House flipping is a concept familiar with most, of buying run-down houses, fixing them up and selling them for a profit. Recently, ‘eco-flipping’ entered the scene with the aim to make the process greener.
It’s a good investment for many and is often tossed in the minds of investors amidst the option to buy and rent. Flipping vs renting can be a close and difficult decision to make. The biggest difference is that flipping requires active management – while rentals can earn you a passive income from the monthly rent.
Flipping is ideal for those looking to make a large return quickly, whereas renting is a good way to build a sustained cash flow. Other options include holiday let mortgages and short-term rentals – for a more passive and flexible income.
Whichever investment strategy you choose, it’s likely to be heavily affected by the change in home buyer attitude, access to sustainable material and long term environmental factors of eco-friendly, sustainable and green property development.
What makes eco-flipping a better investment?
It’s safe to say that we’ve come a long way since engineers, scientists and consumers were ignorant of the negative impact of low-cost, mass-produced materials like plastic, PVCs and lead-based lighting. Since understanding the dangers of building without considering the environmental impact of our materials, there’s been a substantial shift in consumer attitude.
In fact, a Realtor.com survey found that most homeowners take into account the environmental impact of their property, with over 85% saying they would like to live in an eco-friendly home. Those not yet living in eco-friendly homes say they still take steps to reduce their carbon footprint, with 80% using energy-efficient appliances and 75% maintaining energy-efficient lighting.
For consumers, efficient appliances and lighting solutions are so widespread that their long term cost-effectiveness is indisputable. From an investment perspective, the benefits of eco-friendly residential construction trickle down to higher sales prices, positive publicity and tax credits. In short, investors who make green-development priority reap huge ethical and financial rewards.
Over the past few years, the terms ‘green’ and ‘eco-friendly’ have been thrown around a lot, but ultimately come down to energy efficiency, environmentally friendly and healthy living. The shift in demand and appreciation for environmentally conscious homes can immediately translate into large returns for any smart eco-flipper. Here’s how to make the most of the trend.
Remember your target audience when eco-flipping
20 years ago, ‘green’ construction companies would have been focused on attracting customers. To do so, their marketing campaigns largely revolved around ‘save a tree, reduce carbon emissions and avoid landfill’ slogans.
Modern-day green real estate agents, eco-flippers, holiday letters and residents themselves want their property to directly affect their contribution to a sustainable world. More importantly, property developers, flippers and holiday letters want to bring direct value to the end buyers and letters.
In doing so, understanding the end buyer is key to making profitable investments. Everyone wants to cut costs in the long term, but remember the distinction between family homes, working professionals pads, office spaces for businesses and so on. Will rain barrels provide the same value to a large family as they would a single elderly person? Are solar panels and ductless heaters precisely what your end buyer wants? Prioritise your spending with respects to the end buyer and flip a home accordingly.
Listen to the Millennials
Arguably the most important target demographic in the market given their ages, millennials are swiftly becoming the largest group of renters and first-home buyers. Whilst traditional home flipping demands to keep renovation costs low to maximise profits, eco-flipping allows room for additional expenditure, leading to higher property values and resultant profits- thanks to millennial demand.
A survey of 1,000 25-40-year-old homeowners and renters showed that almost a third wanted their homes to be eco-friendly. Data released by Eurocell – manufacturer and distributor of uPVC door, window and roofline systems – stated 29% of respondents rated eco-friendliness as their most desired design feature – followed by minimalism.
The same study found that 49% would be more likely to buy or rent an eco-conscious home; with over 24% saying they’d be willing to pay more money when renting or buying a property with eco-credentials.
Get an Energy Star Label
Obtaining a Green Building Certification can help prompt buyers and renters pay more. To build an energy-efficient home, where future residents keep their utility bills low, you should apply for the Energy Star Label.
Meet certain minimum efficiency requirements, earn your star and in turn, earn the demand of those willing to pay more for eco-friendly homes. Such minimum requirements apply to cooling and heating equipment, window and door insulation, thermostat and ductwork and lighting appliances.
Gone are the days of buying a run-down home, repainting it and at a push fitting in a new kitchen suite; to sell it for a profit. Consumers today expect and demand more from the use and maintenance of all purchases.
Going eco-friendly shouldn’t break the bank
Whilst living a green life is not just the reserve of young people, it seems they’re more likely to indulge in eco-friendly lifestyle choices. It’s beneficial, therefore, for investors and buy-to-letters to keep in mind that young professionals and millennials are their target market.
Eco-flippers, holiday letters and investors can make adjustments to properties to make them more eco-friendly as a response to the market. For example, single glazed windows and doors can draft-proofed, insulation can be added to walls and ceilings – both of which can raise EPC rating; which must be a minimum of E to be let out.
Replacing lightbulbs and appliances with more energy-efficient ones is a cost-effective way to make a property more ‘green’. Go further by implementing ground source heat pumps and solar panels or systems to collect rainwater for laundry, for example. Structural changes don’t have to involve tearing down the building. Rather, strategically adding windows to increase natural lighting can significantly reduce a homes energy consumption.