An investment in real estate can not only increase the quality of life of the occupying tenants, but can also have a positive impact on the surrounding community.
In today’s world many companies have a focus on impact investing, which is defined as “investing that aims to generate specific beneficial social or environmental effects in addition to a financial gain." In many cases, making an investment in real estate can do just that.
The Social Impact
We have all seen or heard stories about run down properties that are eyesores and infested with drug dealers, prostitutes, and the like. Not a very safe, let alone appealing place to live, right?
Investors often look for these types of distressed properties, ones that either have a lot of deferred maintenance or management deficiencies. Investors acquire these properties and come in with a capital budget to renovate both the interior and exterior, making them more appealing.
Not only does this have a direct impact on the quality of life for the tenants that reside in the building, but it can also have a positive impact the surrounding community. When a property is properly managed and maintained, it can attract a higher quality tenant. Having higher quality tenants in a building makes both the immediate apartment complex and the surrounding community a safer place to live. Plus, the investor benefits by being able to charge a higher rent.
These type of investments, if done on a large enough scale, can turn a dangerous neighborhood into a safe and thriving community.
Also, to a minor extent, these projects will create jobs as contractors, painters, electricians, plumbers, etc. will be required to initially do the work, and to handle repairs and maintenance as time goes on.
The Environmental Impact
Sometimes older apartment buildings and complexes don't have individually metered utilities such as water, gas, and electric, which leads tenants to be irresponsible for their consumption of these resources. In many cases it is economically beneficial for an investor to come in and have individual meters installed or implement a RUBS system to bill back tenants for their share of consumption.
Once this system is in place, tenants now have an economic incentive to be less wasteful or consume less of these resources, which is positive for the environment. In addition, because tenants are now responsible for paying their own utilities, it lowers the utilities expense that owner is responsible for, which leads to a more profitable investment.
Leadership in Energy and Environmental Design (LEED) promotes "green design, construction, operation and maintenance" by awarding a certification to projects that meet certain guidelines.
Today, Fannie Mae and Freddie Mac, two very large players in the mortgage industry, have programs that offer lower interest rates, price breaks, and higher loan proceeds to owners who pursue the LEED certification.
The Bottom Line
For those socially and environmentally conscious investors, you don't have to invest in a risky start up or impact fund to make a difference. You can invest in the timeless and predictable asset class known as real estate, and still have a positive impact on the world.
Babylon Property Group provides private investment opportunities for investors looking to diversify their portfolio outside of traditional securities found in typical 401(k) and IRA plans. For more information please contact us by phone at (631) 253-1609 or email at firstname.lastname@example.org.