Are you interested in steering your money toward a high-performing asset that not only offers attractive financial returns but also contributes to a greener future? Then look no further than sustainable real estate investing. The accelerating global shift toward eco-friendly, climate-conscious living and working routines proves that sustainable real estate is a practical investment that comes with both financial and environmental benefits.
Recent data shows that the selling prices of green-certified buildings are 7-17% higher than those of conventional buildings, signaling the rising recognition among investors for sustainable real estate. In this article, we will explore why sustainable real estate is the future of investment and how investors can get started in this field.
What is Sustainable Real Estate?
Sustainable real estate, also known as green or eco-friendly property development, involves designing, constructing, and operating building assets or properties with a focus on environmental responsibility and resource efficiency. These properties prioritize energy efficiency, water conservation, waste reduction, and use of renewable resources to minimize environmental impact and promote healthier and more comfortable living and working environments.
The real estate sector accounts for nearly 40% of global carbon dioxide emissions. By embedding sustainability into development, real estate owners and investors could increase their profits and create new sources of value and revenue streams, while contributing to a healthier planet.
Benefits of Sustainable Real Estate Investing
Sustainability is becoming more important to real estate regulators, tenants, and investors alike. According to JLL, a global real estate consultant, green buildings are achieving a considerably higher capital value premium of more than 20% compared to non-sustainable buildings. Sustainable real estate investment is not only a wise business decision but also an opportunity to have a positive impact on both the environment and society. Here are the benefits of investing in the eco-friendly property market:
1. Long-Term Cost Savings
Adoption of sustainable strategies like energy-efficient lighting, water conservation systems, use of renewable resources, and other green building practices can result in lower operating and maintenance costs and reduced utility bills for occupants and tenants.
2. Increased Property Value and Market Demand
Since sustainable real estate meets the growing demand for environmentally friendly and healthy working and living environments, it creates higher occupancy rates, longer leases, and lower vacancy costs. This, in turn, will increase the property’s value and traction in the market.
3. Access to Government Incentives
In addition to environmental benefits, investing in green buildings and climate-conscious properties will provide financial returns in the form of lower utility bills, tax incentives and subsidies (awarded to green-certified buildings from local authorities), and higher property values.
4. Higher Resale and Rental Values
Green buildings with reduced carbon emissions offer better indoor air quality, natural light, and thermal comfort for occupants. This can lead to higher resale and rental values.
5. Future-Proof Real Estate Investments
Sustainability is the future of nearly every industry, and real estate is no different. Governments and regulators around the world are enacting laws to reduce carbon emissions and mitigate the risks of climate change. By investing in sustainable, energy and water-efficient, eco-friendly real estate assets, you can ensure improved compliance with government laws and regulations and also prevent costly upgrades that may be required in the future to meet those regulations.
How to Find and Invest in Sustainable Real Estate Projects?
If you’re interested in sustainable real estate investing, there are a few key steps to take to get started.
1. Define Your Investment Goals and Objectives
Identify what you are hoping to achieve by investing in a sustainable real estate project. Are you planning to generate long-term financial returns or more interested in making a positive impact on the environment? Once you have a clear understanding of your goals, you can start to narrow down your options and identify which type of sustainable real estate investment is right for you.
2. Perform Due Diligence
Before committing to anything, do your research to understand the development team behind the sustainable real estate project and their reputation in the market, the location of the property, sustainability features of the project, essential certifications procured, the condition of the property, and the demand for the property among tenants or buyers. Also, be clear on the potential risks and rewards associated with the investment.
3. Look For Green Certification
Find out whether the property you’re planning to invest in is green-certified or not. This type of certification means that the property meets the standards for energy efficiency, water conservation, decarbonization, and other sustainable practices dictated by the local authorities. A green-certified property will help you secure higher selling value and market demand, as it shows potential tenants or buyers how serious you are about sustainability and environmental conservation.
4. Create a Solid Business Case
The ultimate goal of any investment is to make financial sense. Ensure the developer can demonstrate how your investment will generate profit and save money over time through reduced operating costs, increased rental income, or higher sales value. Weigh the potential financial risks and rewards carefully before making any investment decision.
5. Enforce a Legally Binding Contract
Ensure you verify all the terms and conditions proposed by the builder and go through all the legal documents related to the property before finalizing your investment decision. Assess if the sustainability features of the property are aligned to your investment criteria, goals, and expectations. Once you’re sure about everything, document a real estate investment agreement that would outline the specific details of your investment, including the capital contributions from your end, profit-sharing mechanisms, decision-making processes regarding property management, maintenance, and potential sale.
6. Monitor Your Investment
Once you have made your sustainable real estate investment, keep a close eye on the project and monitor how your investment is making progress. Evaluate whether the project is on track and your investment is being used effectively. Regular monitoring allows you to spot any potential obstacles early on and tackle them quickly and efficiently.
7. Formulate an Exit Strategy
Sustainable real estate investors are required to follow strict regulations and guidelines to sell or transfer the ownership of the property in which they have invested. A well-articulated real estate exit strategy guides an investor’s decisions (selling or transferring ownership) throughout a given deal and also helps minimize losses and maximize profits on their investments. Make sure you have a solid plan in place to exit the investment if things don’t go as expected.
Looking Ahead
Environmental, social, and governance (ESG) areas have become a strategic priority for investors in recent times. As sustainability becomes the core of investment decisions, investors need to steer their money toward environment-friendly, socially responsible, and economically viable properties to maximize investment value.
If you’re keen on connecting with promising eco-friendly projects that can offer maximum returns on your investment, get started by signing up on our investor matching platform. Start3r enables investors to seamlessly connect with unique and relevant entrepreneurs. Our platform also offers the essential tools and resources for investors to make wise decisions that lead to positive financial and social outcomes.
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