Mortgages & Creative Financing

Green Real Estate Rebates, Incentives, and Tax Credits Explained

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Millions of dollars in incentive money is available to you as a real estate investor if you know where to find it. We've talked previously about where to find rebate money (DSIRE is a great place to start) but haven’t explained the different forms of funds available.  Here’s a quick breakdown*:
[*There are exceptions to all of these general rules of thumb.  Check your city/state regs. to get specific info on your project.]

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Green Rebates

Rebates are used to reward behavior.  The way they work is simple- you buy a qualified item and get cash back for the purchase.  In the energy-efficient world you see this a lot with furnaces, water heaters, AC units, washers and refrigerators.  Rebates usually require you provide proof of purchase, fill out paperwork and then you receive a check for a specified amount.  Two caveats for investors:

1. Rebates usually CAN be combined with other incentives, etc.

2. Rebates are usually offered to anyone, you do NOT have to be the homeowner or primary resident.

Green Incentives

Incentives are used to drive behavior.  If you do ‘x’ then you get ‘y’.  If you quit smoking you get better life insurance rates.  Incentives are often used when you either build/remodel green or reduce energy or water consumption on an existing property.  Incentives can include:
1. Cash payments (checks).
2. Zoning/Planning/Engineering dept fee waivers or deductions.
3. Priority in processing zoning, etc. applications.

Often, incentives are local government programs that originate from Stimulus funds. For example, the City of Encinitas gets $100k in Stimulus funds to promote green building. The City Council decides to offer a $2000 cash incentive to any builder/remodeler that gets their project LEED or BuiltGreen certified.

Incentives are largely given to those that own the property.  It does not usually need to be owner-occupied.

Green Tax Credits

These are great BUT largely available only to owner-occupied owners, not real estate investors. Enough said.

Energy Efficiency Loan Programs

There are loan programs available to investors for energy efficient measures. Typically, these programs are for larger projects but there are some for single family homes. Often the loan will cover the cost of the energy efficiency upgrades somewhat like a 2nd mortgage. Since the loan is based on the projected savings of the program you can often get lower rates and better terms. Check with your lender for more info.

Hopefully this explains the differences between the types of funds you can receive for green upgrades.  While it does take some investigation to find these funds, they can often help you reduce your renovation costs while increasing the value of your property.

    Jeff Brown
    Replied over 9 years ago
    Hey Jim — Enjoyed our time together the other day. It won’t be the last time, either. Since the tax credits aren’t available to investors, along with other incentives, one wonders whether the owner occupied home, given the same ‘green’ add-ons, is somehow saving more water and energy than the rental home next door. 🙂 It’s these completely irrational government rules that make us all crazy.
    Replied over 9 years ago
    Overall, rebates sound like the best deal for taxpayers. But hey, whatever makes green thinking the status quo is awesome.
    James Townend
    Replied over 9 years ago
    Hi Jim, I love the fact that not only peope investing in green are doing their bit for the environement but, also getting a tax relief from tax man. Tax is a complicated subject and you have such as simple method of describing what is a complicated matter – a real skill indeed. I congratulate you on this blog and look forward to reading more about tax benefits that are available in real estate investing. Thanks. James
    Replied almost 9 years ago
    As someone who is starting out in the US market the above is a GREAT overview. I’m particulary interested in Stimulus funds, like your example these seem pretty strait forward to me – is there a central resource or maybe a website that covers these nationwide? Thanks – Paul
    Jim Simcoe
    Replied almost 9 years ago
    Paul, Thanks for the nice words. Check out they have a very comprehensive of incentives and rebates. Thanks and good luck..Jim