Want to make money?
Hey, no problem. All you have to do is buy low and sell high!
You scoff. For good reason.
Predicting future prices has stumped gamblers, economists and soothsayers for centuries.
That’s one reason why at least 10 million Americans lost their homes in the housing crash of 2008-2012.
I’m not a psychic, a realtor or an economist.
But during the crash, my ex and I had a very different experience than most new homeowners.
Unlike the geniuses steering the markets at that time, we unwittingly added significant value to our home. But not in the usual way.
Instead of pouring money into the home upgrades, we successfully re-branded our neighborhood with a sustainability theme.
Our story begins in 2006, when I first visited the Green Acres neighborhood.
I was there on a project with two other students from my Permaculture Design Class.
Permaculture is a community design discipline. It strives to meet our needs for water, food, fiber, shelter and energy in ways that heal rather than harm the Earth.
It’s basically applied ecology.
So my task, together with 2 classmates, was to interview people in the neighborhood and use ecological design to solve their problems.
Now, Green Acres is adjacent to Indiana University, so about half of the houses are student rentals.
This angered the old-timers, who complained bitterly about noise, trash and vandalism.
So my classmates and I wrote up a plan to harness all that student energy and redirect it toward positive ends.
We noticed that a lot of the old-timers had kitchen gardens, greenhouses, compost piles, fruit trees and the like.
We also knew IU had a School of Public and Environmental Affairs.
What if we brought them together through formal city and university partnerships? What if we themed the whole neighborhood as an ecovillage?
Students would earn credit for learning hands-on sustainability skills from long-term residents, and both groups would work toward common goals.
Over time, we figured the neighborhood would attract students majoring in sustainability and related disciplines, and that their work with long-term residents would result in much less neighborhood disturbance.
Some students might even buy into the neighborhood after graduation. Others might leave behind a green legacy and be ready to plant a new one wherever they landed next.
My classmates, who lived in Green Acres, presented the plan to the neighborhood association and the City.
(Don’t blame them for that childlike, Utopian map: I’m the one who drew it!)
The permanent residents loved it.
Gradually, over the course of a year, our intention to turn the neighborhood into an ecovillage got written into the official neighborhood plan.
In the midst of this process, my then wife and I rented a house in the neighborhood and spent several months house-hunting.
Eventually, in 2007, we bought a house in Green Acres. It had languished on the market for 11 months and was a bit big for our taste, but it was in pretty good condition.
Unfortunately for us, 2007 was just about the peak of the housing bubble.
Worse, we ended up moving out of state and selling in 2010, near the bottom of the crash.
Had our house followed the market, we would have lost $25,000.
But in fact, it sold for $10,000 above the purchase price.
And it sold fast. We had an offer in 3 days.
I know what you’re thinking: we must have fixed it up and flipped it like one of those slick hustlers on TV.
Here’s the complete yet embarrassingly short list of work we did on the property over 3 years:
- Painted 3 rooms, including an awful mural in the den ($300)
- Added blinds and homemade draperies to 2 bedrooms ($1,000)
- Added some blueberry bushes, mulch, and herbs to the yard ($400)
- Replaced skylights that started to leak after moving in ($5,000).
- Repointed and re-glazed 23 windows ($150 DIY)
- Replaced a toilet that cracked after we moved in, and did a very funky amateur bathroom renovation ($800)
- Patched up the plumbing and a couple of nasty cracks ($700)
- Left some cheap paintings on the walls and a couple pieces of furniture to “stage” it.
Notice that most of these items were maintenance and repairs, not upgrades.
We didn’t even hire a decorator or replace any of the incredibly old appliances.
Simply put, we didn’t do enough to sell it for $35,000 above market value.
Here’s what I really think was going on:
- A home’s value depends a lot on its location.
- A location’s value depends a lot on Its reputation.
- Going green quickly improved our neighborhood’s reputation and raised our home value.
In fact, several families who moved into the neighborhood just after us told us they chose Green Acres because we were building a neighborhood garden, attracting the greenest students, building a vibrant culture, and talking with the City about putting in rain gardens and other green infrastructure.
This is where they wanted their children to grow up. And that had enough value to buck the market.
If that’s what really recession-proofed our house, it probably added about $4 million total value to the neighborhood’s 419 houses combined.
Not bad, when they could have lost $10 million in the crash.
Now it’s true that this was mainly a rental community near a university, and that, too could have had a recession-proofing effect.
But this would not explain how quickly our house sold the second time.
So I got to wondering: does my theory work elsewhere?
Short answer: Yes!
I checked the Mother Earth Living list of 10 “greenest” neighborhoods in the USA. Four of these had too little turnover to track prices on Zillow, but the remaining six had average prices a lot higher, on average, than the surrounding areas.
This is huge, because green real estate has a hippy reputation, which looks down-market to many investors. But as we heard from our new neighbors, green is actually premium in the marketplace.
Developers, are you listening?!
I also looked at the green student rental market, and it soon became clear that sustainability is a powerful tool to increase renewals.
Recall that Apple Computer, now the most cash-rich company in the world, focused on the college market early on. Sustainability is shaping up to follow that trend.
Whether you’re a landlord or a homeowner, the moral is this:
Protect your home. Connect with neighbors and green bump your ‘hood!