Whenever you open a newspaper, you’ll likely find ads for home improvements such as new windows, insulation, and furnaces. These ads regularly promise energy savings that will allow you to recoup your investment in a short period of time, often something like “5-7 years” or maybe even less. But unless your utility costs are well above average, you might question the credibility of these claims (“how can $10,000 worth of windows pay for themselves in 7 years if my utility costs are only $1500 per year?”).
The truth is, most of the advertised payback periods are based on upgrading an extremely inefficient home with very high utility costs. This post will evaluate the savings possible in more typical situations.
According to Natural Resources Canada, space heating accounts for about 60% of the average home’s energy costs, so it makes sense to focus on this when making energy improvements. You’re probably using a gas furnace to heat your home right now. If it was made before 1995, it’s probably only about 65% efficient. If it was made between 1995 and 2009, it’s probably about 80% efficient. By comparison, new furnaces are 90-98% efficient, so you’ll save 18-34% on heating costs by upgrading. But new furnace costs are in the $5000 range, and natural gas prices are at a 10-year low. So you’ll have to evaluate how much you spend on space heating (it usually accounts for most of your gas bill). If you have a larger home with high heating costs, the payback periods can still be short (7 years or less) if you have an old, inefficient furnace. But if you have a smaller, better insulated home, the payback periods can be long (20 years or so, assuming gas prices remain low).
A heat pump is basically an air conditioner that can run in reverse, and can thus provide both heating and cooling. Since they only move heat from one location to another, rather than creating heat, they can operate at efficiencies of over 300%. Unfortunately, electricity costs have been rising in many parts of Canada over the past few years, whereas natural gas prices are at a 10+ year low. Since electricity is now relatively expensive, this means the savings on heating costs over newer furnaces can be marginal. So the main reason to install a heat pump would be for the air conditioning. However, if natural gas prices rise again, heat pumps will once again provide large savings on utilities. Continue reading ROI of Home Energy Upgrades
Our Old House
When I bought my first house in late 2004 I did so intending to use the basement area in the new addition as a room rental. The space was serviced by the furnace and forced air but also had a gas fireplace and a 3 piece bathroom. The plan was to share kitchen and laundry facilities but otherwise co-habit the house leading a separate life from my tenant. The house we ultimately sold was a 2 storey – I bought more than I needed (lesson learned) so I had lots of personal space to live in. The “den” bedroom was gravy.
It was quite easy to get a student to rent the space for $400 on a monthly basis. This money was put toward paying down my mortgage more quickly. Little did I know there were numerous challenges I had no idea I would face. Being a landlord is far from easy. Here are some of the reasons why it can be so tough to be an on premise landlord.
1) Vacancy. If you don’t have a tenant you are losing money. You are still paying for the property so an empty unit is costing you money.
2) Tenant Quality. Folks aren’t always easy to read, judge or truly know in a one off unit viewing. I didn’t check references on my first tenant which resulted in a high maintenance person living in my home.
3) Akin to tenant quality is the ability to collect rent one time and in full. My first tenant was tardy more than once.
4) Dealing with everything yourself saves money but it sure does take up a lot of time. Your other option is to hire a property management company and that will eat into your dreams of extra cash flow.
5) Tenants have rights and can be incredibly difficult to evict. There are laws and boards that deal with landlord / tenant disputes and the process of dispute resolution can last months.
6) Cash flow is required. While landlord insurance can help protect damaged goods that the landlord owns on the property items such as appliances or even the furnace eventually need to be replaced. You also need to pay the mortgage even when your property has no tenant.
7) Sharing a space, like I did, means that two people who do not know each other have to adapt to each other. If you are like me and think there is a logical way to load a dishwasher you can almost guarantee your co-habitant will be oblivious to such logic.
8) To save money on home maintenance you will likely be looking at having a trailer, a hitch and a number of tools. Hiring a repairman for every problem that arises on the property will lose you money fast. You need to perform spring and fall home maintenance just like you would on your primary residence.
Given my past experience I don’t think that being a landlord is something the SPF’s are interested in doing again soon. Yes, if things go right you will see some profit and perhaps pay off the mortgage a little quicker than your original amortization but a lot of issues can arise to thwart your real estate mogul dream.
What other challenges do would be landlords need to consider?
Going green has been a popular trend over the last few years, as the prices of green products have dropped, and people are realizing more value in them. There are a lot of easy things you can do, and there are also full blown remodels that you can do. Here is a quick breakdown of some projects you may want to tackle, and others you may want to consider.
Easy Green Projects
There are a lot of easy projects that can make your home more “green” – energy efficient, use less resources, and more. By going green, not only are you helping the environment, but you could also save money on your bills.
For example, you could install CFL energy efficient lightbulbs throughout your home. These bulbs use less energy, and thus lower your bills and help the environment. You could also install more energy efficient appliances throughout your home as well. There is no reason to replace them if they are still new, but if you are getting close to the end of life on them, you may want to upgrade to more energy efficient models.
Finally, if you are willing to do a bit more work (but not much), you could look into putting in low flow toilets and low flow faucets/shower heads in all your bathrooms. This will help save water, and in turn lower your costs.
Full Green Remodel
If you’re looking on doing a lot more construction work (maybe you were already planning a remodel or addition), you may want to look at green products instead of regular products. You can use Cordell Estimating Software to look at the difference in cost, but you would be surprised at how minimal the difference would be. Plus, you would most likely realize more savings over time.
Some examples of products that you could include in a remodel are: solar panels on your roof for generating power, you could get energy efficient windows which would conserve energy, and you could make sure that you get a lot of insulation, in both walls and the attic, to save on heating and cooling costs.
Okay, this post isn’t nearly as crazy as the title would indicate. Really, I promise.
We’re all a bunch of hippies here, right? I mean, I am writing on Sustainable Personal Finance, which I’m pretty sure is some sort of code that really means ‘crazy hippie love hour. Also, granola.’ We all love recycling and cloth diapers and all sorts of other crazy stuff, and we all drive the best hybrid vehicles.
No? Just me, huh?
No, I kid. There are some pretty neat ideas coming from people who are attempting to be innovative with the environment in mind. The new electric powered cars look downright cool. Solar power is just a few years away from being economically feasible. Companies everywhere are starting to make changes that will both improve the bottom line and reduce their environmental impact. We’ve begun to realize that we only have a finite amount of resources on this planet, so maybe we should be a little more careful in using them.
Continue reading Living In A Shipping Container