It’s getting to be a greener world out there. Not only are alternative energy sources gaining ground in the marketplace, the work of improving the efficiency of what we do with our energy is progressing rapidly.
This will have an increasing part to play in the purpose-built rental apartment industry.
The Toronto Star recently reported that energy savings in and of themselves have become a commodity, a resource that can be profited from — so much so for-profit companies are rising to promote it.
One such company mentioned was Efficiency Capital Corp., which has an ambitious goal of financing more than $100 million in energy savings over the next five years.
For apartment owners, saving energy has always been desirable. Electricity, heating and water bills all impact the bottom line. If you can reduce your building’s use in these areas, you can save money. It’s as simple as that.
Such retrofits also allow you to improve your apartments’ position in the marketplace and can even allow you to market your properties as green, enabling you to realize higher rents per square foot.
However, there’s been a high up-front cost to switching to more energy efficient infrastructure. LED bulbs were more expensive than conventional bulbs or compact fluorescents. Compact fluorescent bulbs were a hassle to recycle.
You have to spend money to find and patch the insulation leaks.
Cost of energy efficiency has come down
These costs have come down as technology has improved, and sometimes you can get help from municipal, provincial or federal government programs to subsidize the investment. But it still takes a considerable amount of capital in order to save energy.
Encouraging your tenants to help save energy by metering every apartment and charging for water, heat and electricity accordingly still requires the cost of installing new meters and even laying new pipes or rewiring your building. It’s ironic, but you have to spend money to save it.
The work of companies such as Efficiency Capital Corp. blows this field wide open by taking the risk of your up-front capital costs out of your hands. After an agreement is made between you and a company like ECC, the company pays for the up-front capital costs of your retrofits.
It then makes its money back and then some by charging you payments on a lease over the next eight to 10 years.
These payments would be less than the amount of money you save from making these investments, meaning you still come away with more money in your pocket without having to spend money first.
Experts can help
If you have the up-front capital and you’re willing to invest in the upgrades yourself, you’ll receive a substantially higher return on your investment over the long term. You’ll still need to hire experts, however, who can identify where you should be spending your money.
Some changes may seem obvious, but others are less so, and it’s important to get people who know what they’re doing to help you do the right thing. Experts also need to be impartial and unbiased, which is something apartment owners typically aren’t. We’re sometimes too close to our properties to make the best and most objective decisions.
Consultants with experience in the apartment industry can help put you in touch with the experts you need to contact to make the most of your money. In this, as with any major investment in your apartments, old or new, you should call these professionals today.
Derek Lobo is the founder and CEO of SVN Rock Advisors Inc., a real estate brokerage with over 30 years of experience in helping investors make the most out of buying, selling, and renovating purpose-built apartment buildings. Learn more about SVN Rock Advisors Inc., Brokerage on their website at www.SVNRock.ca.