Green Real Estate Investment Study

SPECIAL REPORT:
How to GET MAXIMUM

PERFORMANCE from
your INVESTMENT
PROPERTIES
Go green with your next residential or
commercial investment and add more revenue
and profit through the use of green retrofits
By Jim Simcoe and Andrew Waite
Version 4 – June 2010

This report is proprietary and property of Simcoe Consulting and Nexzus Publishing Group)
and is available to clients for their use in identifying and recovering grants, incentives,
rebates and tax credits. This information is not complete and is not warranted as such. This
information shall not be used for other than guidance for recovery of personal or business
credits. Reproduction and use for other than the intended purpose is prohibited.
How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

Proprietary Information – Property of Simcoe Consulting and Nexzus Publishing)
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How to GET MAXIMUM PERFORMANCE from your
INVESTMENT PROPERTIES
TABLE OF CONTENTS
HOW TO TURN GREEN INITIATIVES INTO GREEN INCOME
By Jim Simcoe and Andrew Waite
Page No.
1. Introduction – How to Reap Immediate Benefits ………………… 04

2. The Business Case - Financial Incentives for Going Green …… 11
3. The Demand for Green Properties …………………………………… 26
4. What People Want – What Buyers & Renters Want………………. 30
5. Who Has the Money? Fed/state/local agencies funds? ………… 34
6. What Money is Available? (Incentives, Grants, Rebates, Tax Credits)
……………………………………………………………………………….. 35
7. How to Successfully Apply for Funds ..…………………………….. 37
8. Retrofitting Rentals as High Performance Rental Properties ….. 43
9. High Performance Green Appraisals…………………………………. 44
10. Green Mortgages (To be written and available in v.4) ..………….. 54
11. Marketing for a Premium Return ……………………………………... 55
12. Avoiding Green Washing ………………………………………………… 60
13. Green Positioning for Better REO Opportunities…………………… 62
14. Resources …………………………………………………………………… 64
15. Bibliography ………………………………………………………………… XX
16. Appendices – Capital Expense & Operating Expense Recovery…. 66
a. San Diego County, San Diego & adjacent cities
b. San Diego City and County Template - Initial Incentive
Recapture
c. Projected Ongoing Operating Cost Improvements with simple
upgrades to water flow and lighting.
d. Maricopa County, Phoenix & adjacent cities

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e. Phoenix Program Lists
f. Phoenix City & Maricopa County Template - Initial Incentive
Recapture
Select cities and counties will be mapped and published based on

demand – contact jim@jimsimcoe.com to prioritize your town.

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1. INTRODUCTION - HOW TO REALIZE IMMEDIATE
BENEFITS FROM GOING GREEN
WHO SHOULD READ THIS DOCUMENT AND WHO CAN BENEFIT?

Any building owner can benefit from understanding and acting on this
information, PERIOD.
As an owner of real estate, whether this is a single family dwelling, a
duplex, small, medium or large multifamily, or any commercial property, any
owner is currently in the position to benefit from many government incentives
designed to reduce energy use, create a more desirable building, a healthier
living and working environment and generate jobs, but most importantly
recover capital expenses for any retrofit, lower operating expenses and earn
more income. This discussion is about improving your investment
performance, lowering vacancies and increasing income.
No matter your politics or position regarding the current stimulus
legislation, this recycled tax money is available to homeowners, investors and
others building owners to encourage energy saving and job creation. Roughly
40% of all energy used goes to heating, cooling and powering the occupants of
residential and commercial buildings.
No homeowner, real estate investor, landlord or commercial property
owner should ignore this content. There is between$1,500 to many thousands
of dollars available per property. This money is finite and could end when it is
all spent or the goal of this portion of the economic stimulus is deemed to have
been achieved.
You are reading an early version of this document that is going to be
updated and future releases will be sent to you at no further charge.

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FROM ENVIRO-SPIN TO INVESTOR SPREADSHEET
Over the last five years it has been frequently suggested that we publish
a green edition of our magazine, Personal Real Estate Investor Magazine. We
could never seem to make the connection between well meaning and
businesslike. This report documents the reasons for our change of heart.
Were the polar bears really endangered or just over-exposed? Al Gore’s
conservation statements didn’t jive with his Gulfstream V? Green Peace’s
warlike activities, Friends of the Earth’s and Earth Liberation Front’s firebombs
seemed to be an extreme and counter-intuitive way to express concern for the
environment. Add the academics at the University of East Anglia, NASA and
the United Nations “cooking of the climate books” and who are you to believe.
The message and the numbers did not seem to sensibly coalesce. Hype or
hope? In short we suffered from “green fatigue” that clouded my ability to grasp
the worth of the message.
Yet underneath all of this was an instinctive and inbred sense there was
a more practical aspect to this very over-spun “go green message.”
“TURN OFF THE LIGHT!”

As a child I was taught last one out of the room turned off the light and
the TV. We could see it. It saved my parents money. It was local and it made
sense. The light bulb was hot when on and cool when off.
The more recent environmental message had gone global and although
makes commonsense most of us were desensitized as this does not appear to
be that immediate as rising sea levels seem to be decades away.
The benefits of being environmentally sensitive on a global scale did not
seem to easily or locally translate onto a spreadsheet for a “fix and flip” or buy

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and hold real estate investor. That was of course until we started to meet Eco-
Brokers©, real estate environmental consultants and lobbyists.
EcoBrokers© are a self-selecting brand of real estate professionals who
are in search of an edge in real estate sales. Green sounded like a good
marketing message. Sadly most of the proponents of these types of initiatives
depend on theory and the global message of green is good. We are not
impressed as we know consumers and others are not motivated by public
service announcements or feel good initiatives. Change only occurs when
rewards follow. We decided we need to find ways to monetize these green
strategies and make to these measurable. Then change would follow.
This report is our journey to that goal.
“TURNING ON THE LIGHT!”

These and others in real estate had taken the time to understand the
issues, the market positions, what needs to be done, who to go to for financial
encouragement, guidance to the investment incentives and why the market is
ready for this message. Examples show the culture of the real estate industry is
being heavily influenced by legislation and the incentives that are being
brought to effect environmental change.
• Did you know that in many markets there are up to 25 different
grants, tax credits and financial incentives and other benefits in
place to encourage adoption of the environmental standards by a
home builder, renovator or investor?
• Did you know that appraisers are encouraged to value homes and
apartments at ten percent more than non-green equivalents once
they are brought up to recognized environmental standards?
• Did you know there is more demand for retrofit properties than
there are properties that are specifically defined as energy efficient.

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This study will show you how to go about learning, acquiring and benefiting
from these incentives. This is how to make money as an enviro-capitalist.
FROM GREEN POLAR BEARS TO GREEN BACKS

PUBLISHERS NOTE: My background includes responsibility for selling
systems, services and advertising. I have worked in the computer business,
the law and accounting, run the commercial side of an Indy 500 winning race
team and published magazines in the technology, investment and real estate
industries. At the end of the day, any business needs revenue and profit to
remain in business and the numbers all must go on a spreadsheet. Good and
bad.
We started our research on Maximum Performance from your Investment
Properties and were surprised at the inability of many green proponents to
articulate why it made economic sense. Lots of good “feel good” but few
make it “look good” on a spreadsheet.
They truly have not explored and developed the core reason for sales
success by showing a client why it works for them and delivers a measurable
return.
The green movement generally does not understand the difference
between capital expenses or operating expenses and then the knock on effect
these investments generate. They do not monetize their theory as in their
opinion developing real financial reasoning apparently destroys the purity of
their message.
They do not “do spread sheets as doing laundry and making beds” is for
ordinary people and not leaders of this movement. This report tries to change
this and deliver clear economic justification for “going green to bank green.”

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ENVIRO-CAPITALISM – BANK ON IT!
“Being ‘green’ is a by-product of a high-performance company,” says Jim
Simcoe, principal and founder of Simcoe Consulting, a green strategy
consultancy “not the other way around. If you are focused on ‘green’ as a final
outcome,” says Simcoe, “you’re taking your eye off the ball. High-performance
companies ultimately become green as a by-product of their efforts because
they are efficient. The fact they are environmentally thoughtful and it makes or
saves them money justifies the strategy. The bonus to the economically
resourceful is leveraging the rebates, tax credits and grant incentives that add
to the bottom line.”
Earth Advantage Institute, Portland, Oregon, found that builders and
real estate agents can market and monetize green building. In the year through
July 2009 traditionally newly built homes sold for an average of $173 per
square foot while similar but green certified homes sold for an average of $193
per square foot or a premium of nearly twelve percent, not counting any green
build incentives.
Green buying, renovation and marketing strategies are becoming
increasingly defined as tools that materially advantage:
• Builders,
• Real estate professionals,
• Homebuyers, or
• Investor clients,
• Commercial building owners and
• The ultimate occupants of these properties (buyer or renter.)
Going green can now be translated into “net green” for a homebuyer,
building owner or investor or in turn, their renter, residential or business.
As an owner, navigating your way to the eco-incentives that green
renovation and green marketing can deliver is still a specialized field. This
report is designed to raise your awareness, show you the steps and introduce

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you to resources that can deliver an investor or home buyer an immediate and
long term financial eco-edge.
This means helping find, make or save you money!
ABOUT THIS DOCUMENT

We are writing this document in a dynamic environment.
NOTE: Our first take on two sample cities and case studies show at
least $3,500 in recovered incentives and rebates alone. No grants, loan
considerations or personal tax credits were applied. These are all
additives to the capital expense reduction.
We have rushed it market so we can provide help to investors in tracking
down these grants, incentives, rebates and tax credits. Some are expected to
expire relatively soon, so immediate compliance and application is relevant.
Others are perennial, but have a time sensitive exception. Then there are the
local and regional variations of the incentive applications. We start by
providing residential and business templates for a couple major cities and will
back fill templates for most major investment markets to meet demand. As a
subscriber to Maximum Performance from your Investment Properties you will
be updated on these templates as we complete these. Thank you for your
support and your business.
For questions or comments email jim@jimsimcoe.com

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2. THE BUSINESS CASE FOR GOING GREEN
General Overview
Going green used to be a hurdle. It was more costly, meant dealing with
bureaucrats and thus was more difficult and marginally desirable to all but the
dedicated environmentalist. “Being green” was for Kermit and those with
environmental lifestyles.
Much has changed. Now going green has shifted into main stream, has
become affordable and profitable, and more desirable for the average
consumer. The current incentives for property owners and especially for real
estate investors make and close the case for going green. Real estate investors
should embrace this enthusiastically as going green means better margins.
There is cash from grants and rebates, and rich tax credits. The bonus, not the
reason for going green, is an improved market position that translates into
financial advantages.
WHY NOW?
Why is this finally happening?
Before explaining, let's first set a true definition of a green real estate
initiative since it can be both ambiguous and misunderstood.
Going green can also attract unnecessary controversy. For the record,
any project, initiative or effort must incorporate four elements to be considered
green:
1. Environmentally Friendly – The resulting building must cause less
impact or damage to the environment than the available alternatives.
2. A Healthier Living Environment – The new construction or retrofit
must create a healthier living/working environment.

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3. Marketing Advantage – The result must be able to be genuinely
presented as a green property that is more attractive prospective
occupants whether homebuyers, renters, investors, rental owners or a
business and their employees.
4. Financial Advantage – The result must lower operating expenses thus a
lower cost of occupancy, generate a higher appraised value over
comparable non-retrofit or green buildings and sell or rent faster as a
genuinely green property.
If the effort does not achieve all four elements then it's not really a
sustainable, high performance or green property, especially when trying to
creating added value in a real estate investment.
WHY HAVE GREEN PROPERTY RENOVATION AND UPGRADES BECOME A

VIABLE INITIATIVE FOR REAL ESTATE INVESTORS TO PURSUE?
There are dozens of reasons but these can all be boiled down to three
major categories all related to monetary values: market demand, energy
efficiency incentives and increased property performance.
Restated what will the capital expense of turning this property into a
high performance property generate in terms of capital recovery (grants,
incentives and rebates as well as improved appraised value) operating efficiency
and avoided capital expenses. Where high performance is used to position a
property for sale expect higher appraised values, income capitalization rates
and a faster sale. In the case of a rental property, chances of higher rents and
lower vacancy rates are well within the norm. The caveat whether selling or
renting high performance properties is the skill and knowledge of those
charged with the task of skillfully packaging, marketing, presenting and selling
or leasing these properties as high performance properties.
A. MARKET DEMAND – DEMONSTRATED BUYER DEMAND

As consumers become more knowledgeable about the desirability of

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green strategies, the demand for environmentally friendly products and
services has risen. Beware however, this is still neither mainstream nor
without controversy.
An expert in real estate brand management with a home that is currently
offered for sale, (and after expressing a degree of skepticism) commented that of
the 38 unsuccessful showings, not one of the prospective buyers had raised
any questions about the energy efficiency of the home or any retrofits. As a
seller this individual had not lead the market with this conversation and
potential differential and valuation benefit.
While consumers may care about protecting the planet as it seems to be
a laudable goal, individuals are most concerned about protecting their lives
and the lives of their families and doing so without undue expense. Make no
mistake this is about money.
Recent studies have illuminated the dangers of every day 'non'-green
toxins that are found in the home and workplace. Ordinary carpet contains
undesirable chemicals like ammonia, benzene and formaldehyde that “off gas”
into the air that is breathed by the occupants. As consumers and businesses
learn about the toxins contained in common materials like paint, carpet,
engineered wood and paneling, cabinets, and plastics, green rated products are
chosen or specified because they are presumed to be safer. These are rated
better for the environment as harvesting and manufacturing generate less toxic
byproducts and are considered less environmentally harmful. These are
ancillary benefits as once again this is about money.
Increased demand is boosting growth of companies who specialize in
green products. More volume gets a lower price and a lower price gets more
sales. Major international companies are developing green product brands and
as more become available, selection and volume increases and the rising
volumes further reduce prices. As this pattern continues, affordable
alternatives are coming to market and becoming more competitive with, and
even, replacing non-green products.

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The effect of all of these new product entries or market volume entries
has been to reduce the premium for green products to even with, or as little as
ten percent more than, the equivalent non-green retrofit product. Coupling a
retrofit with a make habitable in a fix and flip or make rent ready in buy and
hold applications further reduces effort and cost.
B. ENERGY EFFICIENCY INCENTIVES – ADDED MONEY FOR GREEN

RENOVATION
A real tipping point has occurred with the introduction of significant
incentives by various government agencies and private brands. These
particularly important provisions for real estate investors who choose to pursue
a green strategy. Incentives can include product and service rebates, grants
and incentives. They exist on the federal, state, county, city and non-
governmental agency level. A homeowner doing the same renovation has a
number of tax incentives that may apply as additional capital expense and
recovery justification.
Here are two examples of incentives application and payback:
a. Multifamily Property - San Diego, California: A landlord received a
$25,000 cash rebate for upgrading the irrigation system on a multi-family
property. This rebate covered equipment including energy efficient sprinkler-
heads, weather sensors, and control stations.
Another recent project for a landlord required replacing all of the
sprinkler-heads and sensors. The net cost after the rebate was $2,200. The
water savings that became available to this property because of this new
system was approximately $19,000 per year.
b. Urban Streetscape Renewal - Detroit, Michigan: $3.4M was

awarded to the city through the Stimulus Plan (American Recovery and
Reinvestment Act of 2009) to revitalize the streetscape for three streets in
downtown Detroit. An investor purchasing property in the area should expect

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an increase in property value by following the urban renewal and purchasing
investment properties in these locations.
The bulk of incentives are given for energy efficiency improvements and
employing a green strategy in any building upgrade.
For fix-and-flip or buy-and-hold investors, these incentives can make a
difference and provide the bonus between a marginal and a profitable
investment. The incentives and rebates subsidize work that the investor would
complete anyway. Now the investor gets paid to do something they planned
upon doing anyway.
In addition, the subsidy to buy materials and labor actually improves the
property value and helps make the sale or rental at a potentially higher value.
IMPORTANT CAUTION
MARKET TIMING AND POTENTIAL INCENTIVE EXPIRATION
The current market desirability of going green is a benefit for real estate
investors. Do not expect this to last beyond the next 18 months. After
that there is a potential these incentives will be gone as funding will
have run out.
The environmental popularity combined with public and political
pressure to save energy has pushed utility companies and government
agencies to offer incentives to save energy, reduce water use and relieve the
pressure on city sewer and trash services. In tough economic times that
pressure increases exponentially. Costs remain constant, revenue drops and
taxes become harder to raise.
Once the tipping point occurs in the momentum to achieve the tangible
and financial benefits of going green, and the rebates and incentives are used,
they will start to become less available. The utilities, municipalities and other
government agencies will no longer need to offer these as energy and water use
has been reduced and a sustainable trend established. Enough people will
have embraced the concept of green building. All new builds will be required to

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follow sustainable green strategies. Renovation of existing buildings will be
required to follow sustainability building standards so that the majority of all
housing will have a reduced total cost of ownership because of lower energy
use.
C. HIGH PERFORMANCE PROPERTY – A SALES OR RENTAL ADVANTAGE

Companies like Mercedes Benz and Boeing get to be class leaders and
flagship brands that represent quality because of, attention to detail and
associating themselves with high-performance and execution excellence.
Customers choose to do business with these brands expecting products or
services that are best in class.
Green real estate projects should set a similar standard. They are
regarded as environmentally-friendly, but now green projects are increasingly
being thought of as high-performance and more recently financially rewarding
projects.
Green residential projects tend to be built better, use improved materials
and provide superior energy savings with less negative environmental impact.
They may cost a little more to implement, may attract incentives, cost less to
operate and are more comfortable and safer for those who live and work in the
resulting buildings. The performance of these properties is perceived as
superior in every way to non-green projects. But this still is about money.
An investor using a green renovation strategy is ahead of the majority.
Green real estate investors’ properties are considered to be of higher
construction quality and lower energy usage, therefore worth more money.
BEWARE - This is only the case if the property is conscientiously
marketed by a competent real estate professional who understands the value of
green positioning. It is the combination of these elements that provide a strong
business case for green real estate investment.

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CASE STUDY – CASE CLOSED ON HIGHER RENTS
Benefits from going green are easily realized by property managers and owners
in terms of incentives, fewer vacancies, enhanced marketing and savings in
both time and money. While going internally by reducing paper and saving on
postage is great, many owners or investors don’t really see the true benefit until
it is leveraged at the direct interests of their owner landlord. This is the
external application if being a green property manager.
Smart property managers can deliver real benefits for tenants and
returns for owners by making rental properties more energy efficient. The
bonus is positioning these rentals as efficient retrofitted rentals that cost less
to occupy.
Spin to Spreadsheet
Property management system provider Propertyware has a
GreenPropertyManager.org initiative. They appealed to their customer
HomeLovers who decided to examine a customer-focused energy efficiency
strategy by way of a proof of concept. The theory was that green property
rented faster and for premium rents but would this prove to be true in
practice?
The first step was understanding specific rental property efficiency. What
changes need to made to increase both energy and investment efficiency. If
there were any government incentives that may apply how could they be
captured to partially fund this retrofit?
The second step was to actually retrofit a typical rental property with
energy efficient solutions and apply for and collect any available incentives.
The third step was to prove that the property was considered a preferred
rental by the market and therefore could demand a higher price and attract
more tenants.
This case study consciously ignores the extensive list of other benefits
from adopting other internal and external efficiency strategies.
Attracting Ten Percent More Rent

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The market rent for this ‘test’ property was $1,045 per month By
repositioning it as an energy efficient with a lower energy bills, the property
ended up renting for $1,145. This generated a monthly premium of $100 over
market rent, annualized at $1,200.
This little experiment proved that premium rent was possible from
positioning, advertising, and selling a rental property as ‘green’ or energy
efficient.
An advertisement was created and posted specifying energy efficiency.
The advertisement attracted a higher number of better quality renters that
were willing to pay the higher rent. The property rented more quickly than the
average time to re-rent. A premium rent was achieved in a very price sensitive
market with little or no additional effort. The common belief by professionals
was that being green would not make a difference.
# Colu mbine Rd Pho eni x AZ Operati ng
Targeted Retrofit to Buy & Hold Capital Capital Improvement
Done during tenant transition Cost Recovery + Income
Total $1,340 $ 740
Capital recovery <$ 740>
Net capital cost $ 600
Operating Savings
40% off annual electric bill $1,080
Reno/Retrofit Cost Subtotal $ 600 <$ 740> $1,080
Rentals Sales Advantages
Rental premium (+$100mo) $1,200
Reduced vacancy (less .75 mo) $ 800
Tax Credits $1,500
Total (Year One only) <$ 600> $1,500 $3,080
Property Valuation
Property Value (Cost 50K) $150,000
Post-Retrofit Appraisal (+5 - 7%) $160,000
Higher Rent, Better Tenants and New Fees

The advantages of positioning as a Green Property Manager is
still a relatively unique message for the average property manager.

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More importantly is the attraction of a better tenant
demographic that are willing to pay higher rents for a lower cost of
occupancy because of lower energy use. The owner clearly benefits
in terms of incentives, fewer vacancies and more reliable tenants
The fact a property manager can generate fees and higher rent
also means greater income to the property manager.
HomeLovers has transitioned from proof of concept to
improving the income for both their owners and their business.
TAKE AN IMMEDIATE MARKET ADVANTAGE

Now take an immediate advantage.
Position, list and present your property as a green property whether it is
for sale or a rental. This property has been renovated in a green friendly
manner. It is managed in a way that pays attention to environmental impact.
This will reduce your competition significantly.
By positioning this way, you can attract more buyers or renters in a
demographic that is prepared to pay premium prices even in a down market.
Put simply, this is a class of buyers or renters that wants to live/work in
places that are safer and cost less to operate. This demographic will pay more
for that opportunity. This is only half the story.
The grants, rebates, green loans and tax credits pay an investor to
develop property reflecting these cost saving and investment justification
values. Green upgrades and marketing strategies will position as a higher
quality product and a market differentiator that should translate into financial
advantage.

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ALREADY GREEN – ATTACKING TOTAL COST OF OWNERSHIP
Location - The greenest property is an existing property. A well located
inner city property can deliver potential savings well beyond any newly built
property in the far-burbs. There are companies like HomeVestors who have
exploited this strategy to great effect, providing fairly priced properties to
investors to renovate and flip or renovated homes to buy and hold or sell as
starter homes for first time homebuyers.
Consider the fact that many homes in many markets are currently priced
below their replacement cost. The home as it stands, in the current condition,
may be considered beyond its useful life or “lifed out.” A thoughtful renovation
on top of a below market purchase, that is renovated employing green products
and methods can give new life to this home at significantly less than costs of a
new build.
Add a convenient property location and this may mean the occupant
does not incur extended commuting distances saving time and auto energy
costs. This means the “total cost of ownership” and/or use of this home or
rental is significantly less than a home in a more remote suburb.
Existing Structure Optimized - We believe focusing on green sensitive

remodeling begins with location, followed by designs that optimize the existing
structure within the current building footprint thus minimizing the need for
any new construction.
A home is considered a remodel and not subject to the stricter building
standards of a new build provided at least one ten foot wall is retained in the
final plan. This reduces the waste of construction and the need for new
material by preserving the existing outside walls.
Resources Well Managed - A renovation that pays attention to water

consumption can reduce water use by over 50% through indoor and outdoor
efficiencies such as low flow fixtures and drip-irrigation. Healthier indoor air

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quality can be achieved by selecting products with reduced out-gassing
specifications while maintaining quality and aesthetic appeal without
sacrificing the need to stay within budget sensitivities.
The result of a green-ovation or green-hab of this sort is a home that is
well located, within reasonable commute, at significantly less than the cost of
new construction in a potentially less established more remote neighborhood.
LOCATION, LOCATION, GREENER LOCATION

Choosing a location that is not convenient to the occupant’s lifestyle is a
significant source of expense, energy, time and personal wear and tear. The
financial advantage of living close to those aspects of your life that a person
deems important is no argument.
In an era of cheap gas and lighter traffic, many of us thought nothing of
a 60 minute one way commute to work. The phenomenon even earned its own
epithet in “drive till you qualify.” As the economy tightened, those homeowners
who had bought more home for less by accepting the inconvenience of a longer
commute, found it harder to make ends meet. Gasoline and time are not
operating expenses that can be easily deferred.
Buying a lesser home in a neighborhood that is closer to the major
activities in a buyer’s life mean lower expenses due to the consumption of less
gasoline, less wear and tear on a car and an owner.
AN EARTHQUAKE WITH A GREEN & SILVER LINING

THE HEALTHNET CALL MEMBER SERVICE CENTER.
In 1994’s Northridge earthquake knocked out a major interchange on
Highway 5 north of the San Fernando Valley. This interchange provided access
from the towns of Lancaster and Palmdale to the Los Angeles metropolitan
area. HealthNet had 60 plus employees commuting singly or carpooling nearly

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150 miles a day from Lancaster & Palmdale. They could no longer reach their
place of work.
After major repairs were made and the highway reopened, The County of
Los Angeles approached HealthNet and asked them to consider setting up a
satellite call center in Palmdale. Fortunately the technology and the economics
of successfully building and operating a remote call center made sense. This
was only half the story.
The day the center opened, the sixty employees instantly saved $5,000 a
week in gasoline costs, 60,000 miles of travel and recovered 900 hours or 15
hours a week per person to reinvest in their lives and families. Back then Los
Angeles was not considering the impact on the environment short of reducing
the amount of traffic on the freeways.
GRANITE COUNTERTOPS AND CROWN MOLDING DOES NOT TRUMP A

TWO HOUR COMMUTE
The interesting note is the way master planned communities are
conceived and planned. Commercial and office development follow residential
development, and then only when enough “rooftops” and people exist to
generate enough volume to justify local business and employment. This means
the first people to buy in these neighborhoods are forced to commute extended
distances over under-engineered roads until enough volume occurs.
This is backwards and makes remote neighborhoods a hard sell for a
developer. Betting in future growth and development into a self contained
community is a leap of faith. Until that happens, this means residents are
forced to spend more on gasoline, energy and time.
As an investor considering an investment purchase that will appeal to
the largest universe of homebuyers or renters, consider a little less well located
house and assure your tenants more convenience from a well located life.

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Picking (Housing) Stock - LOCATION ANALYSIS
Current trends are pointing to downsizing both in homes and the cost of
upkeep and in new apartment sizes. Everything that is old is new again based
on current and projected energy costs. Investment property value and future
performance (appreciation, rents, neighborhood demographic trends, etc.) is
based on how broad the appeal is to desirable buyers and renters.
Location, location, location is a housing mantra. We articulate this based
on the common sense, convenience and costs. Scoring a location is based on
fundamental and technical financial elements and five vital, cultural and
personal factors and the necessity of a good economy. See the following
diagram:
Personal Real Estate Investor Magazine’s companion title “Where to Live Books”
scores neighborhoods values. These are explained as follows:
1. Value as perceived by the buyer and their budget,

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2. Convenience to the buyer’s universe: job, family, friends, fun & faith.
3. Amenities: If you eat out? Restaurants. If you eat in? A good
supermarket, the bank, the post office etc.
4. Good School District: Even if you don’t have children, the existence of
good schools is an indication of a community’s self image and
reinvestment in culture.
5. Beauty: people like to live in pretty places.
More people want to live there for a reason. Most great neighborhoods
are centrally located, are less costly to live and operate in and are therefore
more recession proof. Where better to live, build or invest whether you are a
homeowner or a commercial property owner?
“LIFE” & “STYLE” ARE TWO VERY DIFFERENT WORDS

The marketers throw around the word “lifestyle” with great ease. “Life” is
something you live while “style” is something you pay for. Crown molding and
granite countertops in exotic far-burbs do not trump a two hour commute.
Translating this into the world of environmentally efficient home or
commercial property ownership or being an investor means appealing to the
largest possible clientele.
Today’s home buyer or commercial tenant is being encouraged by the
nature of the economy to consider green properties first as more
environmentally efficient and offering lower operating costs. If you are an
investor, right now the capital expense of upgrading any well located residential
or commercial building is being subsidized by local utilities, municipalities,
counties, state and federal grants, incentives, manufacturer rebates and
income tax credits.

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3. THE DEMAND FOR GREEN PROPERTIES
Buyer Statistics & Green Surveys Point the Way
The demand for green properties is currently greater than the supply of
green properties. People will pay a premium for a certifiably green property or
rental home even in a down market. This is only half the story.
Various grants, rebates incentives and tax credits make it cost-effective
and relatively easy to begin implementing. Smart investors can capitalize on
this trend and reap financial rewards.
This study is designed to introduce what these strategies are, what steps
can be taken and why they result in financial returns.
Right now there are more buyers and renters desiring green homes than
there are green homes to buy or rent. Increased awareness on safety and a
heightened focus on energy cost reductions are combining to create a market of
green buyers/renters that builders and real estate rehabbers have not kept up
with. Put simply, the supply for green has not kept up with the demand .
Some compelling statistics:
Earth Advantage Institute, Portland OR found that in the year through
July 2009 traditionally newly built homes sold for an average of $173 per
square foot while similar green certified homes sold for an average of $193 per
square foot or a premium of nearly twelve percent, not counting any green
building grants, incentives, rebates, green loans or tax credits. (FYI, this
paragraph also included on page 7)
This study was under-written by product providers, builders and real
estate professionals who needed to validate claims that green strategies
improved financial performance in home sales. The abstract of this 2009 study
by Earth Advantage follows:

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Certified Home Performance:
ASSESSING THE MARKET IMPACTS OF
THIRD PARTY CERTIFICATION ON RESIDENTIAL PROPERTIES
Earth Advantage Institute
May 29, 2009
Abstract
The report presents an analysis of the market performance of third-party
certified sustainable residential properties in the Portland and Seattle
metropolitan areas. In each location, a sample of third-party certified homes
was selected and comparable homes were found. The author documents that
certified homes in the Seattle metro area sold at a price premium of 9.6% when
compared to non-certified counterparts, based on a sample of 68 certified
homes. In the Portland metro area, certified homes sold at a price premium
ranging between 3% and 5%. In addition, the certified homes stayed on the
market for 18 days less than non-certified homes. These results are based on a
sample of 92 certified homes and comparable properties approved by a project
appraiser.
This investigative research effort also includes surveys and interviews
with the builders of third-party certified homes and their residents. The author
discusses the inherent limitations of current valuation practices for homes with
sustainable features. Finally, the report includes a synopsis of related research
on the relationship between marketing initiatives and the sale price of third-
party certified properties.
Executive Summary
CERTIFIED HOMES ARE WORTH MORE

This report explains the basis for this statement, using an analysis of
third-party certified sustainable homes in the Seattle and Portland
metropolitan areas. Moreover, the report shows that there are several
important issues inherent in this seemingly simple statement. The report
concludes with recommendations to further expand the study of the market
performance of third-party certified sustainable homes. It supports heightened
collaboration among residential appraisers, real estate brokers, homebuilders,
and sustainable building advocates to improve a common understanding of the
multiple issues involved in home valuation and communicating the results to a
larger audience.
How one defines a building’s value may vary. Market sales information is
based on standard approaches to building appraisal that do not account for
performance-based cost savings. Further, standard approaches do not consider
resident health or broader environmental benefits that result from the
measures required to achieve third-party sustainable certification. Public
understanding of general sustainability concepts has certainly improved in the
past 5 years. At the same time, more homebuilders recognize the potential
market advantages of building certified homes. However, for many consumers

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and some homebuilders, the connection between quality home construction
and sustainability is not always understood.
COMPARABLE PROPERTY STUDY RESULTS

Earth Advantage Institute selected Taylor Watkins of Watkins &
Associates in Portland to serve as the project appraiser for the comparable
property analysis. Watkins recommended the parameters for defining a
comparable home and reviewed suggested comparables for their suitability. The
parameters used to identify a comparable home are listed in the study. The
goal was to test the hypothesis that certified homes would demonstrate
improved market performance in terms of sales price and time on market than
comparable, non-certified homes.
In Portland, a sample of 92 certified homes and 340 comparable homes
was compiled. The certified homes were built between 2000 and 2008, with a
majority sold in 2006 and 2007. Most certified homes were matched with 3 or 4
comparables. Certified homes were geographically distributed throughout the
metro area.
The Portland study found that:
• Certified homes sold 18 days faster than non-certified homes.
• Certified homes sold for 3% to 5% more than non-certified homes. In a
statistical analysis with a 95% level of confidence, the overall price difference
was found to be 4.2%.
In Seattle, a sample of 68 certified homes and 207 comparable
residences was determined. Like the Portland sample, most certified homes
were matched with 3 or 4 comparable homes. The Seattle analysis also
documented superior market performance in terms of the sales price achieved.
• The expected percentage change for sales price was found to be 9.6% more for
the third-party sustainable certified homes.
• The certified homes did not sell faster, and stayed on the market an average
of 5 days longer (or 40% more time on the market).
These findings are positive factors that will work to the benefit of
sustainable home builders and consumers, providing welcome news during a
time of reduced home market activity.
CONSUMER INPUT
The same issues that determine how much someone is willing to pay for
a house - location, amenities, and size – are involved whether one is shopping
for a certified sustainable home or not. However, residents living in third-party
certified homes should also understand the sustainable features and the
positive impact of those features on the longevity of their homes. The study
recommends public education so that current and future residents of certified
homes will have a greater understanding of those benefits.
Earth Advantage Institute, Master Builders Association of Pierce County,
and Olympia Master Builders conducted surveys of residents living in either
Earth Advantage® or Built Green® certified homes. Residents value the

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sustainable attributes of their homes, particularly energy efficiency and
improved indoor air quality. Of those surveyed, 90% reported that they would
choose a certified versus a non-certified home for their next residence if all
other factors were equal. Collectively, the residents also agreed that they would
pay more in order to continue to live in a sustainable home. Eighty percent of
the survey respondents living in a third-party certified home reported that they
would pay up to 5% more in order to move into a home that had been certified
as sustainable versus one that had not.
SELF-CERTIFIED AND THIRD-PARTY CERTIFICATION

Consumer surveys were taken from residents living in both self-certified
and third-party certified homes. In many respects, their answers were similar.
Both groups agreed that energy efficiency and indoor air quality were extremely
important. In one area of difference, residents of self-certified homes reported
that sustainable certification was less of an influencing factor in their decisions
to buy a particular home than did residents of third-party certified homes.
(Thirty-one percent of residents in self-certified versus 61% of residents in
third-party certified homes reported that the certification was an influence in
their decisions to buy their homes). Additionally, 56% of third-party certified
home residents reported that their utility bills had been lowered by moving into
a certified home versus 46% of non-certified home residents.
HOMEBUILDER INPUT
Thirty-five builders responded to an online survey and an additional 10
Earth Advantage homebuilders provided in-person interviews. The home
builders answered questions regarding any costs associated with building a
third-party sustainable certified home and trends in those costs over the past
five years. They were also asked to assess current appraisal methodologies.
Home builders responded that awareness for sustainable features in a home
had grown significantly over the past five years. Despite this, however, demand
for third-party certified sustainable homes had not directly increased as a
result.
The survey asked if there were added costs associated with building a
sustainable residence. The majority of the respondents – 74% - indicated that
building a home to certification standards was more expensive than building a
home to code. However, they also noted that the change in cost is coming
down. (See Table 5.4.) The increase in construction costs was observed to be
between 5 and 10%. As builders become more experienced with the
specifications of a given program, and as their networks of sub-contractors and
other knowledgeable professionals become more extensive, they have seen
some of these cost increases go down. Home builders join the call for increased
public awareness related to sustainable building practices and increased
collaboration among sustainable building advocates.

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Editors Note: This study was done prior to the roll out of most of the
incentives, grants, rebate and tax credits discussed in this Maximum
Performance from your Investment Properties from this report.
Other references substantiating the argument that green upgrades are

desirable come from The National Association of Realtors and McGraw Hill
Construction reports.
MARKET MOMENTUM DOCUMENTED

1. Surveys conducted by the National Association of Realtors (NAR Profile
of Buyers’ Home Feature Preferences, August 2007) have predictably
found that nine out of ten Realtors® say their clients are interested in
energy-efficient features of green homes and the potential cost savings
of such features. An overwhelming 90 percent agree there will be even
more interest in green building practices into the future.
2. McGraw-Hill Construction (The Green Home Consumer: Driving
Demand for Green Homes, November 2008) surveyed a representative
sample of one million U.S. households (equating to three million
consumers) to find those individuals who had purchased green homes
over the last three years. Going green was the top reason cited by
survey respondents for remodeling their home. Environmental benefits
such as lower energy costs and healthier air were identified by 42% of
respondents as their main reason for home improvements. The study
also found that:
- 70% of buyers are either more or much more inclined to purchase a
green home over a conventional home in a down housing market.
- Overall, lower income buyers say they found tax credits and
government programs, indoor air quality benefits and green
certifications to be the most important incentives for them to buy green
homes.
- Making homes greener is now the number one reason for home

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improvement (42%) over remodeling for comfort reasons (34%) or to
improve appearance (24%).
- More than 80% of respondents said they believe that green homes
are not just more economical, but offer better and healthier places to
live.
3. Green remodeling is the hottest business opportunity to hit the
remodeling {retrofit} market in years according to the National
Association of Home Builders (NAHB) as energy efficiency,
environmentally responsible remodeling techniques, materials and
strategies are being used by an estimated 65-85% of remodelers. The
NAHB estimates that 125 million homes in the US, the vast majority,
lack energy-efficient features but that the average customer is willing to
pay almost $9,000 upfront for better energy efficiency. (NAHB
Remodeling Market Index 2008).
4. When asked to list their top 12 influences in buying a home,
consumers responding to a National Association of Home Builders
survey last year put energy efficiency at No. 2, behind quality of living
space. Five years ago, energy didn't even make the same survey. (*AVID
Ratings, Co conducts an annual survey of home buyer preferences)
5. Green building seems to be insulated from the recession and is
growing. The value of green construction increased five-fold from $10
billion in 2005 to as much as $49 billion this year and could triple by
2013 to nearly $150 billion according to McGraw Hill’s 2009 Green
Outlook study. Their 2008 study included this chart:

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BE THERE BEFORE THIS BECOMES “THE NEW NORMAL”
The desire for green homes and buildings is a growing opportunity for
real estate investors. Supply is limited and investors have been slow to
leverage going green as a market differentiator. This marketing advantage for
investors will quickly erode as more companies identify the opportunity, the
incentives are used up and green becomes the “new normal.”
As demand grows, the supply of real estate investors and builders
supplying green inventory will eventually catch up. The time to take advantage
of this is now.

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4. WHAT PEOPLE WANT - GREEN ELEMENTS IMPORTANT TO
BUYERS & RENTERS
What is Most Important to Buyers
According to a survey conducted by the Earth Advantage Institute in
June 2008, a majority of respondents indicated that a green certification on a
home positively influenced their decision to purchase that particular home.
Some other key findings of the survey:
- Ninety eight percent of respondents would choose to purchase a green-
branded home over a comparable non-green brand home.
- Thirty six percent of respondents said they would pay up to 10% more
(on a $300k home) that incorporated green measures outlined by Earth
Advantage. On a $300,000 home that’s an equivalent of spending an
additional $30,000.
Of the green home elements listed, 77% of respondents ranked energy
efficiency as either ‘important’ or ‘extremely important’. 43% of respondents
ranked Indoor Air Quality as ‘extremely important’ and lower utility costs were
‘extremely important’ to 55% of the respondents.
At the end of the day, most people want to live in a home that is more
energy efficient, less toxic and costs less to run. The number of people willing
to pay more for these luxuries continue to increase spurred on by the near-
constant media attention given to sustainability and green living.
What is Most Important to Renters?

An Apartments.com survey in April, 2009, found that 60% of renters said
that they specifically search for environmentally friendly apartments. In
addition, the survey found that 25% are willing to pay more for those amenities
and 17% said that they wouldn’t rent a non-green apartment.
This survey brings to light a fascinating difference between renters and
homeowners. Both groups are interested in green living and would prefer to

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live in a green home. However, renters are more likely to demand green
features while homeowners will install green features if costs aren’t prohibitive.
The reasoning is sound. A renter will pay slightly more in rent to get
lower utility bills and increased comfort. The amount they save in utility bills
will usually more than make up for any rent increase. In addition, since they
aren’t paying for any of the construction or materials costs for green
improvements they want as many green elements in their prospective home as
possible.
This gives savvy ‘green’ rental property investors several fantastic
advantages including:
• They have little competition, as most rental owners are not greening up
their properties.
• They can get a significant portion of their fix up costs back in the form of
rebates, tax incentives, grants, etc. Thus, they rarely pay full price for
their property upgrades.
• They can charge more in rent because their tenants will enjoy lower
utility bills.
• They rent their property faster and thus have lower vacancy expenses.
All of these same criteria apply to commercial real estate as documented

by many commercial real estate sources. The commercial real estate market
embraced going green earlier than the residential market as the capital costs
for doing so were more easily found and the paybacks in incentives, rebates or
operating efficiencies were more easily demonstrated.

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5. WHO HAS THE MONEY?
“WE ARE FROM THE GOVERNMENT AND WE ARE HERE TO HELP”
Really! Right now this is no joke as the government has made going
green part of the American Recovery and Reinvestment Act of 2009. The money
is there for you to help your real estate investment improvements if you
genuinely desire to make them energy efficient. Below is a partial list of
resources available to real estate investors to receive tax credits, rebates, and a
variety of incentives.
The Database of State Incentives for Renewables & Efficiency (DSIRE) is an

ongoing project funded by the U.S. Department of Energy’s Office of Energy
Efficiency and Renewable Energy (EERE), primarily through the Office of
Planning, Budget and Analysis (PBA). The site is administered by the National
Renewable Energy Laboratory (NREL), which is operated for DOE by the
Alliance for Sustainable Energy, LLC. It is the first place to look for rebates,
credits and incentives for all 50 states. www.dsireusa.org
Grants.gov is the Federal Government’s web site for posting funding

opportunities from all Federal Agencies. It is a central storehouse for
information on over 1,000 grant programs and provides access to
approximately $500 billion in annual awards. www.grants.gov
ENERGY STAR is a joint program of the U.S. Environmental Protection Agency

and the U.S. Department of Energy helping us all save money and protect the
environment through energy efficient products and practices. This website also
offers a list of Federal Tax Credits and Rebates. For example, if you install solar
panels you can receive a tax credit equal to 30% of the cost.
www.energystar.gov/
The Energy Efficiency and Conservation Block Grants (EECBG) Program
was funded for the first time by the American Recovery and Reinvestment Act

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of 2009. It is intended to assist U.S. cities, counties, states, territories, and
Indian tribes to develop, promote, implement, and manage energy efficiency
and conservation projects and programs. Through formula and competitive
grants, the Program empowers local communities to make strategic
investments to meet the nation's long-term goals for energy independence and
leadership on climate change. www.eecbg.energy.gov
The Office of Energy Efficiency and Renewable Energy (EERE) works with
business, industry, universities, and others to increase the use of renewable
energy and energy efficiency technologies. One way EERE encourages the
growth of these technologies is by offering financial assistance opportunities for
their development and demonstration. www.eere.energy.gov
The American Recovery and Reinvestment Act provides Tax Incentives and
Tax Credits for individuals to invest in energy-efficient products. www.irs.gov
EPA leads the nation's environmental science, research, education and

assessment efforts. The mission of the Environmental Protection Agency is to
protect human health and the environment. Numerous sources of funding for
green building are available at the national, state and local levels for
homeowners, industry, government organizations and nonprofits.
www.epa.gov/greenbuilding
Local Governments for Sustainability (ICLEI) is a membership association of

local governments committed to advancing climate protection and sustainable
development. Find the latest funding opportunities offered by local
governments. http://www.icleiusa.org/action-center/financing-staffing
6. WHAT MONEY IS AVAILABLE?
There are a number of rules of thumb to these different sources of cash or
credits.

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• Incentives: These are things that a city or county is willing to do to
encourage green building or renovation in their jurisdiction. They will
give you cash incentives or a cash offset such as waiving permitting
fees. If the city or county gets homes built that are LEED certified or
built to Build it Green standards as in (Encinitas CA) they will provide
grant money to encourage builders to make this happen.
• Grants:A city or county gives money for a specific project and specific
to a particular building, builder and renovator. Detroit offers an
example of eco-friendly, low housing complexes. The builder had to
write a business case for the money. An organizational expert and a
grant writer put this plan for a non-profit together that resulted in
subsidies for combined green, low income housing. Once this pool of
money is gone it can be replaced based on experience and success.
These programs have a very specific value. Once established, they are
hard to eliminate but are harder to win without experienced grant
winning expertise. Advice for best legal structuring and for assessing
and winning a grant is essential.
• Rebates – This is simply a discount for buying something or doing
something that is defined as green. The example is Energy Star
appliances or something agreed to be energy or water efficient.
Changing the light bulbs, buying a washing machine and getting a
$50 rebate by proving you bought it with a receipt. These plans have
been around for a long time in many forms by the energy saving and
green movement emphasizing these as investor friendly.
• Tax Credits – These are available at an LLC, entity and personal level
as an earned tax incentive by way of a discount or a refund. The
magic number is $1500 for going energy efficient in a specific area
such as insulation upgrades. There are much higher allowances for
adopting alternative energy sources such as solar and wind (popular)
or geo-thermal (less frequent) and offer uncapped tax incentives up to

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30% of the capital costs of the upgrade for residential or commercial
properties.

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7. HOW TO APPLY FOR FUNDS FOR YOUR PROJECTS
Applying for and receiving grants, incentives, rebates and credits are
both an art and science. The government agencies and non-governmental
organizations we've spoken about have money to give and will do so willingly as
long as you ask for it correctly. Remember their mind-set. They are chartered
to give this money to deserving projects BUT they also want to make sure they
can easily comply with their internal documentation requirements. This is the
government.
There are at least four requirements for gaining the maximum amount of
grants, incentives, rebates and credits:
1. Complete all documents in legible print and make sure to include every
item they require. It sounds basic but you'd be amazed how many people get
their applications rejected or miss the deadline to receive funds because their
paperwork is incomplete or illegible. If what you submit is missing anything
there is a strong chance it will be consciously overlooked as it is additional
work to correct this.
2. Follow their time-line and procedures. Make sure you are doing what's
required when it is required. Do not do it before or late.
FOLLOW THE RULES & PAY ATTENTION TO THE CLOCK

Jim Simcoe reports he recently had a client who completed some energy
efficient work prior to getting an energy audit (as per the rebate program
instructions). All the work he had completed (roughly $3500) was disqualified
from the rebate because he didn't follow the right procedure. So make sure you
follow the exact time-line and step-by-step instructions they give you.
3. Learn which rebates can be combined and apply for everything. Some
programs overlap and do not restrict you from pursuing more than one rebate
for one energy efficiency measure you complete. For example, you might be
able to get a $2000 state rebate for insulating your walls with eco-friendly

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blown insulation. In addition there may be a manufacturer rebate for $500.
The work and materials may have only cost you $2000 to complete but you
may be able to get both rebates. Check out all rebates and apply for
everything.
4. Apply for a rebate, credit or incentive for any energy efficiency
measure you're completing even if it doesn't have an applicable rebate.
Utility companies, city governments and non-governmental organizations want
and need homes and businesses to be green. In some cases they will offer a
rebate or incentive where there isn't one.
PETITIONING FOR A NEW SUBSIDY

There is a little known program through San Diego Gas and Electric that
allows a business owner to submit a proposal for a rebate for an energy
efficiency initiative a business may wish to pursue. This is not specifically
covered by any other program. The program will provide a maximum of
$350,000 if the proposal is approved. Take the example of a small printing
company with 20 employees. A new printing press (costing $200k) is developed
that cuts power usage by 55%, emissions by 65% and waste by 70%. That
business could petition SDG&E to subsidize some, if not all, of the costs of
purchasing that equipment. The business gets new energy efficient equipment
and lower bills as they are using less power and creating less waste.
Check with your local utility for these types unpublicized programs.

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MAXIMUM PERFORMANCE FROM YOUR INVESTMENT PROPERTIES:
DOING IT YOURSELF VS. USING EXPERTS
In this field both time and expertise translate to money. Investors who
use expert advice benefit for two simple reasons: Time and money.
Greening up a portfolio is a full time task. The research necessary to
identify the programs, find the points of contact, navigate, define and fulfill the
compliance requirements of a rebate or an incentive or grant application
requires unfamiliar expertise. It can be a simple process if the applicant
investor knows what they are doing. Alternatively it can be a nightmare
because of the unfamiliar bureaucratic processes. Missing one checkbox on an
application can lead to delayed application and rebate payments. In some cases
this means failing to meet simple rebate requirements and being rejected
entirely for a simple administrative oversight. A botched application can
literally cost thousands of dollars.
The application familiarity and execution process can be arduous and
time-consuming. It typically takes two to three months researching all of the
applicable rebates, tax incentives, credits and grants that are available to you.
After spending this time, it is possible the applicant will still miss thirty to forty
percent of the money available. Worst still, blow the program expiration date.
If after reading this report and understanding the investment
opportunities, you want us to help with specific and affordable advice, then
please follow the process outlined below.
It is our belief, based on experience, that the time-to-money ratio,
barring any changes to known and current administrative processes, will be
faster and result in additional payments, rebates or incentives to the applicant.
For more information on this program you may contact
jim@jimsimcoe.com
A. PROCESS ORGANIZATION

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PUBLISHERS NOTE:
This is a work in process as the variety and list of incentives differs per city and
county. The attached examples are going to be expanded as we develop these by city. If
you need this to be done for you immediately for any project, please contact
jim@jimsimcoe.com.
This begins with identifying the available grants, incentives, rebates,

green loans and rebates that your investment property may be eligible for. Take
our sample spreadsheet and follow the steps to complete this document:
i. Identify address and property tax identification number for the property.

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ii. UTILITIES: Identify the local electric, gas, and water companies serving
the property and establish service with each. Note account number for
each service provider.
iii. Find the rebate section of each utility provider’s website. Do this prior to
reviewing any work you intend to have done on your property.
iv. RENOVATION OR UPGRADES: Define the work that must, should or
can be done – minimum to maximum, balancing where the greatest
energy savings and incentive effect can be realized.
v. Make a punch list of all of the materials and appliances you intend to
use/install in the property.
vi. Cross-reference the punch list with the applicable rebate section of each
service provider’s website to select your materials/appliances.
vii. Once you’ve selected the materials/appliances, contact the manufacturer
to see if there is an additional manufacturer rebate you can receive.
viii. Seek contractor’s bids to meet the renovation requirements or desired
upgrades, specifying preferred products with incentives or rebates.
ix. Review your contractors bid, and/or your intended renovation (or build)
plan for your property.
x. Starting at the top, complete column B (Your Local Agency) for each of
the rows.
xi. MORTGAGE LOANS: If you are pursuing an energy efficiency mortgage,
your local lender may offer these.
xii. If your local lender does not offer energy efficiency mortgages, Google
energy efficient mortgage loans to find a lender that does.
xiii. TAX CREDIT PREPARATION: Inform your accountant that you are
pursuing the $1500 federal tax credit. Make sure that you follow the
steps recommended by the accountant to ensure this tax credit
eligibility. When possible, use an accountant that specializes in green
incentives/tax credits.

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xiv. APPLICATION: Use the Market Research section to research the specific
area of your property. Check the two programs listed to learn what
monies (if any) are earmarked for your neighborhoods property.
xv. Acquire any forms or grant application requirements from each utility,
government agency or entity offering grants, incentives and rebates.
xvi. Complete and submit paying attention to accuracy.
xvii. VERIFY AND TRACK OUTCOME: Using your materials list and your
contractor bid, complete Column F to see approximately how much
money/incentives you can receive.
xviii. Use Column G to notate the dates you applied for each specific rebate.
This will be invaluable to help you track the status of all rebates.
xix. Use Column H to track when you have received your rebate/incentive
funds.
xx. Use the other columns of the scorecard as a back drop for your entire
‘Green’ process. This information will help you with all future projects.
HOW ONE CITY FINANCES GREEN RENTAL RENOVATIONS

Private investors who own low income housing can benefit from green
renovations or retrofits with a program run by the city of Phoenix. Other cities
have similar programs.
"It's a program for targeted areas of the city which the city thinks needs
help and resources,” said project management assistant Patrick Larkin of the
Neighborhood Services Department Revitalization Department. “It's a
commitment with the property owner to provide low-income affordable housing
over a ten year period with a city provided ten year deferred loan."
Rehab work has to address energy efficiency, housing quality standards,
handicapped accessibility, and other issues. It uses federal stimulus dollars to
weatherize properties as well as the rehabilitation.
"The money is basically used to do repairs to housing quality standards:
HVAC, plumbing, roofing,” Larkin said. Loans can also be used on landscaping

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and curb appeal. Participants don’t have to be Phoenix or even Arizona
residents. "We have out of state landlords who participate in the program,”
Larkin said. For more information, contact: Patrick Larkin, Project
Management Assistant, Neighborhood Services Department Revitalization
Division 602-262-7467 or patrick.larkin@phoenix.gov. Check your local town
for similar programs. Opportunity identified by Cheryl King of EcoLiving.

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8. RETROFITTING YOUR RENTAL PROPERTY AS A HIGH
PERFORMANCE RENTAL INVESTMENT
A. INTRODUCTION
Rental property investors can take advantage of retrofit strategies in
more ways that fix and flip property owners or home owners. Rental properties
are the low hanging fruit where investors are paid to take advantage of energy
efficiency and retrofit strategies.
GETTING STARTED
This begins with a plan to identify what is possible with the property.
This may be attractive from a philosophical perspective but the only reason to
do this is if it makes financial sense. It is a matter of comparing the capital
expense of certain retrofit steps that will yield the greatest returns, incentives
and effect on reduced operating costs in an existing residential property?
To repeat:
1. There is the capital cost of the retrofit
2. There are the capital recovery opportunities in the form of grants
incentives and rebates
3. Then there are any applicable tax implications for a property owner
4. The improved operating efficiency over time
5. Any improved valuation because reaching these lower operating costs,
and finally
6. The improved income possible by emphasizing the lower cost of
occupancy of this rental to a tenant that is sensitive to environmental
responsibility, appreciates the lower cost and is willing to pay a premium
for this advantage.
This is no longer a theoretical discussion as we identify later in this
report. The authors have approached the most margin sensitive and skeptical
real estate professionals of all; property managers. Once client, HomeLovers
agreed to field and market test the assumptions. We followed a plan outlined

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here and delivered savings that deliver a return in investment in less than 12
months, and over the life of every future tenant lease.
MATCHING INVESTMENT TO RECOVERY

This is about getting “the most bang for the buck” in retrofit investment,
but also “the most buck for the retrofit bang.” Simply investing retrofit dollars
where they will have the greatest effect and the greatest return.
To some this appears cynical, but quite frankly proposing doing retrofit
for retrofit sake is socially naïve and equally cynical.
People are motivated to do things when they see a simple advantage,
especially when there are dollars resulting from the action. The flaw with most
green strategies and the promoters is that they have not taken the time to
analyze the financial effects. This is the sole reason for this report and why our
will readers benefit better.
Every property is different. A twenty percent reduction in energy use is
an attainable goal, while thirty to forty percent reductions range from feasible
and to possible completely dependent on how much an owner is willing to
invest in an energy-efficiency retrofit. With increases in energy and fuel costs
comes increased savings. These become more attractive over time as the
original investment gains greater value because of rent inflation and valuation
improvements.
If any of the legislation that is being proposed to restrict carbon output
by introducing added taxes and costs, only ensure these strategies provide
greater payback immediately and then over time. Whether Cap and Trade
legislation ever comes into effect, the one thing that is certain are increases in
the costs for energy with the rising costs for oil, gas and electrical energy.

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MONETIZING THE STRATEGY
One unsurprising realizations in examining this area of improved
investment performance through green retrofits was the vague expressions of
benefits to a total lack of investment justification. Green advocates don’t seem
to do numbers. This is the opportunity we decided to embrace, implement,
prove and document.
The steps to reach a payback can range from simple and relatively
inexpensive with a 12 to 36 month payback to a more extensive approach that
is more expensive and takes a longer to reach a full return on investment. We
do not get anywhere near advocating solar systems or arguments for going off
the grid as most are not feasible or economically practical. Solar installations
are still marginal even with tax credits, because this assumes the tax payer has
income to recover the credit against any taxes owed.
The real goal is to identify the steps that bring the highest and best
returns fastest and with the least hassle.
MATCHING RETROFIT STEPS TO INVESTMENT RETURN OPPORTUNITIES

Determine what needs to be done to match energy efficiency grant
fulfillment requirements with the best recovery potential then execute these
retrofits. What is the capital cost and then how will these generate any capital
recovery or operating expense and income improvements. Any applicable tax
credits are specific to the tax payer. Any increased valuation for the property is
specific to the property and the appraisal strategy that is followed.
Going green is about two things – material and performance –This
discussion is about applying strategies and materials to get to improved
building performance and by definition an improved investment performance.
This begins with an energy audit that typically is conducted in the context of
the retrofit. This must be done by a contractor that is recognized as providing
audits that are accepted by the utility or agency that you are expecting to
recover the grant, incentive or rebate from.

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One big win in an audit is that it often finds pending building system
problems and catches minor issues before they escalate into more major and
therefore expensive issues.
B. SINGLE FAMILY RESIDENTIAL RENTAL
Steps you can take range from something as simple and inexpensive as sealing pipe leaks to
substantial investments like a high-tech energy-management system. Commonly, the more pricey
the investment, the longer you have to wait for a payback. But you will come out ahead.
Parkchester North, a 55-building condo co
mplex in the Bronx, installed insulated windows. Over the next 20 years, the management
projects that this one retrofit will save the complex more than $500,000 in energy use.
As well, a property's asset value gets strengthened when environmentally friendly technologies
reduce operating costs. And there are the more intangible effects that also add value.
Like New
For instance, just as new buildings, in ads and promotional materials, are quick to trumpet their
commitment to sustainable design, so, too, can older buildings evoke social consciousness and
environmental responsibility by doing energy-conserving retrofits that can attract co-op or condo
buyers. A green building is healthier and more comfortable than otherwise because interior air
quality is improved — and prospects like the idea of being responsible citizens, especially if they
can also save on their utility bills.
For a building contemplating these kinds of improvements, the key is to compare the upfront cost
of a green-related retrofit with its projected payback in terms of energy savings. The best way to
start is with an energy audit by a certified contractor or consultant. The audit will give the
building a handle on what needs to be done, what can be done, and what the estimated price tag
will be. Audits can be carried out separately or in combination with a full capital-needs
assessment and capital plan.
Here are examples of some of the more easily accomplished retrofits:
• Upgrade your lighting. Substitute compact fluorescent lighting for fluorescent bulbs.
CFL bulbs last ten times longer than conventional ones and slash energy consumption by
66 percent.

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• Install bi-level lighting in public areas such as staircases, hallways and the laundry
room. These setups change from dim to bright only when sensors detect foot-traffic,
rather than burning lights brightly around the clock. The result? A 50 percent decrease in
electricity consumption.
• Prevent heat leaks. Check pipes and ducts for leaks, and seal them accordingly. Inspect
the whole building envelope for cracks and other openings from which heat can escape.
• Save in the kitchen. Substitute Energy Star appliances for older refrigerators
(particularly profligate wasters of electricity) and ranges.
There are many other available retrofits, including the installation of photovoltaic cell arrays on
the roof to harness solar energy, or planting a green roof in which vegetation provides an extra
layer of insulation that deters heat loss while reducing summer cooling needs by as much as 25
percent.
Making Condense of It All
Two recommended but substantial investments involve your heating system. Both yield
immediate savings in fuel consumption, but recouping the capital outlay can take three to six
years.
High-tech condensing boilers are much more energy-efficient than conventional ones because
they condense and recycle exhaust gases to preheat water entering the boiler — recapturing
energy that otherwise would escape up the chimney. This increases the efficiency of fuel
conversion to energy to over 90 percent, compared to the 80 percent or less of conventional
boilers. This not only saves money but also reduces emissions into the environment.
However, condensing boilers are up to 50 percent more expensive to purchase and install than
the conventional variety and require more maintenance. The savings will pay for this added
expense, but only after a few years.
Condensing boilers also cannot be used in steam-heating systems so the best route to higher
efficiency in that case is with a computerized energy management system. An EMS uses
electronic sensors throughout the building to continually monitor room temperatures and ensure
that heat is correctly distributed. More advanced EMS installations also provide zone controls for
finer adjustment of heat-balance. Fuel costs are reduced because the monitors feed the boiler
much more accurate information than a thermometer-based system. Long-term maintenance
problems are also minimized because the EMS alerts management as or before they arise.
There are many shades of "green" available to the enterprising co-op or condo board, enabling
the adaptation of relatively simple strategies now and to phase in further improvements later.
Retrofits quickly show up in bottom-line savings while continuing to add to the value of
apartments. Operating costs are pared, the building's value increases and you make a significant
contribution to decreasing harmful air emissions and to mitigating climate change.

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Not only do you save money, but you get to be all global-warm-and-fuzzy.

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8. HIGH PERFORMANCE GREEN APPRAISALS
Once the short, medium and longer term grants, incentives, rebates and
tax credits (state & Federal) are identified as opportunities to recover the
expense of the capital investment and operating improvements, the next step is
understanding and monetizing the effect retrofitting a home has on the
property appraisal.
There is significant survey information that confirms properties that have
undergone retrofit to meet higher performance standards, homeowner occupied
or intended as rentals. These are theoretically valued more highly than
properties built to the lower code standard of similar, location, square footage
and configuration that have not benefited from an energy efficient retrofit. We
assume they appraise at a superior value than the similar code built
properties.
Currently The Appraisal Institute and other industry bodies take little to
no position on the effect a retrofit has on turning a property into a high
performance property. They agree it is good but do not have any empirical data
to support improved appraisal values.
Ask the average appraiser about the preferred treatment and value a
high performance property should receive and the response is hesitant. The
Appraisal Institute directed our inquiry to the significant reports and articles
that support the appraisal industry as acknowledging green retrofit strategies
as having some value, albeit a currently undefined,
This still does not reduce the retrofit to a viable number.
AVERAGE APPRAISALS
Understanding the appraisal process helps understand why
understanding the improved value of a high performance versus code built
property is still an evolving skill.

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The goal of an appraisal is to set the current market value of a piece of
residential real estate. This is mark the price to what the current market says
buyer will pay for a comparable property or a “mark-to-market” valuation. This
sets the market value and sales price in a normal market.
A lender requires an appraisal to confirm the value of the property that
will be security for any mortgage made to a borrower buying this property. This
is a formal process and should not be compared to a comparative market
analysis (CMA) done by a real estate agent to determine and set an asking price
for a property seller. A CMA is used to suggest an asking price. An appraisal by
a licensed appraiser is the only valuation report a bank will use when
considering the property value as security.
• Appraisers are licensed by individual states after completing coursework
and internship hours that educate and familiarize them with the real estate
markets that they will most likely work in.
• The lender might use internal staff appraisers, or contract with an outside
and independent appraisal company. Choosing an outside the appraiser,
and someone the lender is not familiar with, the results might be subject to
review before they are accepted.
• The appraiser is ideally an objective third party that has no financial or
other connection to any person involved in the transaction, seller, agents,
buyer or lender. This was one area of extensive conflict during the
overheated residential markets of the last decade.
• The property to be appraised is defined as the subject property.
• The cost of the appraisal is typically charged to the buyer/borrower as a
service fee by the lender as part of the loan application process.

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CONTENTS OF A RESIDENTIAL APPRAISAL REPORT
Appraisals are very detailed reports, but here are a few things they
include:
• Details about the subject property, along with side-by-side
comparisons of three similar properties.
• An evaluation of the overall real estate market in the area.
• Statements about issues the appraiser feels are harmful to the
property's value, such as poor access to the property.
• Notations about seriously flawed characteristics, such as a
crumbling foundation.
• An estimate of the average sales time for the property.
• What type of area the home is in (a development, stand alone
acreage, etc.)
RESIDENTIAL APPRAISAL METHODS

There are three ways to determine the value of anything, and each plays
a part in appraising residential properties:
1. Sales Comparison Approach
This is the most widely-used and accepted in residential practice is the
sales comparison approach. The appraiser bases their opinion of the subject
property value on what similar properties in the vicinity have sold for recently,
with appropriate adjustments for time, acreage, living area, amenities and so
on.
Typically two other properties of a similar nature that are within two
miles of the subject property and that have sold within the last six months.
These benchmark properties are called comparables, or comps.
No two properties are exactly alike, so the appraiser must compare the
comps to the subject property, making technical and mathematical

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adjustments to the comps in order to make their features more in-line with
those features of the subject property.
Making and applying these adjustments is where the expertise of the
professional appraiser becomes necessary in understanding how much or how
little value a fireplace or other feature may have without knowing the
neighborhood, talking to real estate professionals and recent buyers in the area
about the importance of these amenities is in that particular location and
market. The result is a figure that shows what each comp would have sold for if
it had the same components as the subject.
2. Cost Approach
Another appraisal approach is the cost approach. How much would a
property cost to replace, that is, rebuild, minus "accrued depreciation?" This is
defined as the depreciation that has occurred since the property actually was
built. The cost approach includes concepts like "economic life" and "effective
age" that are mostly of use in determining the value of special use properties,
special purpose properties or properties where subsequent structural
improvements greatly impact value.
The cost approach is most useful for new properties, where the costs to
build are known. The appraiser estimates how much it would cost to replace
the structure if it were destroyed. The land cost is included in the value.
3. The Income Approach and Capitalization Rate
The third approach to value is the subject property based on income they
generate for their owners -- the most obvious examples being rental properties
such as apartment buildings, non owner-occupied houses and duplexes and
the like. The rental income an owner might reasonably expect from a property
is part of its value. For a purely owner-occupied residential property, this may
not be applicable, but it can be important if the property is to be rented out or
used otherwise to generate income, such as a rental home, store or office
building.

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This income can be affected by improvements to the property that
make it more desirable to rent or less expensive to operate and maintain
because the property has been retrofitted for higher performance
through better energy efficiency.
HISTORY AND RELATED MARKET DEVELOPMENTS

Most of the best high performance and green related building, market
research and appraisal work began in the U.S. Northwest in cities like Seattle
and Portland. This was driven by commonsense and more recently by social
and environment sensibilities.
This echoes a 1971 recession joke about the “last person leaving Seattle,
please turn out the lights.” Along with a sense of humor, Washingtonians and
the Northwest had a sense of conservation. This predisposed them to be early
adopters of the environmental initiatives, particularly high performance. It is
no accident the first appraisals to consider energy efficiency are out of Seattle
and Portland.
Baseline Data and Sales Trends
The data from the previously referenced study by Earth Advantage
Institute, Portland, Oregon validated the fact that green sensitive market,
builders and real estate agents can market, sell and monetize green building.
This July 2009 on data that found code built new homes sold for an
average of $173 per square foot while, similar but green certified, higher
performance homes sold for an average of $193 per square foot. This delivers a
premium of nearly twelve percent, not counting any green build municipal
permit fee waivers, grants, incentives, rebates or state and Federal tax credits.

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In Portland, OR:
• Certified homes sold for 3% to 5% more than non-certified homes. In a
statistical analysis with a 95% level of confidence, the overall price difference
was found to be 4.2%.
• Certified homes sold 18 days faster than non-certified homes.
In Seattle, WA:
• Certified homes sold for 9.6% more than non-certified homes.
• The non-certified homes stayed on the market an average of 5 days longer (or
40% more time on the market).
IT’S INCOME PROPERTY!

The economy and the inherent professional conservatism of real estate
appraising and valuation professions promotes a risk adverse approach to
valuation. They are not willing to pioneer new methods or considerations. This
is particularly true in the appraisal of residential real estate, compounded by
the current economic environment
Use of the tradition methods of comparative valuation or replacement
cost of buildings residential is appropriate if primarily for single family. The
simple answer is to legitimately redefine the property from an owner occupied
residence to its true character as a rental property and commercial exercise.
In 2008 about seventy two percent of all residential sales are owner
occupied while the remaining 28% are income property. Small multifamily are
almost always income property.
Therefore the argument is to consider the single family rental property
just like the small multifamily and to use the capitalization rate method of
valuation, after all the debt service and other expenses will be offset by rental
income.
This is a perfectly acceptable and normal approach to valuing an
investment property that does not cause the residential appraiser to move into
an area they are unfamiliar with. The premiums offered by increased income
and the expected reduction of operating costs allow a better capitalization rate.
The variable is that the appraisal group or appraiser must be comfortable
with commercial valuations versus a strict residential approach.

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APPRAISAL PROTOCOLS
As an aftermath of the sub-prime meltdown, appraisals are not meant to
have any contact with the vendor or the bank, however it is strongly suggested
that an appraiser take notice of any retrofit activity that has occurred to the
property. We discovered with residential and commercial appraisers, the
leaders in this business realize going green adds value. The fact that operating
costs can be reduced and income improved means in the case of an income
property, the capitalization rate can be improved. This means providing some
evidence of the retrofit and income and expense projections to the bank and to
the appraiser.
SUGGESTED APPRAISER CHECKLIST

Here is the checklist for a client to submit to an appraiser to gain an
increase in value:
7. Energy Audit report (if completed).
8. List of all energy-efficient measures completed (wall insulation added,
HVAC system optimized, etc.).
9. List of energy-efficient materials/equipment installed (low-flow shower-
heads, CFL lighting, weather stripping, etc.).
10. Invoices for the installation calling out the materials used
11. Projected annual utility expense savings based on historical data
(homes past 12 months utility bills or comparable home utility bills).
12. Projected 'Asset Value Increase' based on the Energy Star Formula.
Annual savings in energy costs/Capitalization rate = estimated increase
in asset value. (This comes directly from the Energy Star website.)
13. *Pictures of each energy-efficient measure being installed.
14. *Property valuation link- Something that I will create and have on
my site that will have the latest data/stats on buyers/renters desires for

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green and any statistics about green buying trends that would add to the
case for increased values.
*If you think these are valuable.
This also means an investor trying to get a conventional loan approved

by deemphasizing the fact this is an investment property is probably not
getting the best performance out of this transaction.
Appraisers tend to be conservative and less inclined to jump on these
retrofits as increasing value in the case of a owner occupied home valued on
the comparative or replacement method. It is essential the appraiser realize
this is appraising income property where the custom is to use the capitalization
rate method.
The Appraisal Institute Position on Green Properties

The Appraisal Institute is an association of appraisers designed to
advance professionalism and ethics, global standards, methodologies, and
practices through the professional development of property economics
worldwide. They published An Introduction to Green Homes in June 2010 as an
earth-friendly initiative that provides:
• An overview of the many programs, organizations, and products
that are fueling the current surge in environmentally responsible
building and remodeling
• Detailed descriptions of LEED and Energy Star green home and
product certification programs
• Information on popular green home products and features such as
energy-efficient appliances, toxin-free flooring and insulation, and
vegetated roofs
• Updates on environmental organizations that are leading the way
in sustainable building, including the U.S. Green Building Council
and NAHB Green

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• Detailed case studies focusing on various attributes of green
homes
• Insights on how green features affect the value of homes
But most important for investors -
• Methodologies that can be applied to measure this increment of
home value
The publication spends most of the time explaining green and retrofit
issues and identifies this is a new field most appraisers are not familiar
with. Most importantly it establishes that green features and issues are a
growing movement worthy of an appraiser’s attention. Below are
summaries of specific comments from An Introduction to Green Homes.
As an investor I would have a copy of this document on hand to help
appraisers and any lenders understand the state of the market and what
they are expected to do.
The Standard Uniform Residential Appraisal Report

These are Fannie Mae Form 1004 or Freddie Mac Form 70. These only
reference green building issues in two places on either URAR form:
Page 1 URAR – Additional Features allows room for a one and half line
description of any “special energy efficient features.” This is inadequate to
list all of the changes but this can refer to a specific addendum that can list
all of the upgrade and retrofit features. This is for the benefit of the lenders
underwriter.
Page 2 URAR – This is the sales comparison approach grid. This
references “special energy efficiency features” on page 1 and any addendum.
Now a contradiction arises. It may or may not effect value given the
energy efficiency of this property if it is compared directly with other retrofit
properties. Page 522 of 2010 Fannie Mae “Selling Guide” states:
B4-1.4-13, Appraisal Report Review: Insulation and
Energy Efficiency of the Improvements (04/01/2009)

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Introduction
This topic contains information on insulation and energy efficiency of the improvements.
Insulation and Energy Efficiency of the Improvements

An energy-efficient property is one that uses cost-effective design, materials, equipment, and site orientation
to conserve nonrenewable fuels.
Special energy-saving items must be recognized in the appraisal process. The nature of these items and
their contribution to value will vary throughout the country because of climactic conditions and differences in utility
costs.
Appraisers must compare energy-efficient features of the subject property to those of comparable properties
in the “sales comparison analysis” grid to ensure that the overall contribution of these items is reflected in the
market value of the subject property.
Then on page 537 of the Fannie Mae Selling Guide allow any income
adjustments to be used as an added argument for appraisal considerations
using a background of comparable valuations of similar properties.
B4-1.4-20, Appraisal Report Review: Income Approach to

Value (04/01/2009)
Introduction
This topic contains information on the income approach to value.
Part B, Origination Through Closing Subpart 4, Underwriting Property
Chapter 1, Appraisal Guidelines, Appraisal Report Assessment - May 27, 2010
Income Approach to Value

Fannie Mae does not accept appraisals that rely solely on the income approach to value as an indicator of
market value.
When the income approach to value is used, the appraisal report must include the supporting comparable
rental and sales data, and the calculations used to determine the gross rent multiplier.
The income approach to value is not appropriate in areas that consist mostly of owner-occupied properties
since adequate rental data generally does not exist for those areas.

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GREEN MORTGAGES
INTENTIONALLY LEFT BLANK AS CONTENT FOLLOWS IN

VERSION 5.

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9. MARKETING FOR A PREMIUM RETURN
Once the grants, incentives, rebates and tax credits are identified,
applied for and in process of being awarded and collected, there is a second
part to monetizing a green strategy.
This is the market positioning of the property to either sell or rent at a
premium earned because of a green retrofit being recognized as resulting in a
verifiably better property. Watch for “green washing” or fake promotion of a
green property.
There is a healthy skepticism at the whole concept of “going green.” It is
based on a serious lack of baseline data and documented experience. Personal
Real Estate Investor Magazine agreed with this skepticism until we began
interviewing and finding the source and citations of various claims.
Nothing beats a successful proof of concept to prove to us there is
substance to one or other claim. This proof of concept was designed to prove
that renters would pay a premium for a retrofitted rental property on the basis
of a lower cost of occupancy.
HIGH UTILITY COSTS

A REASON NOT TO RE-LEASE OR TO VACATE A RENTAL EARLY?
One of the most frequent reasons cited by tenants deciding to move out
of a single family rental is the high cost or electric and gas utilities for the
heating and cooling of the property.
Applying a retrofit strategy to a rental property can have the effect of
reducing these costs from 20 to 60% therefore removing or reducing the
frequency of this complaint because this has the potential to lower the cost of
occupancy for a tenant.
We know that if this message is used to position the property for sale or
for rent, this tends to attract more response in a market where few properties
are formally positioned as energy efficient. This next case study substantiates

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this. A green advertisement versus the same ad language with no references to
green efficiencies generated three times the number of responses.
PREMIUM RENTAL CASE STUDY - May 2010
Columbine Property – Phoenix AZ
Objective: To improve rental yield by promoting as energy efficient.
Outcome: Achieved a 10% increase above market rate rent.

1. Proposed market rent for this property was $1,095.
2. Property rented for $1,195 generating a monthly premium of $100 over
market rent and annualized at $1,200.
Conclusion - This unequivocally proved that a premium rent was gained from
positioning, advertising and selling a rental property as a maximum
performance with a lower cost of occupancy because of increased energy
efficiency.
Process:
3. An ad was created and posted on CraigsList.com that emphasized “green.”

(see below).
4. Prospective tenants responded to the 'green' web ad.
5. The Leasing Representatives at the property management company needs to
be coached to emphasize the energy efficiency and tenant savings.
Note well: In this case, even though the sales rep did not think 'green' was a
factor in the rental sale and they did not mention 'green' as an advantage in the
sales process, they achieved a rental premium of 10% above market or $100
more a month or more $1,200 on an annual basis.
Sample Ad Copy:
Save $$$ monthly in this energy-efficient 'GREEN' home with pool!

This home is scheduled to receive numerous green energy-efficient upgrades prior to
your move-in that are projected to lower your utility bills by 30% or more!
Upgrades like improved insulation (to keep it cooler in the summer and warmer in the
winter); energy-efficient showers and sinks, etc.
This is the only affordable 'green' home in Peoria and can literally save you hundreds
of dollars a year on your utility bills.
If you're interested in seeing the home, please email XX, thanks!
MARKETING IDEAS

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Leveraging a hungry media with interesting content
The media can be leveraged with interesting stories about green projects
as they need content. Green content sells to green sensitive media.
Thirty years ago most content came from these sources:
1. TV- 3 channels (ABC, NBC, and CBS)
2. Radio- FM or AM
3. Print- Newspapers, magazines and books.
At the time TV came on at 6 a.m. and signed off at midnight. There were
ten radio stations that had the dominating influence in your area. The morning
and the afternoon paper had significant power and sway. Getting press was
hard. Today, the Internet, cell phones, video games, mobile phone apps,
satellite radio are easily available and have completely diluted the power of
these historic media outlets channels. The average wired TV gets 300
channels.
With the abundance of media sources and a shift to non-stop, 24 hour
news cycles, the need for content is voracious. Media sources and their
reporters, writers and producers crave “eyeballs” and the ratings that follow
good content reaching large audiences and readerships. The need to create
relevant content to fill a vast news hole is the good news. The warning to
content creators is clear: create simple messages that can be easily found by
content tracked by meta tags or key words that clearly define the content.
Puppy dogs & infants
Puppies and babies are feel-good stories. Walk through a park with
either and you're bound to get smiles. The media loves feel good stories.
Currently, sustainability is a hot topic. Being green saves money, protects the
planet and when positioned as a financial advantage attracts no controversy.
It's the triple-crown of content for any media source: It's interesting and
compelling, it benefits the reader/viewer directly and makes the media source
look like an expert.

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The third element is key to having the media recognize you and your
success because it builds a favorable brand for the media source while your
activities help position them as experts in a field that is gaining mainstream
interest. Being an expert creates a competitive advantage in the fight for
eyeballs. Add a financial justification and this competitive advantage multiplies
as it is interesting and potentially valuable.
How to leverage media to increase profits
First, understand what the media needs: a compelling story, some free
advice and feel-good touch at the end. Your presentation should tell them why
your story makes sense, is timely and ultimately helps their readers and
viewers. The story angle and pitch should follow their suggested format for the
story (case study, profile, trends, etc.)
Second, position yourself as an expert for the interview or profile
attached to the story. Sell the fact that there is no story without a personality
and that the human involvement is crucial. This reaffirms the position of a
thought leader that validates the writer/interviewers story.
Third, with some media attention, more will follow. Leverage this for more
with a personal press release campaign. The more media, the more recognition
as an expert, the more media opportunities will arise.
The benefits to leveraging the media:

1. Third party publicity increases the perceived value of the covered projects.
Positioned as the expert, the perception is that the associated homes/buildings
are higher-performance, greener and thus worth more.
2. For investors pursuing a buy-and hold strategy, especially in central and
recovering neighborhoods, it can attract a better class of tenant, higher rents
and a competitive advantage. There may be ten houses for rent in a certain
neighborhood but tenants will pay a premium for your property because they
saw it on local TV or read about it and now assume it is a high-performance
home and a high performance landlord.

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CASE STUDY - IN THE NOW INVESTMENTS
WWW.INTHENOWINVESTMENTS.COM
This is an example directly from a Simcoe Consulting client:
In The Now Investments buys foreclosures and HUD homes in the Detroit
area. They rehab these and then re-sell to investors. When Simcoe started
working with In the Now, they began by greening all of their rehabs using eco-
friendly materials and taking advantage of tax credits and rebates. In The Now
contacted a reporter at Crain’s Business Daily (the largest business publication
in Michigan) and pitched him on doing a story.
Message: In The Now was creating sustainable neighborhoods out of
formerly dilapidated homes. They were also creating green jobs and at the time
were unique in Detroit with this type of green real estate investment. The
result was a full page article, with pictures, published within three weeks of the
reporter interview. New deals resulted with new investors and several new
prospective partnerships as a result of one article. This article has become the
basis of appealing to more media with this opportunity.

Page 65 of 88
11. AVOIDING “GREEN WASHING”
“Green washing” is the practice of companies spinning their products
and policies as environmentally friendly. “Environmentally friendly” or the word
“green” are not standards.
'Green' is loosely defined. This presents an opportunity for companies to
falsely claim being green. The bottled water company that claims their
“greenness” because their new bottle is shaped differently and uses 10% less
plastic is employing more cost effective manufacturing, not green
manufacturing. The bottle is still plastic and it still takes almost 2 gallons of
water to produce just one individual bottle of water.
Green washing has grown with the popularity and attention to
environmental awareness. As consumers become more educated they recognize
green washing quicker. The result for a company that falsely claims or
overstates a green position is undesirable. The brand, sales and goodwill that
has been built up over the years can be damaged.
As a green investor/company, avoid misstating your involvement with
green initiatives at all costs. The over-zealous green marketer can create more
problems than sales.
There is a three step plan to ensure staying clear of over-zealous green
marketing and the resultant green washing:
1. Never claim to be 'green.'
Green is an end goal, one that you can strive towards but cannot reach.
To be truly 100% green you'd have to leave absolutely no environmental
impact. This is virtually impossible for any human being, much less a
company. It's better to claim the steps and efforts the company is using to
“Maximum Performance from your Investment Properties” and what you're
doing to be a green-'er' investor/company.

Page 66 of 88
2. Be honest.
Explain to your customers, prospects, vendors, etc. your true
motivations to pursue green strategies as a market advantage, more satisfied
customers, better economics and improved financial returns. This makes
sense and presents the company in a favorable light versus others who claim
their motivation is protecting the planet. People want honesty and will reward
it.
3. Commit to Continuous Improvement.
Continuous improvement is a concept first encountered in Japanese
manufacturing. “Kaizen” is the philosophy or practices that focus upon
continuous improvement. Subscribe to this methodology as you pursue
profits. Solicit your customers, vendors, anyone for their advice and feedback
to improve service and make your projects greener. A 'green' company is most
often thought of as a high-performance company and green a byproduct of this
ever improving process.
Green-washing is a short cut when there are no short cuts. By
conscientiously avoiding misstating your position you create a positive
impression and create a competitive differentiator from competition.

Page 67 of 88
12. GREEN POSITIONING FOR BETTER REO OPPORTUNITIES
Banks are encouraged by very clear accounting and reserve rules not to
hold real estate, especially properties that they have recovered as a result of a
non-performing loan. These negatively impact their balance sheet and their
statutorily required reserves. Banks approve REO agents and using a green
message may provide an advantage.
An investor with a green message can potentially differentiate from other
investors that the bank is dealing with. There may be a preference to work with
a green investor because the outcome will be potentially more desirable,
financially and from a community benefit perspective.
The reasoning is simple. Instead of holding distressed property, the bank
is selling it to an investor who is claiming to make the property more energy
efficient, safer and less expensive to operate than when it was first built. Many
rehabbers do a quick rehab and then flip property for a fast profit spread. A
green renovation is positioned differently as green-habbing and improving the
property. The selling bank is part of turning a negative into a positive.
How to make this work:

1. When submitting an offer to the bank, position the proposal as coming from
a green real estate investor. Include a press kit, a brief letter of your green-
habbing process and how you plan to make the property more energy efficient.
2. In the letter to the bank, ask if they accept offers to allow mention of the
selling bank in any future media scheduled in association with marketing the
property. Explain turning a distressed property into a green property will
attract media who are interested in the story. This is at no added cost to the
bank.
3. Request that the bank provide favorable terms and/or a lower price so that
the green-hab can be completed quickly. Explain that this rehab is more than
a typical investor would be doing to the subject property. Ask the bank to
adjust their terms accordingly.

Page 68 of 88
The key is to position yourself as a green investor and “partner” with the
bank. Explain the benefits of selling a green property over competition
(favorable media attention, higher-performance homes and a premium
appraisal, etc). Most banks prefer to sell their distressed properties to
responsible investors and green helps this image.

Page 69 of 88
13. RESOURCE LIST
Jim Simcoe – www.JimSimcoe.com
Andrew Waite – Personal Real Estate Investor Magazine

www.PersonalRealEstateInvestorMag.com
602-241-0800
Earth Advantage Institute

www.earthadvantage.com
14. Bibliography
Simmons, Alan F. SRPA, LEED, AP - An Introduction to Green Homes –

Publisher The Appraisal Institute - 2010

Page 70 of 88
Appendices
1. San Diego County, San Diego & adjacent cities
2. San Diego City and County Template - Initial Incentive Recapture
3. Projected Ongoing Operating Cost Improvements with simple upgrades
to water flow and lighting.
4. Maricopa County, Phoenix & adjacent cities
5. Phoenix Program Lists
6. Phoenix City & Maricopa County Template - Initial Incentive Recapture
1. San Diego County and County Cities

Page 71 of 88

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SPECIAL REPORT:

How to GET MAXIMUM

By Jim Simcoe and Andrew Waite

Version 4 – June 2010

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

1. Introduction – How to Reap Immediate Benefits ………………… 04

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

Select cities and counties will be mapped and published based on

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

WHO SHOULD READ THIS DOCUMENT AND WHO CAN BENEFIT?

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

“TURN OFF THE LIGHT!”

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

“TURNING ON THE LIGHT!”

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

FROM GREEN POLAR BEARS TO GREEN BACKS

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

ABOUT THIS DOCUMENT

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

WHY HAVE GREEN PROPERTY RENOVATION AND UPGRADES BECOME A

A. MARKET DEMAND – DEMONSTRATED BUYER DEMAND

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

B. ENERGY EFFICIENCY INCENTIVES – ADDED MONEY FOR GREEN

b. Urban Streetscape Renewal - Detroit, Michigan: $3.4M was

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

C. HIGH PERFORMANCE PROPERTY – A SALES OR RENTAL ADVANTAGE

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

Higher Rent, Better Tenants and New Fees

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

TAKE AN IMMEDIATE MARKET ADVANTAGE

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

Existing Structure Optimized - We believe focusing on green sensitive

Resources Well Managed - A renovation that pays attention to water

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

LOCATION, LOCATION, GREENER LOCATION

AN EARTHQUAKE WITH A GREEN & SILVER LINING

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

GRANITE COUNTERTOPS AND CROWN MOLDING DOES NOT TRUMP A

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

“LIFE” & “STYLE” ARE TWO VERY DIFFERENT WORDS

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

CERTIFIED HOMES ARE WORTH MORE

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

COMPARABLE PROPERTY STUDY RESULTS

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

SELF-CERTIFIED AND THIRD-PARTY CERTIFICATION

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

Other references substantiating the argument that green upgrades are

MARKET MOMENTUM DOCUMENTED

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

What is Most Important to Renters?

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES

All of these same criteria apply to commercial real estate as documented

How to GET MAXIMUM PERFORMANCE from your INVESTMENT PROPERTIES