The Pareto Principle of Green Investing

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The Pareto Principle states that 80% of your results from 20% of your efforts.  He actually said it more eloquently than that but you get the idea.  The same principle can be applied to being a successful green real estate tycoon.

There are literally several thousand different things you could do on any property to contribute to it’s energy efficiency, reduced carbon footprint, operational cost savings, etc.  Most, if not all, investors should only pursue those that offer the highest value return.  Again, 80% of your results will come from 20% of your efforts.

So, if you told me you could only devote 20% of your efforts to greening your investment properties, here are the two areas I’d tell you to put that focus.  There are a solid ten you could focus on but these two represent the 20% that will deliver 80% of the results.

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The Two Areas to focus on for Green Investing Would Be:

Rebates and Incentives:

Find all that apply to your project.  There is simply too much money available to you as an investor to ignore.  The payback is usually much greater than the invested time.

For example, many of you have to buy water heaters on your rehabs.  Almost every city in the US offers a rebate (usually a few hundred bucks) on water heaters.  The time to fill out the application and send it in with a receipt is usually under 30 minutes.  If a water heater costs $400 and you can get a rebate for $200, a half hour of your time to save $200 seems like a good deal to me. Rebates are often offered at the city, county, state, federal levels and can be found through most local utility companies.  In addition most rebate programs don’t have combining restrictions.  Meaning that a $400 water heater may have a state rebate ($200) and county rebate ($100) and a NGO (non-governmental organization) for $100 that can all be combined. Net cost = zero.

Look for rebates on appliances, energy audits and specific energy-efficiency measures (solar, geo-thermal, solar water heating, etc.).  While you might find some small programs I would advice not to bother looking for rebates on specific materials.  Better to get your purchase price discounted though effective negotiation and green project leverage.

Results of rebate efforts: Higher quality, more energy efficient items at lower costs than regular alternatives.  You save money AND get better stuff.

Building Envelop:

Focus on tightening the building envelop as much as possible. Use low-cost methods to ensure a tight building envelop with less air leaks and gaps.  Use the least amount of energy to keep it warm in the winter and cool in the summer.

Blown wall/attic insulation; spray foam window/plumbing insulation; switchplate foam gaskets; weatherstripping; window film; cool roofs; vapor barriers; etc are all great methods to provide a tight building envelop.

I’d also suggest getting an energy audit performed so that you can see where the problem areas are before you begin the work.  Energy audits can cost less than $400 and come with applicable rebates.  Even if they they didn’t check out this math:

1. Cost of energy audit: $400
2. Utility savings (based on completing repairs found in energy audit) : $150/month
3. Increased price someone will pay for your property* (to save on their utility bills): $5000
4. Not a bad return…
*There is a proven formula we use to determine exactly how much a potential buyer will spend.  If you’d like more details contact me in the comment section.

Results of tightening the building envelop:  People living there will save money every month on their utility bills. You, the investor, can charge a higher sales price or higher rent due to an improved building envelop.  People will pay more because their total net out-of-pocket monthly expense to live in the home will be less.

The results of using Vilfredo Pareto’s principle is that you make more profit. It’s as simple as that.  Let this principle, created by yet another great Italian (yes I’m biased) guid you on your path to green real estate riches.  Ciao..Jim

Photo: Brock Builders via Flickr

About Author

I help real estate investors increase profits and property values through a variety of green strategies. I help clients find hidden rebates, tax incentives and credits to maximize returns on any property.


  1. Hey Jim — It dawned on me that your very practical, totally capitalistic approach to ‘green real estate’ must really irritate most in the so-called ‘green’ movement. 🙂

    Recently, The Boss and I began the search for our final home. It will be large enough to entertain moderate sized groups, and a couple families worth of overnighters. We’ve decided against building new, as we believe two factors will allow us to buy an existing white elephant — then redesign/rebuild. (We’re planning to use as much old growth wood as is practical/possible. 🙂 ) Those two factors? First, The Boss, in another life, was a well known & respected interior designer, used by many developers to ‘spice up’ their own in-house efforts. Second, in San Diego we can buy very old, largish homes in A+ locations, tear them down to the studs, including bearing walls if needed, and still pay less than buying a lot and building.

    We’ll be going as green as possible, the driving force being cost savings both in installation and monthly use. We also plan on making it a ‘smart’ house if possible. Our goal is to locate this home by the end of next year. Your posts have given me much encouragement.

    • Thanks for the kind words, Jeff. My apologies for not being in touch sooner-crazy week. Since you’re in SD we should grab coffee sometime, would love to meet you in person. Also, check out the new SG&E program, should help you out with some rebate money, etc…jim

  2. I live in Alabama and the power company will give us a free water heater if we switch from gas (a little known secret).
    I absolutely can’t stand our gas company —- it’s one of those where you need to be at your property from 7:30am – 4:45pm in order for them to turn on the gas and they call you from a blocked number to confirm the appointment. If you miss the call, you’re done, and you have to start again. Rrrrrgghhh.
    Needless to say, we go electric every time we can!

    • Sounds like your gas company is like our cable company. Alabama has some great rebates for homeowners though.. I love the south, so easy to get rebates and easy to get higher prices on properties due to the weather. Thanks..Jim

  3. Hi There!
    I’d love to hear more about your formula for increaed resale value re weatherization upgrades. In Maine, we have an amazing thing called the home energy savings program administered by Efficiency Maine. Short story =

    1. energy audit
    2. do stuff energy auditer tells you
    3. if his computer model says you’ll save 25%-49% you get a check for 30% of your money spent
    4. if model says 50% or more you get HALF your money back.
    5. just expired = 2010 summer promo, get 1k add’l per unit back regardless of % saved

    Example: We just put 13k into a 2 unit I bought as REO for 26k. I saved 51% acc. to model and received rebate for 8k. This includes putting in new furnace, 9″ of attic cellulose, foaming basement, new water heater, and spending 1.5 days caulking every seam in the building. We can now heat the place with a candle … !

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