Destination Green

Is it possible to make a 1970 split level house cool by today’s standards?  Lara and I are foolish enough to try, with a green twist.  After all, doing so puts the walk in two things that we’re doing a lot of talking about – 1) that eco-friendly remodeling of an existing home is a relatively low-impact way to create a green dream home, and 2) that greenlording with a green exit strategy can be a smart approach to real estate investment.

We’ve just moved into the 4 bedroom, 2 bath 1900 square foot home pictured above.  We bought it in 2003 from the original owners as an investment property.  It is quite dated, and a bit tenant-worn after six years as a rental, but it has as they say “great bones”.  And the yard has mature peach, cherry and plum trees, as well as grape vines.  To put all of this fruit to good use, we’ll be calling on our friends Jana and Steve and their wine-making talents for payback for the cork floor labor they got out of me earlier this year . 

There’s not much about this place that doesn’t need updating – nope, it’s all as dated as this kitchen.  So we’ll have lots of eco-friendly home projects to blog about in this series.  

Here is a sampling of the projects we have on deck…

• new bamboo cabinets in the kitchen and vanities in the bathrooms.
• replacing worn carpet with rapidly renewable flooring throughout.
• sourcing and installing the most eco-friendly concrete countertops we’ve heard of to date.
• re-painting the entire inside of the house with low or no VOC paint.
• energy efficiency improvements guided by a professional energy audit.
• a sprinkler system audit and corresponding xeriscaping to reduce lawn watering requirements.
• installing water-conserving fixtures throughout.

We hope you’ll grab our feed, follow along and maybe even learn a bit from our experiences, if not our mistakes!

Oh, one last thought about the timing of things.  We’ll be completing and blogging about these green remodeling projects as quickly as our day jobs permit, but we may take a slower road toward our green exit of this home than originally anticipated.  We’re confident it is going to be a pretty cool and comfortable greened-up home to live in.

Let’s face it, there aren’t many places you can invest your money these days with confidence.  And residential real estate has got to be one of the worst investment choices, right?  Well, that depends.  It depends on…yup…location, location, location and strategy, strategy, strategy. 

Ft. Collins is one of those locations that has weathered the residential real estate storm quite well.  And it’s future appears bright enough to warrant wearing shades.  Read why U.S. News picked Ft. Collins, and neighboring city Loveland, last week as one of The Top 10 Housing Markets for the Next 10 Years.  Also, check out the many other lists that put Ft. Collins at or near the top, all of which point to a strong future for home value appreciation in the area.

In 2003, Dave and I purchased three residential investment properties in Ft. Collins.  With vacancy rates  in the 4% range, we have been able to keep these rental properties occupied with excellent tenants, while earning strong positive cash flow.  Comparables and Zestimates^TM would indicate that these properties have gained about 10% in value since we purchased them.  Ten percent over 6 years is nothing to write home about, until you consider that home prices at the national level are down 32 percent since 2006!

The Green Exit strategy that we wrote about a couple of months ago in our post on Greenlording leaves us confident that we will beat market comparables when we go to sell these properties down the road.  To summarize that strategy, we re-invest our positive cash flow into eco friendly improvements to our rental properties, which will ultimately allow us to deliver sustainably updated homes for sale to an increasingly green-minded market of home buyers.  Oh, and we get more conscientious tenants and higher rents along the way too.

We feel very fortunate that we’ve found a way to invest that is built on our hobby of renovating mid-century homes, our passion for the environment and the mission behind Destination Green.   Interest rates and vacancy rates in Ft. Collins are relatively low, creating a great opportunity to purchase rental properties that offer positive cash flow and are poised to appreciate nicely over the next decade.  We hope you’ll join the journey, and would be honored to be your guide.

When it comes to our investment properties, Lara and I are real estate investors with a bottom line orientation.  However, unlike the greedy Wall Street high flyers and Johnny-come-lately real estate speculators that the rest of us have recently been called upon to bail-out, we take a long view with a wide lens to focus on the triple bottom line.  The triple bottom line puts profit in its proper place alongside our planet and the people who inhabit it.  So I guess you could say we’re Greenlords.  And I guess we’ll be so bold as to take credit for the term Greenlording and its definition.

Greenlording

verb

1: Responsible property management done by or on behalf of green-minded investors toward a green exit strategy, motivated by the triple bottom line (antonym: slumlording).

Don’t get me wrong, we’re not so eco-friendly-green that we’re blind to the color of money.  To the contrary, we believe that the green exit associated with greenlording is win-win, double-green (environmentally and financially beneficial), with a triple bottom line. 

The environmental benefits of greenlording are obvious – our tenants live in healthier homes that consume fewer resources, and put less carbon and wastewater into our air and waterways.  But there are also unique and compelling financial benefits associated with being a green-minded investor who consistently reinvests positive cash flow from investment properties into eco-friendly projects of manageable size spread out over several years. 

1. Reduced Operating Costs - If you pay the utilities for your rental properties, your operating income can benefit directly from relatively small investments in energy efficiency and water conservation projects that lower utility bills.  If your properties are in an area where it is customary for the tenants to pay the utility bills, proper marketing will highlight the benefit of lower operating costs associated with such projects, which can improve the cash flow picture by enabling a higher rental rate.  In either case, projects like adding insulation, changing to low flow toilets and showerheads, and replacing worn out appliances or heating/cooling equipment with new Energy Star products can pay big dividends.  Be sure to seek out any local rebates and/or lending programs related to such improvements.
2.  Higher Rental Revenue - Anecdotally, we’re convinced that the practice of greenlording increases rent revenue.  It just seems intuitive that homes that are proactively maintained and upgraded to become more eco-friendly over time will be easier to rent at higher rental rates than typical rental properties, all else being equal.  That said, it is difficult to find studies and data that shine a light on the impact of greenlording on occupancy and rental rates for residential properties.  No doubt such studies will be available soon.  Until then, we’re banking on the idea that residential real estate trends will track with those for commercial properties, which according to the recent study by the CoStar Group^®, showed a 15% higher occupancy rate and a 8.5% higher rental rate nationally in the first quarter of 2008 for Energy Star rated properties vs. their ordinary counterparts.  Our own experience of raising rent by 9.1% at a property to which we made some very visible eco-friendly improvements in 2008 fits well with this data. 
3. Higher Selling Price at Exit - When it comes to quantifying the benefit of greenlording on selling price, one could again extrapolate from commercial to residential using the CoStar Group^® study to arrive at an estimated selling price premium for Energy Star rated properties of 26.8%.  However, industry expert Jim Amorin of the Appraisal Institute tells SmartMoney that his experience indicates an eco-friendly home typically appraises for more like 10% to 15% greater than a comparable conventional home.  Either figure should get any real estate investor’s attention. 
4. Deferred Taxes - It’s great to have strong positive cash flow from your rental properties, and it is tempting to take that cash flow as profit in any given year.  However, similar to investing in a 401K or IRA, a mindset of reinvesting positive cash flow into eco-friendly projects allows you to defer taxes and improves the ultimate ROI of your investment property.    

So we’re convinced that expanding the view to see the triple bottom line will help the planet and all of us on it, while it also actually improves the conventional bottom line for green-minded real estate investors. 

We hope you’ll go greenlording with us!