"Green"...you cant go anywhere without hearing the term these days....and with good reason. But is being green or eco-friendly really something that we as investors should really care about? Afterall- green usually means expensive also. But the combination of green and rentals could be a winner for investors. Here's a few things investors should consider when making the move to green rental properties...
Long term...it just makes sense
As investors we are inherently price conscious when it comes to buying property. But most investors are buying rental properties for long term cash flow and financial security. So it makes sense to make decisions based on long term profitability.
A property with its own renewable energy source such as individual wind turbines or solar panels will save the property owner and tenants in energy bills. As time goes on and the systems upfront installation cost are recaptured- the systems actually add to profitability. Other energy saving aspects have the same impact. Overall- properties with extensive green features tend be of higher quality and therefore require less ongoing maintenance.
High demand...low supply
As green goes more and more mainstream...people are more likely to search for rental properties that enable them to lower their personal environmental impact. For those of us with green rentals this trend is exciting. The number of people seeking green properties is increasing at a much faster rate than the number of actual green rentals. In today's market- rental rates have been squeezed. But a property advertised with energy conserving features will be able to sustain higher rental rates. Higher rental rates means better profitability and better quality tenants.
Green properties are more energy efficient and have a higher indoor air quality than their non-green competition. Thus tenants tend to stay longer in these properties- reducing tenant turnover. Keeping good tenants in your rentals longer is key to increasing the long term profitability of a rental.
The Emergency Economic Stabilization Act of 2008 gives tax incentives to property owners of income producing properties who upgrade to renewable energy sources. Property owners can deduct as much as 30% of the installation cost of the upgrade.
Check with your accountant- smaller investments in energy saving features can also be deducted. Just make sure you check first with your accountant to see what exactly can be deducted.