ACI Conference 2011 The Hardware and Software Hardware Happens in the Sessions. You get data and results and see new programs and equipment. Software Happens in the hallways and at lunch and in the bar. You meet people, form relationships and share ideas.
Next Year Baltimore
G r e e n E a r t h E q u i t i e s . C o m
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Saving The Planet One House At A Time 1
G r e e n E a r t h E q u i t i e s . C o m
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Saving The Planet One House At A Time 2
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Observation from 30 years contracting: Full Energy packages don’t sell easily by themselves
Original Hypotheses: Full packages will sell if combined with Wow! Remodeling. 30 month test results 1. 12 foreclosures purchased, renovated & sold 2. Sold at $20,000 above Market Comps 3. 6 were sold before completion 4. 25 - 50% Energy Savings 5. No Programs, Just Free Enterprise 5
The Three Package System
The Wow! Package
1. Granite Counters at Kitchen & Baths 2. Extra Deep Stainless Steel Sink 3. Designer Spray Faucet 4. Italian glass tile backsplash , s i 5. Under Counter Lighting h T e d 6. All wood Cabinetry u l c n I 7. Crown Molding and Tall Baseboard 8. All new interior doors and trim 9. New Front Door with Art Glass 10. Tile & Travertine floors 11. Engineered Wood Laminate Floors 12. Designer tile and faucets at baths 13. Chair Rail, , Wainscoating & 3 tone paint 14. Designer Light fixtures & ceiling fans 6
The Done! Package 1. New Front and Back Lawn 2. Automatic Sprinklers with timer 3. New 30 - 50 year roof 4. New Roll-up Garage Door with Openers 5. Gutters 6. New 2 inch faux wood blinds , s i h T 7. Major Professional Tree Trimming d n A 8. Sewer line renovated as necessasry 9. All new oil rubbed bronze hardware 10. New Energy Star Appliances with Warrantees 11. New Windows and HVAC with Warrantees 12. Upgraded Carpet with 6 lb pad 13. Deciduous Trees placed for Energy Efficiency 7
The Energy! Package 1. New HVAC system, Stainless Steel Heat Exchanger 2. Manual J sizing, usually half of previous capacity 3. New R-8 short mylar ducts partially buried 4. Manual D with tight seal and test n 5. Extra Return Duct in Master Suite a c e s i 6. New LoE2 windows and Patio Doors w h So de t 7. Low E 140 at west windows e u l c In rytim 8. Deciduous Trees planted selectively e v 9. Shell Sealing of floor & ceiling with test E 10. Attic Insulation to R-50 11. Occupancy sensors 12. Gas Stove and Dryer options 13. Ceiling Fans at all sleeping and living rooms 14. Panasonic Ventilation with controls 8
Like Feeding A Pill To A Dog Everything Green and Energy Efficient is the Pill. The Granite Counters and Travertine is the Dog Food. ... Dont try it without the Dog Food! G r e e n E a r t h E q u i t i e s . C o m
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Oh, Honey, I love it! Let’s buy this one....
How Green is (sometimes) Sold
Well, they have those Energy Stars and the carpet is made out of recycled Pepsi bottles so I guess we might as well...
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The Team Players 1. Spouse or S.O. (Forget this one at your peril) 2. Realtor to purchase 3. Realtor to sell 4. General Contractor or 5. Project Manager 6. Lender or 7. Money Partner 8. Loan Broker 9. Energy Related Subs 10. Wow! & Done Subs 11. Due Diligence Team 12. Insurance Broker 13. Escrow Officer G r e e n E a r t h E q u i t i e s . C o m
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W
4
The Homeowner Wins With Lower Bills and Increased Comfort The Community Wins With New Jobs, More Home Ownership & Increased Property Values
Energy-Wise Renovator The Planet Community Home Owner
The Planet Wins With Less Carbon Emissions The Investor Wins And Gets To Keep A Little Green
A True Win, Win, Win, Win Strategy! 12
The “Cliff’s Notes” Formula For The 3 Package System The Energy Package $20,000 (hard cost) The Wow! Package $20,000 The Done Package $20,000 Soft Costs $20,000 Profit $20,000 Total Buy-Sell Spread $100,000
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NOTICE: The Sweet Spot Is Outside Of The Mainstream of Remodeling, Real Estate, & Building Performance Remodeling
Real Estate
Sweet Spot
Green & Building Performance
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Each Of These Disciplines Have Essential Information BUT: Energy-Wise Renovating House Flipping Investors Must Find the SWEET SPOT In Each Discipline And DISREGARD the Inappropriate “Common Wisdom” of Each!
Remodeling
Real Estate
G r e e n E a r t h E q u i t i e s . C o m
Sweet Spot
Green & Building Performance
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Summary
In Sum, because you are an Investor, not a Contractor & Because you are blending Sweet 3 disciplines, not just one, Spot Remodeling You are free of many constraints, and can do the right thing because you know it is the right thing to do. Green & Real Building But as you exercise your Estate Performance freedom, Just know, you may be branded a HERETIC by your Saving mainstream friends. The Planet G r e e n E a r t h E q u i t i e s . C o m
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Cost & Benefit Analysis Conventioal Contracting To Residential Customer Marketing To Acquire Customer
25%
10,000
Sales Commission
10%
4,000
Premium for Occupied Working
10%
4,000
Overhead & Profit
30%
12,000
Contracted Work
10,000
Total Contract
40,000
Why would you want to do this?
40,000
Energy-Wise Renovation of Foreclosure by Investor Marketing To Acquire Customer
2%
800
Sales Commission (pro-rata)
10%
4,000
0
0
30%
12,000
Premium for Occupied Working Overhead & Profit Contracted Work Total Contract
23,200 40,000
40,000
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When You Could Do This? Saving The Planet One House At A Time 17
All The Testing & Certification You Need.... And None That You Dont Disclaimer: The Ideas presented here are for a noble experiment: “Delivering Excellent Home Performance Projects using only our own properties, purchased right and renovated with the concepts developed on this site and implemented purely in the American Free Enterprise System. They may not be appropriate for “Home Performance Contracting” as normally practiced G r e e n E a r t h E q u i t i e s . C o m
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Contractor, Rater, or Energy-Wise Investor? The “Rules” and Best Practices for these disciplines are different. An assumption that is true in one discipline can be false or irrelevant in another area. Most of the assumptions that you’ve heard are designed for contractors and their symbiotic cousins, the raters, contracting with homeowners in incentive driven programs. (and they are mostly true in that context) G r e e n E a r t h E q u i t i e s . C o m
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Quick Review Of G.E.E. Principles 1. Work only on our own properties, 2. Select an area and stay in it. 3. Sell to first time home buyers 4. Complete 3 package system: Energy, Wow! & Done 5. Sub-Contract Everything 6. Systemize Everything 7. Negotiate Hard @purchase 8. Control the Comps, see#2 9. Influence the appraisal, see #2 10. Demand Wholesale Pricing 11. In & Out Quickly 12. Do everything short of Renewables, almost everytime. 13. $100K spread 20-20-20-20-20
GreenEarthEquities.Com
Projects Done & In the Pipeline
7 5
Tarpey North Cluster
2
1
6 Tarpey South Cluster
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The Energy Package The Energy Package is presented in the form of a List. This would typically be perceived by our industry as “Prescriptive” (In some circles that is almost a swear word.) We use a Prescriptive List with Performance Criteria. It’s a Hybrid PrescriptivePerformance approach. ...Capturing the best of both the Performance and Prescriptive approaches
Good “performance” from This 1200 sf Saving The Planet “prescriptive” home One House
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The Hybrid Approach (Prescriptive Selection With Performance Test Out) Benefits of Prescriptive Methods: Fast, Easy Selection of Scope of Work. No money spent on testing and certifying means more to spend on caulking etc. (real home performance) Works best on easy cookie cutter tract homes. G r e e n E a r t h E q u i t i e s . C o m
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Define Your Buyer First Time Buyer. Hopefully FHA Priced where payments will be only a little more than rent. =$150K to $250K Sell price ForeclosureRadar.com estimates rents Rentometer.com publishes exact rents G r e e n E a r t h E q u i t i e s . C o m
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“Naked” Capitalism? 1. Minimum Government Involvement. 2. Minimum Program Involvement. 3. Use All “Wholesale” Vendors and Suppliers 4. Minimize Overhead 5. Focus On Adding Hard Value. 6. Find Your Own Money. 7. Find Your Own Buyers. 8. Buy Smart Stay NIMBLE! G r e e n E a r t h E q u i t i e s . C o m
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Belief - Desire - Action Faith
Action Zone
Conviction
Predisposed To Action
Belief
Certainty Confidence Assurance Possibility Doubt No
Getting Ready For Change Status Quo Comfort Zone
Change Possible
Disbelief Fear
g n re sire i i s k e e n d e t i t t e D n a h n t D n a n s o T e s e i g l e o s e en r s u eW i r n r u s i e s i f o e f i a s s n f t d h i r t l a r P u e In is u D B Cu Vag Ind Disin Co Disp W
Desire G r e e n E a r t h E q u i t i e s . C o m
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Each Year MILLIONS Of Homes Go Into Foreclosure Opportunity This GOLDEN OPPORTUNITY Is 99% Lost Because: 1. All Investor Training focuses on ROI only. 2. Government Hampers Energy Wise Investment ... So... 3. Investors Put Lipstick On The Pig! Some Dont Know ... Some Dont Care Which One Is Our Government? G r e e n E a r t h E q u i t i e s . C o m
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House
They Started Off The Same
$70,000 $10,000 Renter Zero No Change Zero Lowered Dragged Down
A
House
B
Purchase Price Improvements $ Occupant Energy Retrofit Carbon Footprint Green Jobs Tax Base Neighborhood
The Flood of Cheap Flips (A) has created APPRAISAL Challenges for Quality & Green projects (B) G r e e n E a r t h E q u i t i e s . C o m
$70,000 $50,000 New Owner Everything Reduced Yes Raised Lifted Up
Then Everything Changed
m e l b o r P G No ELLIN Saving S The Planet Š 2010
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House
A
House
B
The Success of A ... Is impacting B The Success of Conventional Investors with their philosophy of minimal cosmetic improvements (Lipstick on a Pig) has established an easy valuation technique that can be used by uneducated or lazy appraisers, (who dont know how or wont take the time to evaluate energy efficiency of a home) G r e e n E a r t h E q u i t i e s . C o m
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How Much Does It Cost? Estimates for GEE properties: 1. Windows U=.30 $3000 2. Minisplit Heatpump with new ducts, $7500 3. Appliances incl Washer, Dryer, Refrigerator, $ 4500 4. Lighting & Controls $1000 5. Shell & Insulate $3000 6. Ventilation System $1000 7. Solar PV & DHW after credits and rebates $15,000 8. Etc. $2000
=$37K
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Where Does $37,000 Fit In The Cost Breakdown? Most Investors that you are competing with do very little of this $37K list. Solutions:
1. Start with built in equity. (find really good deals) 2. Smart Selection of finishes 3. Wholesale pricing 4. Make the Invisible Visible 5. True Believers for buyers. 6. Consider “Buy & Hold” G r e e n E a r t h E q u i t i e s . C o m
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Another Option Sell Them Before You Buy Them 1. A Buyer has seen your work and likes it. 2. Get them pre-qualified 3. Go shopping for the property they want. 4. Use their 203K financing
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The Concealed Unit = Key To Acceptance In US Market The small ducts feed the bedrooms and bathrooms A lowered ceiling will be installed when the ductwork is complete. All the ductwork is within the building envelope and covered by R-55 insulation = No duct loss! 32
Looking Up At 2 Concealed Units Sharing a 20x30 Filter Grille & Access
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Hard Pipe Install & Seal
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We Like Hard Pipe Better
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Details On Test Home #1 1200 sq ft 3 bed, 2 bath Attic R-55 Leakage .5 cfm / sq ft floor Vent Panasonic ERV 40 cfm Walls R-16 with 1” rigid Windows U 30 < 10 sq ft Western exposure Fujitsu 2 ton MiniSplit on roof 1 12,000 btu wall mount 1 12,000 Btu concealed unit Hard pipe in lowered hall H2O & stove - Natural Gas Occupants = Couple + Newborn (First Home)
One House At A Time
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Results: 13 Months Later Bill Date Feb 4, 2011 Jan 5, 2011 Dec 7, 2010 Nov 4, 2010 Oct 6, 2010 Sep 5, 2010 Aug 5, 2010 Jul 7, 2010 Jun 6, 2010 May 6, 2010 Apr 7, 2010 Mar 7, 2010 Feb 4, 2010
Elec Use 590 583 563 328 481 480 458 375 284 297 347 388 283
Elec $ $72.34 $69.66 $66.99 $39.03 $57.24 $57.12 $54.50 $44.63 $33.79 $24.76 $28.93 $32.34 $23.59
Gas Therm 23.0 18.0 23.0 14.0 12.0 10.0 Hot 9.0 Fresno 10.0 Summer14.0 16.0 21.0 20.0 18.0
Gas $ $24.91 $19.14 $23.45 $15.79 $13.82 $11.67 $9.90 $10.65 $14.48 $14.08 $17.41 $17.41 $15.31
Total $ $97.25 $88.80 $90.44 $54.82 $71.06 $68.79 $64.40 $55.28 $48.27 $38.84 $46.34 $49.75 $38.90
Note: This wont work without a good envelope G r e e n E a r t h E q u i t i e s . C o m
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Comparing 2 GEE Projects Very Similar - Some Differences
Month MS HP Test 1 Contol 1* Oct $57.24 71.15 Sept $57.12 109.97 Aug $54.50 112.77 Jul $44.63 109.32 Jun $33.79 40.36 May $24.76 43.70 Total-> $272.04 487.27
1200 sq ft 3 bed, 2 bath Attic R-55 Leakage 1 cfm / sq ft floor Vent Bath Fans Only Walls R-11, no rigid ins added Windows U 30 < 15 sq ft Western exposure Rheem 2 ton package on roof (13 SEER 80% furnace) Flex R-8 Ducts in Attic, Man D H2O & stove - Natural Gas Saving The Planet Occupants = Couple + Newborn
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Room For Improvement 1. Real Estate Appraisal Train Appraisers in valuation of Home Performance 2. Stop penalizing Investors. Give them at least the same incentives as homeowners. (Solar Tax Credit etc) 3. Utilities make available Neighborhood Average Bills. More granular than Zip Code, perhaps 1/4 mile radius. G r e e n E a r t h E q u i t i e s . C o m
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Room For Improvement Create a “Pay For Performance” Incentive Program paid out 12 months after completion based on Utility Bills. Benefit: Zero Overhead and Real Performance. No Modeling or Ratings or Third Parties required. Only Performance is rewarded.
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Marty, This could be bigger than the flux capacitor. If we combine the free enterprise gene with a green heart ... these people really can save the
planet!
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Imagine it, Marty If everyone in the room bought a foreclosure and experimented and had fun ... The things we’d learn, the stories we’d hear, and the party we’d have have next year!
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Thank You! You’ve seen 10% of the slides and no movies. See them all at: GreenEarthEquities.com In the PlanetSavers University Also Sacramento April 27 SMUD Merced April 29, PG&E Fresno April 28 in Real Houses
In The Energy Wise Renovating Army!
Dave@GreenEarthEquities.com G r e e n E a r t h E q u i t i e s . C o m
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