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Making the Financial Case for Retrofitting your Rental Property

Let’s talk about retrofitting investment properties. Making existing buildings more sustainable and energy efficient is the socially responsible thing to do for the environment, of course. But in order for many folks to take the plunge, they want to know it’s worth the investment. It’s one thing to make these changes for the place you call home, but what about for rental properties? Are green renos worth it financially?

 

Would you be surprised to hear that increasing data suggests that YES indeed it is worth it.

 

Green Renos: What the Research Says

 

  1. Green buildings – both commercial and residential tend to get higher rents.

 

Bentall Kennedy, one of the largest international real estate advisors, with more than 300 properties in their North American portfolio – found that their buildings with environmental sustainability certification had an 18.7 per cent higher occupancy rate than non-certified properties. As well their ‘green’ office properties netted 3.7% higher rents over regular properties.

 

  1. Green buildings attract better quality tenants, who are happier and stay longer

 

A few studies have likewise noted that sustainable buildings attract better quality tenants who will stay longer in a green building. Just as one pays a premium for organic food, many will pay a premium for an energy efficient, sustainably renovated apartment unit. These tenants tend to be happier and stickier, which reduces landlord leasing costs associated with turnover. This is nothing to scoff at—empty units are a real drain of money.

 

  1. The carbon tax is increasing every year, this means your renovation and upgrades will pay for themselves in much less time

 

The cost of energy is expected to rise, so while a major renovation is likely to pay for itself over 10-20 years, that timeframe decreases as the cost of energy increases because you will be saving on energy costs every month.

 

Green Renos: Don’t Greenwash, Make Meaningful Changes

Changing the light bulbs to LED and lowering the furnace a degree are symbolic gestures only. Don’t expect to see a substantial difference to your monthly bills or your consumption patterns if these are your only changes. The meaningful impact comes from renovating and retrofitting. Below you’ll find the priority list of building improvements that will yield the greatest change.

  • Insulation and draft-sealing

One of the best ways to cut down on energy consumption and to save money is to go for the very best insulation you can afford, like cellulose or Roxul. Insulating all walls, the attic and basement will make a huge difference. Some studies have measured the energy savings at up to 30% by keeping heat where you want it.

Quick tips:

  • Hire professionals to come in with a thermal screening camera. They’ll be able to pinpoint exactly where your gaps are and plan for the most cost-effective solution to stop the heat leak.
  • Insulate all interior hot water pipes in the home to save money every month.
  • Foil seal all HVAC duct seams to minimize energy leaks.

 

  • HVAC equipment

There are two types of eco-friendly heating and cooling systems – Passive and Active.

Passive systems maximize nature’s ability to heat and cool without furnaces and air conditioners. This would include constructing a home with a light coloured roof or green roof that reflects rather than absorbs heat. Specialized windows are also employed in passive systems. These are designed to keep heat out and cool air in.

Active systems are the mechanical heating and cooling systems like geothermal, solar, and high efficiency furnaces on the market.

Depending on where you are in the reno process, it may make sense to include a few of these in your project.

  • Low VOC paints, primers, adhesives, and caulking

Consider using construction materials that are low in VOCs (volatile organic compounds). Some people, especially children, and those with allergies and respiratory issues, can be very chemically sensitive. VOCs are also terrible for the environment. Advertising a unit that has been ethically and greenly renovated will allow you to charge a premium and attract the best tenants.

  • Energy efficient appliances
  • Updating appliances to the most energy efficient – especially the fridge, dishwasher and washing machines – will help save money month over month. This is sure to be an attractive feature for would-be tenants.Quick Tips:
    • Buy just as big as needed, no bigger. Cooling a fridge that sits near empty is just not a good use of your dollars.
    • Use the EnerStar guide when choosing appliances.
    • Avoid side-by-side refrigerators, they are far less energy efficient.

     

  • Electric vehicle charging
  • Including an electric vehicle charging station in your garage, a feature you could charge a premium for in your rent, would surely attract some of the best environmentally conscious tenants. And getting one more gas-guzzler off the roads will benefit us all.

 

Green Renos: Federal and city incentive programs

 

With the carbon tax increasing, there’s no better time to get your rental property retrofitted to be as energy efficient as possible. New federal incentive programs are expected to be announced soon. At the moment there are a few City of Toronto and other third party programs you can take advantage of such as:

 

Check for more using Natural Resources Canada’s app.

When we talk about global warming we are so very quick to point to cars and industrial factories as the big dirty contributors to climate change. But in reality commercial and residential buildings account for 17 per cent of greenhouse gas emissions in Ontario. That’s a pretty hefty number. So we really have to get moving on retrofitting our buildings. The cost of not doing so will be high, financially, socially and morally.


Looking for a green condo? Read about what to look for here.

 

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