How energy efficient renovations can help investors

22 May 2014
Expert Advice by Gavin Smith
22/05/2014
 

Energy efficient renovations are not only good for the environment but it can also give a competitive edge for investors in the property market. So what are some of the benefits for making green renovations?

Cost efficient
Eco-friendly renovations will not provide a direct benefit to investors as such. However, with household bills increasing, tenants may start choosing an energy efficient home over other properties in order to save money on water and energy bills. They may even be willing to pay extra rent in order to have these features. 

Renovating your property will mean some upfront costs. If you are concerned about these extra costs, certain State Governments offer a number of rebates. To see if you are eligible, take a look at this website: http://www.livinggreener.gov.au/rebates-assistance?wb48617274=E46F8320

Improve property value
If capital growth is your main objective, you may find that green renovations could improve the property’s re-sale value. However, many renovators fall into the trap of spending too much on improvements and not making a profit when they re-sell.

A good way to avoid overcapitalising is to compare the property’s expected post-renovation value with other properties in the area. You may find it harder to sell your property if the projected value is well above the area average.

Tips for energy efficient renovations
There are several inexpensive solutions that can make your property more eco-friendly. Some include:

•    Natural light is a great way to both heat and light a property naturally. A skylight is just one option to help do this.
•    Elevating the ceiling also allows more light in and can also cool the home.
•    Insulation can help keep the home comfortable throughout the year as it can reduce heat during the warm months and keep the warmth inside during the cooler months. 
•    Compare water efficiency with the Australia’s Water Efficiency Labelling and Standards (WELS)
•    Ensure taps, toilets, showerheads and other faucets have a high WELS rating. 
•    Rain water tanks can also be useful, but you will need to do some research. You will need to cater for the maximum amount of people who will be living in the property (you can use the number of bedrooms as a guide) and also decipher what the maximum annual rainfall is for that area to calculate what the maximum load would be.
•    Write a priority list to ensure you finish the most important jobs first.
•    Compare upfront costs with ongoing savings to ensure the renovation will not end up costing you money. •    
•    Depending on your circumstances, you could possibly fund the renovation using your home loan. Speak with your lender about what options are available to you. For example, if you have significant equity built up, you could use it as security to fund the renovation. You could also add on an extra amount to your home loan to fund the renovation costs. 

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Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.
 

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