Renovating a property to be more eco-friendly can be beneficial whether you are an investor or home owner. Of course, an energy efficient home will have a positive impact on the environment, but it can also give investors a competitive edge in the rental market.
Of course, an energy efficient home will have a positive impact on the environment, but it can also give investors a competitive edge in a rental market. So why should you consider turning your property green?
Although investors may not directly benefit from energy efficient features, due to the rising water and energy costs for tenants, the demand for eco-friendly homes may begin to steadily increase and tenants or buyers may be more willing to pay extra.
If you are worried about how much the upfront cost will be, governments across Australia offer a range of rebates. Check if you are eligible for assistance.
If you are an investor looking to improve capital growth or you are a home owner looking to sell your property in the near future, eco-friendly renovations may help improve the property's price tag. But just like all renovations, you will need to ensure you do not overcapitalise.
It is also important to compare your projected resale value with other property values in the area. If the number is well above the location average, you may have trouble selling the renovated property for that price.
Tips for green renovations
There are plenty of low cost solutions that can help improve the property's efficiency, but before you jump into the deep end, make sure you have a clear budget and schedule in mind to make certain you meet your goal. Take a look at what other things you should consider before starting:
- The type of light bulb you use can make a huge difference to the energy usage. Choose bulbs with 8 watts of power and 12000 hours of life, instead of the standard 100 watt bulbs with 50-100 hours. (Source: Sustainable Buildings)
- Elevating the ceiling can allow more natural light and also cool the home.
- Skylights are a great option to both light and heat your home naturally.
- Install a solar hot water system.
- Ceiling insulation will not only reduce the amount of heat in the home during summer, but it will also keep the warmth inside when it's cooler.
- Ceiling fans are a most cost-efficient option. According to Ergon Energy, ceiling fans cost around two cents an hour to run, whereas an air conditioner costs 52 cents.
- Use Australia's Water Efficiency Labelling and Standards (WELS) scheme to compare water efficiency of different products.
- When choosing showerheads, taps, toilets etc., ensure the fitting has a high WELS rating.
- Rain water tanks: When deciding on a tank size, you will need to do some calculations. Research what the maximium annual rainfall is to determine the maximum load and also use the number of bedrooms to figure out how many people the tank will need to cater for.
- Compare upfront costs with ongoing savings to ensure it is worth going ahead with the renovations.
- Write a priority list of the most cost effective and most necessary renovation jobs.
- Ask the professionals you're engaging for as much pricing information as you can.
- Funding the renovation: Depending on your financial situation, you may be able to fund the renovation with your existing home loan. However, you will need to speak with your lender before making any decisions. Home owners who have substantial equity built up can use this as security to finance the renovation. Your lender may also allow you to top-up your home loan amount to cover the renovation costs; however this will depend on your current financial situation. A vital point to note is that if you are completing major structural changes to the property, your lender may require you to take out a construction loan. So speak with your lender about whether your proposed renovations will be acceptable under your current loan agreement.
Eco-friendly renovations used to be left to the environmental enthusiasts. But, with the cost of living steadily increasing, many investors and home owners are now seeing both the environmental and financial benefits of going green.
See if you qualify. To get a more accurate idea of how much you can borrow with State Custodians,