How To Budget For An Eco-Friendly House
You buy organic at the local farmers market, hunt for the fair-trade label while perusing store aisles, and dabble in impact investing. So naturally, your eco-conscious preferences might also have you leaning toward a sustainable home.
Maybe you’ve always longed for a home with solar panels, bamboo flooring, or a grey water irrigation system. But whether you’re buying a home with sustainable features or renovating your current digs, these homes often require a deeper financial commitment than a standard one, points out Alexander Lerner, a realtor of Figure 8 Realty in Los Angeles.
So how should you go about saving for a sustainable house, and what should you consider money-wise? Let’s dig in:
Do Your Research
Just like budgeting for anything else, you’ll want to do your research and factor in the costs. For instance, if you’d like to install solar panels in your home, the average cost is $4.11 per watt in California, and $3.41 per watt in Texas. Yearn for bamboo flooring in your kitchen? It could cost about $4 per square foot, plus the cost of labor to install.
If you’re going the DIY route, consider how much money and time would it take to purchase materials, punch holes in the walls or perform any modifications to your home, and do the install. You might also need to take some time off work.
If you’re hiring professionals to get the job done, gather a couple of quotes. Depending on the specifications of your home, time of year, and scope of the job, the cost of transforming your abode from standard to sustainable can vary. If you’re planning to install during the winter, which is typically a slower time of year for contractors, it could be less expensive. On the flip side, you’ll need to deal with colder climates and the hassle and complications that come with doing so.
If you’re buying a home with sustainable features, saving for that purchase isn’t much different — if at all — from purchasing a regular home, says Lerner. You’ll still need to have enough money for the down payment and closing costs; work with a lender to get a loan, and you’ll still need to make sure that you can afford to pay the monthly expenses such as a loan, taxes, insurance, and so forth. “In a lot of ways, most people will likely approach budgeting and saving to purchase a sustainable home exactly as they would for any home purchase,” says Lerner.
If you’re renovating, will you be adding just one feature, such as a grey water irrigation system or solar roofing, or do you plan on adding several over time? If so, how much will you do to turn your home into a sustainable one?
Look for Ways to Offset the Costs
You might be able to find grants, rebates, or tax credits to offset some or even all of the costs of installing eco-friendly features or buying a green home, says Lerner. If you’re buying a home, hunt around for a loan with better rates. “When factoring in the monthly savings and the resale value for some of these features, it’s possible that you could end up substantially increasing the value of your home for little to no cost.”
Just like how you can stack deals and coupons to score the greatest savings on a gadget, you could do the same for energy-efficient add-ons. For instance, when Riley Adams’ parents installed solar panels on their rooftop, they qualified for the 30% investment tax credit (ITC). What’s more, at the time, the state of Louisiana offered a refundable tax credit equivalent to 50% of the project’s installed costs without a cap on the costs.
“Because my parents itemized their deductions, they had to claim the state’s refundable tax credit as income on their federal tax return, thereby reducing the effectiveness of the state credit,” says Adams, a licensed CPA and founder of The Young and the Invested. Plus, since Adams’s parents installed solar panels back in 2011, they’ve rarely paid more than the minimum energy bill.
Consider the Value Add
The good news is that these features, while expensive, can both save you money and add value to your home, points out Lerner. First, he explains, you can expect to see lower utility payments. Second, adding sustainable elements to your home can add a tremendous amount of value to the property. This will especially be true as home buyers become more environmentally conscious and specifically seek out homes with these components. “If you want a sustainable house, be prepared to spend more up front, but that initial investment will likely pay off and be worth it in the long run,” says Lerner.
But value shouldn’t be defined by money alone. The costs and additional work might be well worth the satisfaction of living in a sustainable home. “More and more people are beginning to recognize and acknowledge that if we want to ensure a habitable future on Earth for ourselves and our children, then we need to re-examine and change how we presently live,” says Lerner.
“That’s a large part why buyers are searching for homes that can lower their footprint and reduce their impact on the planet, and why some home buyers become more interested in homes that have been certified green.”
While it might be more work and costs up front, having a sustainable house could help you save in the long run. Plus, if being a green citizen is on the top of your list of priorities, it’ll be worthwhile to have a house that embodies your eco-friendly values.
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