After 5 years and hundreds of thousands of dollars in mistakes I thought I’d write a post for new investors just starting out. So, if I was going to start a ‘green’ real estate investment company tomorrow here’s what I’d do:
- Pick a company name, DBA and fill out the appropriate paperwork at your county recorders office. I’d pick a name that did NOT have the word ‘green’ or ‘eco’ in it. Those are both slowly becoming outdated. To separate yourself and create a competitive advantage, think about names that imply high-performance or ultra-efficiency. Go that route.
- Pick a logo for your business card/website. Go to a graphic designer and spend a ton or use a service like 99designs. I used them for a client recently and got 76 designs to choose from for $200 in 3 days. Best service available for non-artsy types (like me). Avoid the typical ‘green’ logo images of leaves or plants in soil growing out of hands (which is everywhere by the way). Go for images that imply performance.
- Pick a URL for your site and set up your site using a WordPress blog. Pick from the thousands of free templates available, I like this one. This is fast, free and easy. WordPress makes it easy for you to add content, etc on the fly.
DO NOT DO ANYTHING ELSE UNTIL YOU’VE COMPLETED #1-3 ABOVE
- Get educated on green building. Take a class, read a book, hire me (shameless plug) or watch some green building videos. You absolutely need to have some idea about green building if you’re going to be a green real estate investor. Don’t get caught up in the super-technical, just get a good understanding of how buildings work and what influences building performance.
- Get educated on green materials. Here’s a hint-don’t go overboard on this, stick to the basics like: flooring (marmoleum, FSC wood, organic carpet, etc) , no-VOC paint, eco-friendly stains, low-flow toilets/shower-heads. With literally hundres of thousands of different products on the market stick to the basic categories or you’ll just be overwhelmed.
- When you bid on properties (short-sales, Foreclosures, etc.) tell the bank/seller how you plan to green up the home. When sellers/banks are looking at multiple offers, your offer has more value to them if they know it’s going to be greened up. This may not work every time but in my experience it is something that banks do consider.
- Create a rehab plan/budget for the property. Put everything into 2 categories: what must be done and what you’d like to have done. Take care of all of the “must’s” first.
- Research all applicable rebates, tax incentives, credits, grants available to you. Check out DSIRE for a comprehensive list. IMPORTANT- See what rebates can be applied to item in your Must Be Done list. For example, if there are holes in the wall, fixing those holes and blowing insulation in (something you might have to do anyway) can be a rebatable expense.
- Once the property is green-habbed, create a marketing plan to sell/rent it. If the property has been greened and made energy-efficient, highlight ALL of the benefits of the property so you can sell it higher or rent it out quicker for more money. These benefits typically include:
– Costs less to operate annually.
– Healthier to live in it.
– Appraises for more money.
– Easier to resell.
– No competition.
- Sell the monetary and health aspects of ‘green’ to prospects. DO NOT SELL THE ENVIRONMENTAL ASPECTS. That should be a bonus to your prospect, it’s not the reason they will buy/rent from you. Always remember that people buy on emotion and justify with logic. For example, I am wearing a Reef flip flops right now. I could have chosen much cheaper drugstore flip flops but I have Reefs because they remind me of surfing in Hawaii, drinking Pina Coladas and Jimmy Buffet. That’s my emotional reason to spend $40 on flip flops. Logically I can justify the purchase because I know from experience that they will last a long time and be very comfortable.
Buying/renting houses works the same way. Tie the emotional in with the logic and you have a sold/rented house. The emotional tie-in is the “your family is safer, you’ll spend less, you’ll be the only high-performance house on the street, your neighbors will envy you, etc”. The logic tie-in is “This is going to save me $1000 a year and my house is worth more than anyone else’s in the neighborhood now”.
These are the first ten steps I would take if I was starting a real estate investment business tomorrow. Hope this is helpful! Jim
Photo: Jeremy Levine Design