When I first started reading about energy efficient upgrades for rental property, I thought the idea was ludicrous, believing this was the tenant’s responsibility.
However, after over 10 years of owning rental property, I have found that tenants care about energy efficiency. In fact, one of the top questions I receive from prospective tenants is, “How much are the utility bills?”
So, there is a dual benefit with investing in energy efficient upgrades: environmental and economic.
When you invest in your property’s energy efficiency, you are telling your tenants you care about the property.
Listing energy efficient upgrades (and featuring them in amazing photos) increases the number of higher quality tenant prospects for your property and increases your ability to raise rent.
Below are some fairly easy things to implement to reduce your tenants’ energy bills and increase the value of your property.
1. Replace Air Filters
Many leases require the tenant to replace air filters. Yet, it has been my experience that this is rarely done. Not only is this not energy-efficient, it causes your HVAC systems to work overtime, which shortens their lifespan and causes more maintenance bills.
I recommend dropping off air filters at your properties every 90 days. They cost only about $20 and can save you a lot of maintenance costs in the long-run.
2. Seal Doors and Windows
All my rental properties are older than 30 years. This means there are a lot of gaps in the doors and windows. I make it a point to do a thorough inspection of the doors and windows and to reseal any places where there is a gap. This inspection should always be done in the daytime when the visibility is better. A simple, and inexpensive window insulator kit will do wonders for reducing your utility bills.
3. Insulate Upstairs
Insulation is no fun to work with. However, it’s cheap and has one of the best return on investments of any home improvement project. Hot air rises, so I recommend to not get overwhelmed with trying to better insulate the entire house and instead focus on the attic area.
The cost ranges from $500 to $700 for a 400-square-foot attic. If you do it yourself, the materials cost around $250. With an annual savings of approximately $200 (higher in cold climates), this project easily pays for itself in two years, making it a great investment if you really are able to do it yourself.
Related: Beating the Stock Market – With DIY Insulation (MrMoneyMustache.com)
4. Use Shady Landscaping
Landscaping can dramatically affect your energy costs. The best part about this investment is that it’s a relatively small one-time investment and it lasts a lifetime. And a bonus is that landscaping increases the curb appeal of your property.
The shade under trees can reduce the air temperature by six degrees, according to the Department of Energy. Because cool air falls to the ground, there can be as much as a 25-degree difference between the air at the bottom of a tree and the top of a roof that isn’t shaded.
This is a great infographic explaining the energy benefits of proper landscaping: Energy Saver 101 Infographic: Landscaping
Related: Landscaping for Energy Efficiency (energy.gov)
5. Change the Setting on the Water Heater
This is one of my favorite “hacks” as it costs no money; yet, you save money every month because of it.
Most water heaters come with the default setting of 140 degrees. Have you ever taken a 140-degree shower? Neither have I, and I don’t expect to either! The Department of Energy recommends changing this setting to 120 degrees.
Turning down the temperature 10 degrees Fahrenheit on your hot water heater saves 3 to 5 percent on energy costs, so a drop from 140 F to 120 F saves you 6 to 10 percent.
Note: I recommend changing the setting to 100 F. You can always increase it later if you need to. The first time I started changing the water heater settings, I changed it to 80 degrees … and my wife definitely noticed. So I would not recommend changing the setting this low.
6. Change Lightbulbs
I’m naturally a cheapskate and love buying the traditional store-brand lightbulbs at the dollar store. However, energy-efficient lightbulbs, such as halogen incandescents, compact fluorescent lamps (CFLs), and light emitting diodes (LEDs), can reduce your energy costs, and they last longer than traditional lightbulbs do.
The Department of Energy states that the new efficient lightbulbs use 25 to 80 percent less energy than traditional incandescent lightbulbs and last 3 to 25 times longer.
7. Use a Water Heater Blanket
I saved this one for last because it’s my favorite. This upgrade is the easiest to implement, and I’m sure it will get you a high return on investment. You can get water heater blankets at any hardware store, and they cost approximately $25. But you will save approximately $30 a year.
All you do is wrap your water heater with the insulation blanket, and it normally is sealed with duct tape. It takes less than two minutes to do.
The economic benefits of investing in energy efficiency are exacerbated by the tax benefits.
I personally replaced the windows in one of my older rental properties this year. I get to expense the cost of doing this while also receiving a tax credit for the energy efficient upgrades. To be eligible for the tax credit, I let my local utility company perform an energy audit. The audit was free and provided me with some practical advice on improving the energy efficiency of the property.
Consult with your accountant on this issue.
- Q&A on Tax Credits for Sections 25C and 25D
- Residential Energy Tax Credits: Overview and Analysis
- Professional Home Energy Audits
I hope you found these tips to reduce your energy costs and improve the quality of life for your tenants useful. Did I leave one out? Let me know in the comments!