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Investing in your Rental Property
Energy audits can provide long-term financial gains Investing in your Rental Property
by Holly Welles
Utilities are expensive, especially during winter months, when tenants rely on energy the most. In light of Canada’s recent carbon emission tax, electricity will only become more costly with time. Additionally, the uptick in energy consumption adds to the global warming crisis with each passing day. Leased spaces account for 490 million metric tonnes of carbon emissions annually. That’s the air volume equivalent of 245,000 Empire State Buildings.
Energy’s impact on the environment — and consumer wallets — has led many property owners to consider conducting audits. These allow them to determine how much their tenants pay for power compared to competing properties. It also enables owners to see why their systems and facilities are losing efficiency and what they might do to fix it.
Often, solutions include a renovation and an updated electrical system, resulting in happier tenants and more money in the pockets of property renters.
What Do Energy Audits Tell Building Owners? The first step to a comprehensive savings plan is an energy audit. Depending on what kind of review a landowner has, the inspection can include an assessment of the building envelope and heating and cooling systems, as well as upgrade recommendations and data analysis of utility bills and costs.
If an owner hires a professional auditor, the level of audit chosen will determine what information they receive. A level one audit is the most affordable and focuses on energy conservation measures that an individual might take at little or no cost. The inspection includes a walk-through of the buildings and an examination of the past year’s utility bills.
This type of review can be a good starting point, but a level one audit is typically not extensive for a large apartment complex. A level two, then, may better serve a property owner’s needs as it also identifies energyusing systems and quantifies their power use.
The most detailed, however, is a level three audit. This kind will provide the above information as well as specific details concerning a property’s electricity use and an in-depth analysis of each system’s energy use. This level of audit may be best for larger facilities and property owners with more money to invest in upgrades or improvements.
Prioritize Renovations Conducting an audit before beginning renovations is key to prioritizing remodels or improvement projects. Leveraging the data provided by the auditor will allow owners to make the smartest decision regarding what to fix first. Additionally, the choice will be based on necessity rather than aesthetics or intuition.
Ultimately, this will result in happier tenants and better savings for both them and their landlords. And once building owners have renovated to improve energy efficiency, they can move on to other improvements that aren’t as pressing.
Look for Incentives While planning renovations, it’s essential to search for incentives to minimize costs. Various
federal, state and local utility incentives provide tax credits on renewable energy systems. Grant and loan programs may also be available through government agencies.
Efficient power usage may not be as expensive as it seems — owners just have to know where to look for credits, discounts and incentives. And if they do find a program that applies, a new electrical system will likely pay for itself in no time.
Multifamily Audit Benefits Another reason to consider energyefficient system upgrades or installations is the Canadian carbon tax. Put into effect last year, the rule sees that Canadians pay at least $20 per ton of carbon they emit. That dollar amount will likely rise in the coming years as policy-makers continue to urge the public to switch to energyefficient systems.
While the effects of the carbon tax will continue to be studied, it’s clear that homeowners and investors have financial incentives to switch to clean energy. However, renters may also be paying more attention to energy spending regardless of this new legislation.
For example, an energy audit can determine how much the tenants may spend on utilities each month. If the inspection reveals that the tenants are paying more than neighbouring properties, owners who aren’t mindful of upgrades may run the risk of losing residents.
The installation of new, energy-efficient systems may also attract more eco-friendly tenants. So, if landlords can commit to renewable or clean electricity, all the better. Of course, both situations spell major financial gains for property owners who are always looking to fill vacancies.
Single-Family Audit Benefits Conducting an energy audit can also increase property value. Simply using the words “energy efficient” in listings can allow homes to sell for a considerable amount more. In the U.S., for example, a study of 66,000 homes found that those listed with these words sold for 6% more than other comparable houses without energyefficient systems.
This point is especially beneficial for real estate investors. Single-family investors potentially have the added benefit of attracting buyers who are willing to spend a bit more on green energy upfront. This creates a significant financial advantage for investors working on fix-and-flips or simply looking to sell an upgraded rental property.
Energy audits have a measurable impact on real estate investments of any type. Ultimately, the investment is well worth the reward for owners, renters, buyers and sellers alike.
Switch to Clean Energy for Higher Monetary Gains The advantages of green electricity are abundant and can lead landowners to discover new ways of harnessing energy without the high cost. As renewables grow in popularity and accessibility, more people will join the movement and lower their maintenance costs.
Holly Welles is a freelance writer covering real estate trends for Rental Housing Journal, Apartment Guide and other web publications. More of her work can be found at www.therealestateupdate.com
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