While environmental concerns and sustainability issues have become a major trend among multifamily investors and homeowners, it seems that they are not the only ones taking advantage of “going green.”
Most landlords, even if you don’t want to spend much on your rental property, can take steps to improve your building’s energy efficiency. Savings made this way can then be used for expanding or improving your rental units.
Here’s a short list of considerations.
Exploit the expansion potential
Although every Realtor will tell you that the location is key to a successful rental purchase, the truth is that great locations are expensive. So instead, you should look for properties in undiscovered, or up-and-coming locations that will be in high demand in five to ten years. However, more importantly than buying a location, you should always look out for rentals with great expansion potential.
Cost of purchase vs. build
Let’s take for example the Golden Gate Heights neighbourhood in San Francisco. Most homes in the neighborhood sell for between $650 and $850 per square foot, which is relatively inexpensive compared to the rest of the city. The building cost per square foot, ranges from $150 for simple rooms with electricity, to $350 for bathrooms and kitchens, but according to the National Association of Homebuilders, the national cost per square foot is only $80. If you challenge a contractor to get a quote that low, you might be surprised by the results.
Building always wins
Once you get hold of a solid contractor who is reasonably priced, don’t let them go. Even if you’ve set your eyes on an underdeveloped lot in an expensive part of the country, the good news is that construction costs don’t follow the cost of housing – they are relatively stable. As a result, rental development returns are much greater in places with higher housing prices such as San Francisco, Washington DC, and New York City.
When talking about rental housing in the U.S., we often make comparisons with renting overseas.
Faced with insecure tenancies and unaffordable home ownership, over the past several years, in Australia, there has been a surge of enthusiasm for developing a sector of multifamily housings, which already gained a widespread popularity in the U.S. However, another trend that is present in Australia is building sustainable rentals which can still release equity, should the landlord decide to sell the property later. Apart from eco-additions, passive designs, and indoor-outdoor spaces, construction companies like Meadan Homes make a great case of promoting duplex additions as a great option for flexible rentals that can be easily sold down the line.
Use programmable thermostats
Chances are that heating and cooling are the biggest energy hogs in a rental unit, and one of the best ways to save energy consumption is to install a programmable thermostat. Whichever arrangement you have with the tenants, the thermostat benefits both parties. With quality ones priced between $35 and $50, it’s a small investment for large savings. It can be programmed to turn the unit on and off based on tenants’ daily routines, reducing both the monthly bill and the building’s carbon footprint.
Maintain the HVAC
Make sure the furnace filter is replaced between one and three months, to ensure clean air and improve the furnace efficiency. While each furnace has different specifications, different filters have different lifespans. While being inexpensive and easy to change, a clean filter will ensure clean indoor air and better furnace efficiency, reducing its power consumption. By keeping your HVAC unit running at optimal levels, you’re increasing the energy efficiency of the entire rental.
Invest in humidifiers
A humidifier keeps your rental humidity levels constant, even during the winter when heating is regularly used. Keeping the humidity levels up during the heating season isn’t only beneficial to your health and furniture, but it also makes the ambient air temperature feel warmer than dry air, which means you can lower your thermostat setting. While some HVAC units come with built-in humidifiers, you can always get it separately for a great price.
Buy energy-efficient bulbs
You can always tell an energy-efficient building by its bulbs. Landlords who are concerned about energy efficiency and savings made this way will always use CFLs (compact fluorescent lights) or even LED bulbs. In countries like Germany and Australia, where environmental awareness is high on all levels, incandescent bulbs have been phased out between 2009 and 2012, while legislators in Australia are preparing a regulation that would evict the halogen bulbs as well by the end of 2020. Although the out-front cost of LEDs is higher, they last incomparably longer and they really pay off through reduced consumption.
While expansions and additions are always more cost-effective than purchasing new rentals, a prudent landlord will always make sure those extensions are energy-efficient. The practices listed here won’t only pay for themselves in energy savings, over the duration of the rental, but if you decide to sell, you can always sell the improvements as well, or move them to your next property.