks. You can also advertise features like that when you are on the hunt for tenants or buyers, bringing you in additional money.
● Return on Investment
When someone invests money into real estate, they are hoping for an excellent ROI, preferably as soon as possible. By investing in sustainable and green building practices, you will be increasing the value of your new property or rehab, measurably improving your average long-term ROI. In fact, it's estimated that many sustainable building projects essentially pay for themselves within a decade.
● It's Becoming the Standard
Like all technology, sustainable building practices started out as expensive and impractical to most developers. Unfortunately, this perception still exists in the mind of many investors to this day. However, sustainable building practices are rapidly becoming the norm when it comes to property development. Why? Because the new building technology is simply better! There is a reason why a home built with sustainable building practices sells for more than one that isn't optimized for energy-efficiency.
● Tax Benefits
If you know where to look, there are many tax breaks and benefits from federal, provincial, and local governments for sustainable building practices. These can include insurance reductions, utility rebates, and other incentives that reduce the burden of the additional cost of building for investors.
● Better for the Environment
Nowadays, most companies are looking to promote their "green" practices. Caring about the environment certainly isn't a fad, and businesses that opt for more sustainable practices can get a tremendous amount of goodwill from the public.
Of course, that's just a side benefit. Everyone should care about taking care of the environment, regardless of perception. By using more sustainable practices and materials when building, there will be less waste (both in the long and short-term) and a smaller carbon footprint. Both wins for the planet!
Are There Any Downsides?
While sustainable building practices are a very desirable option, there is one drawback: They are more expensive.
While the price of "green" materials has dropped significantly as compared to decades past, they still cost more than their non-green counterparts. If you're a potential real estate investor looking for a place to put your money, this means you will be spending more than you otherwise would for the materials and construction of a property.
That said, the excellent return-on-investment, prospect of better tenants, and increased rental income more than make up for that… over time. Basically, sustainable building practices may earn you more money long-term. But if you're looking for a short-term investment, spending the additional money on green practices might not be your best option.
Either way, you choose, real estate is a fantastic place for investors who are looking for a stable and profitable market for their capital! Contact Regalway Homes today, and we can start talking about the advantages of passive real estate investment!