For most people, the biggest investment they will ever make is the purchase of their home. However, this purchase is usually made without factoring in their Return on Investment. Typically, the ROI is based on only two factors; when the home is sold and the percentage of appreciation over the time of ownership. Luckily, homebuyers today have a third high-return investment choice…..an Energy Efficient home.
Homebuyers need to include energy efficiency in their decision making process when purchasing a home. Energy efficient items that are incorporated into the home are the only items that can actually pay a homeowner a “dividend” every month they own the home. There are four main categories of energy efficiency to consider; Heat and Air Systems, Windows, Insulation, and Appliances. By upgrading to high efficiency on these items a homeowner can typically save 30% plus on energy costs. Monthly savings of upwards of 50% are not uncommon.
What other items in a home actually pay for themselves over time? The answer is none. Only items that directly effect energy usage will provide a return on investment. Where else can you invest $35 to $40 a month and get a return of $70 to $80 a month? A home that is designed with energy efficient systems will typically pay for the upgrades within a matter of a few years.
As an example, to upgrade a typical 2000 square foot house, to incorporate a high efficiency HVAC system, upgrade to Low-E windows, install Open Cell 0.5# Foam insulation, and Energy Star appliances will add approximately $5000 to the cost of the home. This equates to a $35 increase on the monthly mortgage payment. However, these upgrades will result in approximately $850 in yearly savings on utility costs.
In addition to the savings realized, there are several other factors to consider. Mortgage companies now offer Energy Efficient Mortgages (EEM’s). How will an EEM mortgage impact a home buyer? The EEM allows for an increase in qualifying income ratios which directly relates to home buying power. The EEM factors in the reduced operating costs, which increases the Loan-to-Value ratio. The bottom line is a buyer can qualify for a higher priced home.
In Oklahoma there are Federal and State Tax Credits available, up to $6000 total, when a home is built to high energy standards. These credits would completely pay for the upgrades in the previous example. The homebuyer will then realize instant savings of $70 a month.
The intangible items to consider are the comfort level of the home, indoor air quality, the positive impact on the environment, reduction of outside noise levels, third party energy rating assurance, and increased market value just to name a few.
An increased investment in an Energy Efficient home can and will result in one of the highest ROI’s in the marketplace today.
Bart Bartholomew is Manager of Builders Insulation & Building Product. He is one of the leading experts on energy efficiency in the Oklahoma City market and is one of the most active Associate Members of COHBA. He can be reached or by phone at (405) 688-5576. You can learn more about how an energy efficient home is as important as ever by watching the Defy The Trends video entitled "Energy".
