Benefits of Green-Certifying Your Rental Property

44 views December 1, 2022 December 1, 2022 Chris Lougeay 0

Is green-certifying your rental property worth it? That’s the question many property owners and developers ask themselves when it comes to their rental properties. Getting your rental property certified might seem daunting. However, you might be surprised to learn that 54 percent of multifamily builders are choosing to build 15 percent or more of their properties green — and that percentage is expected to rise to 79 percent by 2018.

Clearly, there are real advantages to green-certifying your rental properties. Here are a few:

8 Reasons to Green Certify Your Rental Properties

  1. Reduced operations costs. Case studies abound: It is a well-known fact that green buildings save their owners big money over time. One study found that green buildings showed a decrease in operating costs of 15 percent for new construction and 13 percent for retrofits over a period of five years, with payback times of eight and seven years, respectively. While landlords don’t always pay the utilities, they can often profit indirectly by charging premium rent for their green-certified units.
  2. Higher rents. Many people are willing to pay more to live in green properties. This is especially true for millennials, a prime market for apartment rentals. However, adding green amenities to a property is possible without investing in certification. Does certification really matter? According to one study, it does: LEED-certified units were found to command a rent premium of 9.1 percent, versus 4.7 percent for non-certified green properties over the market average.
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  3. Lower vacancy and turnover rates. Green-certified buildings tend to be located in walkable neighborhoods and are a lot more comfortable than conventional buildings because of their superior weatherization, lighting, and ventilation requirements. This means tenants are more likely to renew their leases. One San Diego study found a 4 percent lower vacancy rate for green-certified buildings.
  4. Quality assurance. Having third-party inspectors on your building site may sound like a lot of red tape. Yet, in the long run, investors who value quality appreciate the fact that green certification inspectors oversee every aspect of construction. Making sure everything is up to code ensures that the building will perform as expected and reduces the likelihood of experiencing ongoing maintenance issues that plague many managers of non-certified buildings.
  5. Heightened interest from investors. It’s no secret that certified buildings consistently score higher for occupancy, rental rates, tenant retention, and energy efficiency. In other words, green buildings are more profitable — a fact that is not lost on real estate investors. As Deloitte’s Real Estate Sector Leader Robert O’Brien puts it, “Going forward, adoption, measurement, and reporting of sustainability initiatives will be a business imperative, given the broader benefits on rental growth, yield premiums, total occupancy costs, asset values, and marketability.” However, green features alone are often not enough to satisfy conservative investors. Green certification offers proof that a building is what its owners and builders claim it to be. In addition, many companies these days operate under sustainability initiatives. Adding green-certified properties to its portfolio is an easy way for an investment company to comply with any social or environmental commitments its shareholders expect of it.
  6. Anti-greenwashing. “Green” is a highly vague label and means different things to different people. While claiming a building is “green” may help boost sales initially if the building doesn’t perform as expected, it may lead to backlash and accusations of greenwashing or portraying a product as sustainable when it really isn’t. Green certification requires rigorous adherence to strict sustainability standards, and stands as uncontestable proof against greenwashing — therefore insulating owners and investors from what could become a PR headache.
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  7. One of the lesser-known perks of green certification is that certified properties often qualify for financial incentives unavailable to their conventional counterparts. From more accessible financing to lowered insurance premiums to grants and loans, these opportunities can significantly reduce the actual cost of construction and maintenance of green-certified buildings.
  8. Simplified code compliance. Many existing code inspections are automatically bundled into the green-certification process and are performed by the third-party certifying organization. This can streamline code compliance and tighten the price gap between certified and non-certified construction.

One important thing to remember when you are considering green-certifying your property is that green building is best approached as a holistic exercise. Many so-called “costly” green upgrades — such as solar panels — work in synergy with one another and often prove to be relatively cost-effective when they are included in the building plan from day one, as opposed to simply tacking them on to a building that wasn’t designed with sustainability in mind. By incorporating green design and involving their certification team from the get-go, property owners can best assure that their certification efforts will pay off.

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