Green investing question

26 Replies

I was curious if anyone had any success with green investing. I have a passion for renewable energy and real estate investing as well and wanted to merge the two. Since I currently work for a renewable energy company that designs systems for both residential and commercial, I was thinking about contacting investors who specialize in this niche to possibly partner up with my company. I would use this to get my foot in the door to real estate investing and learn up close and personal about operation cost and value added with renewable systems. Any other advice about how to merge these two?

@Jerome Adams , most of the green energy industry has been propped up by government handouts, not by private investors or consumers. When the government stops taking our tax dollars and giving it to green energy, I think you will see this whole green movement dwindle.

When you ask about green investing, are you talking about equipping properties with green technology? Or are you talking about investing in green energy in general?

As you know, most green energy technology takes years to see a return on investment.

I think you will find that most investors are more than happy to install technology that improves efficiency or reduces costs. Some people call this being green, I just call it being smart. But they won't invest in most of this green industry stuff that costs two to three times traditional technology, just so they can say they are "green".

Hi Jerome,

What is your preference for real estate investing? Are you looking to buy and hold, rehab, develop?

I can see where SOME green initiatives might improve your selling price, but not always. I feel it is still a bit of a niche market, like Ryan said people are happy to invest in it if it results in reduced cost for them, but not just to be green. For instance, I might pay a bit more for a home with geothermal heating installed since the cost to heat and cool is so much less (plus someone's getting a 33% rebate from the government for the investment) but I wouldn't pay more for a home built with green materials.

Kelly

@Ryan R. , looking at things logically, the oil and gas industry is subsidized and has been for much longer than the renewable energy industry and for much more money. So any handouts that you refer to of your tax dollars is misguided.

The green"movement" is not dwindling simply because it is a natural progression of science and economics. Whether your ahead or behind the curve is another thing.

I was referring to equipping property with green technology. I completely agree that an energy audit of the home should be done and installing existing technology that improves energy efficiency is always first. It is true that the return on investment can take years but how long can be longer or shorter based on how the tax credits,incentives and rebates are for a particular state and town. And if your system is producing more electricity than needed, your profit from selling back to the utility makes the ROI even stronger.

I was primarily interested because I know the product we offer at its price would probably make more sense than a traditional solar installation so I already see the potential where it would make sense in places like multifamily or commercial real estate settings.Than after we are able to lower our cost even further it would be economically viable for SFH. There are immediate monetary benefits to a property for adding a feature such like renewable technology. I was hoping to speak with someone who dealt in this niche

@Kelly N. thanks for replying. I myself am personally looking at a buy and hold strategy but I want to work with investors in any other facet of investing where they are "physically" involved in the property.

I know from being in the industry even for a short time that many people do not know even a small amount of options and at what cost they are for "greening" a property. That's where I want to come in and show and research these options where cost is reduced, value is added as well as other socio-economic benefits. I already had this idea but after reading some of the articles on the subject here on biggerpockets helped me realized others saw this as well

@Jerome Adams , I think you've been fed some hot air regarding oil & gas industry subsidies. Regardless, our government has blown billions of dollars in wasted green energy scams.

You go on to prove my point when you talk about return on investment depends on "tax credits, incentives and rebates", this means "government handout".

The green movement is dwindling. Lets not mix advances in technology with al gore's climate change/green crowd. No one is opposed to more efficient technology, or even abandoning oil when a viable alternative is available. But that doesn't exist right now.

I'm tired of the Green crowd telling me that the Earth is 100,000,000 million years old and that it has gone through cooling and warming periods thousands of times, but then telling me that a supposed .1 increase in temperature over the last 20 years is my fault because I have an SUV. I call BS.

As a side note, in my corporate job, I have customers whose budgets are in excess of $100,000,000. annually. They laugh at these green companies trying to win their business with a more expensive product that's labeled "Green". It doesn't matter what the technology is, it's gotta make dollars and sense.

Maybe a better angle would be to approach developers who will incorporate the "green technology" into their new projects. That developer will then advertise the project as having the "green" features - to lure in buyers who have that preference and are willing to pay a bit extra.

I did attend a presentation a couple of years back by an investor / contractor who was using some "green" approaches in his rehab work. I wasn't convinced of the payback, but maybe some others might be.

Part of the government subsidizing industries is an attempt to get the industry to "scale up", and then with economies of scale it might become more cost effective. Doesn't always work out that way, but that is the hope.

@Ryan R. regardless of subsidies, energy efficient building construction has been around a long time and has been well integrated into the building codes for years. I'm not sure it can be called a niche anymore if you are required to do it.

@Jerome Adams check out greenbuildingadvisor.com for lots of good information on building and remodeling "green". i think you will find some like minded people there.

as Kelly alluded to, the issue is really a marketing issue. how do you market a home as green in a way that will raise your selling price to justify the extra money you spent installing the green systems. "green" items are not as flashy as a kitchen with granite countertops and stainless steel appliances and many people will not understand the value of a roof w/ R60 insulation. most energy efficient measures are pretty boring.

@Colin L. , no one is debating whether building with optimal energy efficiency is a good practice. As I stated, I'm all for improvements in technology/increased efficiency.

The OP stated that he was passionate about renewable energy; this is what I was commenting on.

A buddy of mine is a mechanical engineer. He built an icf house with geo-thermal energy, spray foam, high-end windows, etc. Bottom line, when he sold it, he didn't monetarily benefit from these improvements. He could have used traditional materials and sold the home for about the same price.

Bottom line, as others have stated, you have to be able to recoup the additional costs from green energy technology since it is usually more expensive. If @Jerome Adams can figure out a way to do that, he'll be way ahead of the game.

@Ryan R. I personally like to deal with facts and not be emotional about certain subjects. Its the engineer in me. As always I never take anything at face value and always research something before I accept. Getting the data on all these items whether it be how much oil and gas is subsidized, the change in climate due to man made activity or technologies that currently exist to replace oil as means of transporting energy is easily found if you choose to do so and I would gladly send them to you. Obviously your SUV is not the sole cause of that increase but most people such as yourself don't care about the science behind that either which is fine. And I can guarantee you that if your government didn't subsidized gas and oil you wouldn't be able to put gas in that SUV you own.

As far as labeling of handouts because of tax breaks, and advantages is kind of hard to understand. Every industry is subject to them including this one of real estate investment. That's one of the most attractive parts of all real estate investing. And I'm 99 percent sure you don't complain when you receive these tax benefits from your investing although I'll be sure to picket after your next transaction.

As far as your corporate job or any other business for that matter, I would hope they laugh if they see something in the budget that doesn't make sense other wise they would be awful at their job. On the other hand if due diligence is done and it makes sense well then that's another story

@Colin L. and @Steve Babiak thanks for the resources I'm definitely going to check them out. I think developers are the way for me to go since incorporating the energy efficiency in the design instead of simply adding features make these homes cost competitive and a better option for homeowners in the end.

Start a company that builds and retrofits for green and efficiency. Many have done this in my area, BUT a good emerging market for this would be multi unit landlords. Imagine the savings when parking lot lights can be solar powered and landscaping water can be processed from the gray water from sink and showers!

Team up with colleges as well, college students are always free research labor! YAY for free research labor!

I would recommend if you really are passionate about it become a building contractor and build and retrofit for efficiency.

@Jerome Adams , we obviously disagree on this particular subject. I'm sure there are many other topics that we would both find common ground on, and in the future, through this community those may manifest.

However, I wish you the best of luck in this pursuit. Good Luck.

@Emily Dixon I think that's a great idea! Especially student housing. A developer/investor I met at a recent trade stopped and talked to me for about an hour about that because he saw our product and was curious about it. He's developing some student housing and we are going to sit down and see how it could fit into what he is doing and potentially give his complexes an edge over the competition while getting me that education in multi unit real estate that I wanted.

@Jerome Adams , be sure you research the developers you go after if that is your decided path. Many of the developers I am aware of look at short term calculating, therefore the cost benefits aren't always there from their point of view. They are more interested in an approach they've done before and they are accustomed to.
I'm not trying to generalize, and yes a lot depends on location. Some communities require higher performing buildings, so you will find that the developers there can handle the requirements (although they are not always happy about it). Also if you look at a market where buy and hold is the focus, and as @Emily Dixon has pointed out University work could be a good start, you may find a different perspective.
Not to get in the middle of it ;> but you can see the contrast between short term cost analysis as I think @Ryan R. is looking at it and more of a life cycle cost analysis as a buy and hold oriented group would.

Of course scale comes into play and market too, but hopefully you get what I'm trying to explain.

@Kristopher K. I completely agree with what you said and thanks for the advice. I just have to figure out who to approach within the university setting, but I can probably get that info from my boss since we working with a university to display our technology in a public setting.

@Jerome Adams , If you have access to the facilities management group they may be able to direct you, or they may be the ones to talk to. They are also most likely the ones who would know about the contracts and service plans they have with vendors regarding mechanical systems.
Good Luck!

Facts?

It is a fact that the "alternative energy" sector receives billions in direct taxpayer subsidies each year.

It is a fact that the oil and gas industry receives NO direct taxpayer subsidies. The ability to write off expenses, including development and research which results in more jobs and more oil and gas and lower prices, is NOT a subsidy. Unless of course you are on the side
of government that believes that ALL income produced in the private sector belongs to the government... It's about how much they choose to allow us to keep... Then I guess we are ALL subsidized!

In all the discussion, I think the answer is somewhere in the middle. If we take all the political points out of the discsssion, I think all of us can agree that saving energy and conserving where possible benefits everyone, conservatives and liberals alike.

I agree with @Emily Dixon point about multi family. By using energy efficient products to conserve water, and electricity, and gray water for landscaping, it can have real benefits to all the tenants, and save owners money in the long run.

@Jerome Adams It's great that you are so enthusiastic about the business you are in. However; though most tenants like energy efficient features, few want to pay more for them, therefore; as developers and property owners we have to make a decision to install them because we believe they have a benefit over the long haul,, and may make a project more marketable, even though they will not necessarily bring in a higher dollar amount in the way of sales prices, appraisals, or rents.

My company is in the process of pumping out green energy savvy and healthy retrofits in our local market.

I say savvy because we go to the extent of putting out a better product than the average home "flippers" in our area, yet we don't necessarily break the bank.

Here is the medium ground we have found. And what we do with our properties in order to consider them green and a better product.

We are providing our homes that we flip with a much better insulation package than our competition. Our direct competition (investors we personally know, as well as others) insulate by code and only when it is needed. We rip out all drywall and plaster every time.

We are putting in much more efficient HVAC and water saving appliances in all our green retrofits. We shoot for 15 seer and above and the most efficient water heaters we can find while the competition is putting in the cheapest units and most standard wh's. we put in all low flow faucets and showers.

We replace non efficient windows and lighting fixtures with energy star rated items.

We use non volatile or renewable materials such as lowVOC paint, eco carpets, cork and bamboo flooring.

We hire a company or do it ourselves air sealing throughout the entire home.

Ofcourse we properly document everything we do that we feel is above and beyond a typical flip and have a third person energy audit completed in order to justify to the end buyer and appraiser why our home is better than a comp home.

We find that buyers love hearing from a certified professional that the home we are offering will cost them substantially less on their monthly bills than the competition, and that it was built with healthy and family conscious materials.

Our homes are not exactly getting certified for energystar or leed or anything like that, however we are getting really good HERS ratings and we find properly explained to prospective buyers they "get it"

In conclusion, by picking the upgrades that we feel matter and directly impact our end buyers monthly bills and health we find that

A. Yes we are spending on average 5-10% more on rehabs than the competition
B. We are enjoying awesome average list times
(We have a track record of 14 days being the longest it took for an accepted offer)
C. Its a hell of a lot of fun and we feel good about our product at the end of the day.
D. Building codes are changing everyday.... alot of the things we are doing now can and most likely will be code in the future anyway... we're just ahead of the competition in our eyes.

@Jerome Adams how has your foray into green investing progressed? Have you figured out a business structure that is viable? I am establishing an REI company with my partners who are currently general contractors. I came up with the idea for us to incorporate green, energy efficient rehabs as part of our business. You are correct that most don't know what costs are for greening a building and my partners are included. What I do know is in general materials are 30% more to retrofit and you should be able to see 10% increase in resell and bills will be lowered anywhere from 20-30% over time. What I'm looking for, and @John Espinosa  maybe you can chime in, is have you come across any hard data that suggests this is economically viable on a residential side or is it still geared more for commercial which has LEED standards?  I have much more bhag, big hairy audacious goals that I am researching and was thinking we could chat to see if any of our business plans, ideas could work in synergy.

@John Espinosa I went to your website and it comes up as some sort of evil "I gotcha" site with some lady speaking a foreign language.  Not sure what that's about.  I hope it hasn't downloaded me a virus....

Jerome-happy to see someone from NJ interested in regenerative investing. I’m part of a regenerative real estate team called Latitude as well as an investor friendly team called Streamlined Properties led by Jonathan Greene. You can read a lot of his posts as he’s very active here on BP. I am merging both investing and regenerative design through my real estate state work. As a real estate agent I’m looking to work with investors interested in converting homes that implement regenerative design to flip, or buy and hold for long or short term rentals. Would love to pick your brain and see how we can put our ideas together to collab on this further. I’m new to BP so I’ll be posting more on regenerative investing and design soon. 

Originally posted by @Jerome Adams :

I was curious if anyone had any success with green investing. I have a passion for renewable energy and real estate investing as well and wanted to merge the two. Since I currently work for a renewable energy company that designs systems for both residential and commercial, I was thinking about contacting investors who specialize in this niche to possibly partner up with my company. I would use this to get my foot in the door to real estate investing and learn up close and personal about operation cost and value added with renewable systems. Any other advice about how to merge these two?

Also I wanted to share this article with you from Freddie Mac supporting that indeed energy efficient and eco-friendly homes sell faster and at a higher price point versus their conventional counterparts.

Do Green Improvements Increase Resale Value? “Studies have shown that green homes sell faster and for more money than homes without energy efficient designations. In fact, Freddie Mac research found that homes with energy high efficiency ratings sold for 2.7% more on average compared to homes that did not.”

“The National Association of Home Builder’s latest edition of “What Home Buyers Really Want” cited energy efficient features among the top “must-haves” for today’s homebuyer. The survey found that:

  • 89% of buyers desire Energy Star-rated windows
  • 86% of buyers desire Energy Star-rated appliances
  • 81% of buyers desire Energy Star rating for the entire home
  • 77% of buyers desire energy efficient lighting
  • 77% of buyers desire triple-pane insulating glass windows

The chief motivation for these sustainable features is the potential savings they offer in annual utility costs.”


https://myhome.freddiemac.com/...

Thanks for sharing this info! I absolutely agree-in order to invest and implement these regenerative design strategies into your investment properties it’s important before hand to build a team of professionals that specialize in these areas and they are certainly out there and actively growing. Originally posted by @Andrew Hofing :

@Jerome Adams how has your foray into green investing progressed? Have you figured out a business structure that is viable? I am establishing an REI company with my partners who are currently general contractors. I came up with the idea for us to incorporate green, energy efficient rehabs as part of our business. You are correct that most don't know what costs are for greening a building and my partners are included. What I do know is in general materials are 30% more to retrofit and you should be able to see 10% increase in resell and bills will be lowered anywhere from 20-30% over time. What I'm looking for, and @John Espinosa  maybe you can chime in, is have you come across any hard data that suggests this is economically viable on a residential side or is it still geared more for commercial which has LEED standards?  I have much more bhag, big hairy audacious goals that I am researching and was thinking we could chat to see if any of our business plans, ideas could work in synergy.