InvestorLoft Real Estate Investing Blog

Rental Property Goes Green! Tips for Real Estate Investors

There’s the popular slogan in modern marketing campaigns: “Green is the new black.” But is “environmentally friendly” really something a real estate investor needs to consider? Green (money) and black (net profit) together can be a winning team for real estate investment. Here are a few reasons why going green can help your investment property portfolio.

It’s a good long term investment

When an environmentally friendly home comes onto the market, the higher sticker price may be a bit of a deterrent to potential investors. But a shift in thinking from the cost of the property to the long-term benefits shows there’s a lot to be gained from buying green.

Many homes that have undergone remodels to integrate green energy production (like solar panels) get inspected as part of the upgrade. The installation company typically goes through the entire house and counsels on how to make the residence as energy efficient as possible, from replacing windows to fixing cracks and updating wiring and air ducts. These repairs are made before the renewable energy system is installed. What this means is that most homes with these upgrades will have the added bonus of more energy efficient windows, air ducts and heating/cooling systems. Double check to see if the house was inspected with the upgrade. If it was, it means less money out of your pocket for repairs and more immediate cash flow.

The other investment doesn’t show up on a financial report. Every effort to cut back carbon emissions helps to clean up pollution, reduce global warming and improves the quality of air in our urban centers. Properties tend to be more desirable when surrounded by good air quality and a healthy outdoor environment.

Significant tax incentives

If you’ve been putting off updating your current rental properties to be more green, the tax incentives put into place by the Emergency Economic Stabilization Act of 2008 make conversion to renewable energy more attractive to your bank account.

The new legislation extends tax credits to residential buildings that were previously only available to commercial properties. Until 2017, property owners can claim upwards of 30% of the cost of installation of solar panels or a renewable energy system deemed self-sufficient for energy use.

Not feeling up to the large project of solar panel installation? Small updates can be used as well to reduce your tax bill. Itemize any improvements you make, whether it be replacing appliances or just switching incandescent lightbulbs to more energy-friendly halogen or compact fluorescent bulbs. Just make sure you consult with your accountant to find out what paperwork and receipts you’ll need when tax time rolls around.

More attractive to potential tenants

Consumer awareness of green living has expanded beyond recycling and turning off lights. People are more likely to seek out living arrangements that enable them to reduce their carbon footprint in every aspect of their daily life. If you can advertise your properties with phrases like “green,” “renewable energy,” and “environmentally friendly,” it will help your listing stand out from other available rentals.

Potential tenants also appreciate the budget-friendly aspect of a green home. Just updating appliances to Energy Star-approved models can cut the electric bill for the home by 1/3. Insulated windows will help reduce heating costs for properties in states that typically have brutally cold winters or scorching summers. Highlight how your green property can save money for a tenant through reduced utility bills and you’ll be competitive in the market without having to cut your rent rates. Keeping rent rates at the upper end of the median means more money in your pocket and a better return on investment.