In today’s progressively green society, energy efficiency, sustainability, and eco-friendly features are no longer considered ‘optional’ even if they still cost more than traditional alternatives. Owning and operating an apartment building means understanding the changing industry and striving to be as green as possible. Green, after all, is not only the new standard most tenants expect, but acting on multiple energy-saving opportunities can save property managers bundles down the road.

That said, financing these retrofits can be a daunting and complicated procedure. What is the best place to start? What are the projects worth focusing on, and how quickly will they produce a return on investment? To help simplify the energy-efficiency journey, here are some commonly-asked financial questions answered.

Which retrofits can best benefit a building?

There are several “big ticket items” that will provide building owners a lot of savings. Replacing an older boiler with an energy efficient system is a common retrofit. Adding heat reflector panels to in-suite radiators helps reduce the amount of heat that escapes through the wall and directs it back to the unit, so less time and money is spent heating the units. Other beneficial retrofits include roof replacements and windows, toilets and shower heads; changing to LED lights throughout the building and adding motion sensors in the garage so that the area is only lit up a fraction of the time. Also, general upkeep of the building—keeping notes and records, especially as units turn over, about defective taps and toilets, can be helpful. Of course sub-metering (putting payment back on the resident) is a popular undertaking among landlords these days.

How quickly will owners see a return on investment?

Though every project is different, here is an estimate on payback for a variety of common energy-efficient retrofits.

Windows – 3-8 years

Variable speed fans: 1-2 years

Toilets/shower heads:  1-2 years

Lighting: 1-2 years

Boilers: 3-7 years

Thermostatic controls:  2 years

Taps: 1-4 years

Sealing cracks in exterior walls: 6-10 years

What are some financing options?

For a number of years CMHC has had an energy efficiency program, which over time has expanded to allow landlords to receive higher loan amounts and premium rebates for completing energy efficient upgrades relating to hydro, water, and gas consumption. The program now allows for greater flexibility in the underwriting, providing higher property valuations and loan amounts.  Visit cmhc-schl.gc.ca for more information.

 Is improving energy efficiency really worth the investment?

Absolutely. Quite simply, by reducing your operating costs your net operating income increases. Greening your building will lower your expenses, attract new tenants and improve the value of the property. According to energy experts, completing improvements can realize a decrease in utility costs anywhere from 10 to 20 per cent. Some older buildings can realize a savings as high as 50 per cent.

Peter Cook (pcook@firstnational.ca, 416-593-2913) and Robert Fleet (robert.fleet@firstnational.ca, 905-301-3449) are Apartment Financing Specialists with First National Financial LP. Together they have originated over $3 billion of mortgages and their combined 32 years of experience with mortgage financing has led to frequent speaking engagements across the country.