Green Brand Development - The Dos and Don'ts of Eco-Friendly Real Estate Flipping

If you’ve been following me at all, you may have read from my blog or forum posts about my company’s recent decision to go ‘green’. As I type this, we are currently my local market’s first eco-friendly home redevelopment firm focusing on existing home rehabs. Prior to this, my company had been successfully flipping homes since early 2011 without the need to go green. Our formula was a simple one – provide better homes than competitors at lower prices. Using this formula we enjoyed an average market time of 14 days and never sold for less than 95% of our asking price. So, you may ask why we decided to abruptly change our successful flipping formula by going green?

If it Ain’t Broken, Fix it Anyway

The reasons for why my company went green are numerous but mainly we are simply listening to the market. The American public has spoken and it is clear that they want ‘green’ homes. Recently publishing results from their Green Home Builders and Remodelers Survey, McGraw Hill Construction, an industry leader in American construction, found that eco-friendly home building represented an impressive 17 percent – or $17 billion – of the overall American home construction market in 2011. This is a massive jump from just 2 percent in 2005 and 8 percent in 2008. Even more, that number is expected to rise to as high as 38 percent within the next four years with increased market share of $87 billion to $114 billion! So, with that information in mind, the companies deciding to transition into green, in my opinion, are future-proofing their businesses and positioning themselves to be industry leaders.

But, not everything is rosy in the green world as an interesting dichotomy exists within the American public that real estate investors have to take into consideration. Simply put, Americans are tired and downright annoyed from the constant daily bombardement of so called ‘green’ products and services. And, they have the right to be – since it’s inception, greenwashing has been deceptively used by some companies to increase profits and manipulate public opinion. I’d venture to say that the average American consumer has grown to become skeptical of green claims and that if used deceptively, green marketing can actually hurt one’s business.

Marketing the Unmarketable

So, how does this translate to real estate and how should one go about navigating the world of green? By spending the past few months researching numerous green companies and emulating the one’s who were most successful, I’ve found the answer simply rests on one word: trust. In order to successfully leverage the green label and reap it’s benefits, real estate entrepreneurs have to focus on earning the trust of their local market by building a strong, honest and reputable brand. The American public is smarter than they perceive to be and they can quickly sniff out a fake from the real thing. So, if you want to become a REAL green company, you have to do it the right way – the hard and sometimes expensive way. I’ll show you what I mean. Here are a couple of strategies that we are implementing at our company and some lessons we’ve learned along the way:

1) Be Careful with Eco Friendly – A few years ago (90’s to early 2000) a green company would have focused on their environmental impact in order to attract customers. Save a tree, reduce carbon emissions, avoid landfills – all these marketing campaigns have their place but they should not be emphasized for modern day real estate companies looking to go green. Instead, consumers want to know what directly affects them and their everyday lives. Don’t think about how your house can save the world but think about how your house can bring direct value to your end buyer.

2) If Not Eco Friendly, Then What’s the Point – The world ‘green’ has been thrown around so much the past couple years that no one knows exactly what it means anymore. But, I’ve found that the most successful real estate firms focus on three tenents: Energy efficiency, healthy and environmentally friendly. Guess which two are most important right now?

3) What features do you include – There are a lot of things you can do when building or renovating a house to be green. If you think of all the options, you can be there for days and quickly become overwhelmed with what features to go with as opposed to others. Do I need rain barrels, solar panels, ductless heaters, etc.? At our company, we’ve found it easier to base our rehab decisions after having organized improvements between two categories: saves end buyer money and doesn’t save end buyer money. After these two lists are put together, pick all the cost effective improvements on the saves money column while choosing only a select few from the other column. What does this mean? It means solar panels are out for now but little things like low flow faucets, dual flush toilets and efficient windows are in.

4) Healthy is In – So we’ve already talked about how eco friendly doesn’t bring end buyers direct value but what about healthy conscious features? In my opinion, and it’s what my company is focusing on, health conscious features are MAJOR selling points that few companies are emphasizing. The reason for this is because health conscious features such as no VOC (volatile organic compound) paints, hypoallergenic flooring and extensive home sealing that increases a air quality brings DIRECT value to home buyers. In the near future, the companies who can leverage health features the best will reap the most benefits.

5) Marketing! – If you’ve been in real estate for anything longer than 1 day you will have realized that marketing plays a big part of this industry. Going green and being successful at it depends squarely on your ability to market your green homes. I’ve already harped on it but marketing green can be done incorrectly and sometimes its as simple as using the wrong buzz words. Also, making false claims can ruin a business. What we’re doing to combat this is by bringing in a third party energy auditor to keep us honest. And, we didn’t just go with any energy auditor. We shopped around and found the go-to energy auditor in our area.

6) Think Beyond Today – Any Joe Schmo can come in and make a quick buck in real estate but only the best can build a brand that can withstand the test of time. Set your standards high NOW, and reap the benefits later. By building your brand and becoming a company people can trust to provide high quality homes, your homes will sell themselves. So, before you think about taking shortcuts to going green – think about your brand and if you really want to be known as the shortcut company?

7) Leverage the Community – By going green you open up a range of opportunities to partner with your local community. Take advantage of these opportunities as they help to build your brand, improve your marketing and positions you and your company as industry leaders. At our company, we have an energy workshop scheduled for later on this month that will educate our local community on methods to reduce their monthly utility bill as well as healthier options to use in home.

There are a few of naysayers in my local market who don’t believe in our vision and are projecting us to fall flat on our face. They say that green features aren’t needed to sell a home and that we are leaving money on the table when we choose to go above and beyond a typical flip. In some cases they may be right – but going green has a learning curve (an expensive one) and we jumped in knowing this from the beginning. We are still chugging away against the grain and we like to remind ourselves – we’re not here to flip one home, we’re here to build a trustworthy brand that others will look up to.

So what do you think? What kind of company and reputation are you building? What are your thoughts on going green?
Photos: Ole Houen

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.