Good Deeds, Real Estate, and You ; People Who Want to Be 'Socially Responsible' While Taking Advantage of Rising Property Values Can Decide among a Variety of Real Estate Options
G. Jeffrey MacDonald Correspondent of The Christian Science Monitor, The Christian Science Monitor
Attention, ethically minded investors: One well-chosen investment could potentially help clean the environment, reduce crime, and appreciate by 10 percent or more each year.
Experts say the place to seek this investment would be in real estate, a growing favorite among Americans eager to profit from the sector's historic strength and recent boom. Yet to marshal bricks and mortar in a quest to build a better world, investors would need to be proactive long after the purchase - and be willing to craft their own definitions of success.
That's because few real estate investment products are packaged or marketed as "socially responsible." Though investors may choose, for instance, from among more than 300 real estate investment trusts (REITs), none of them touts a social or environmental agenda, according to Gary Pivo, a professor of urban planning and natural resources at the University of Arizona.
Still, whether investors aim to reduce energy consumption or provide a lift to nearby neighborhoods, real estate offers an opportunity to have a social impact they can actually see. And plenty are jumping at the possibility. Fifty percent of mortgages on single-family homes from socially motivated ShoreBank in Chicago, for instance, go to borrowers who are buying a nearby investment property on the city's South or West sides to fix up, rent, or sell.
"They don't trust the stock market, but they're not afraid to put on their overalls on a weekend and paint an apartment," says Jack Crane, senior vice president for mortgage lending at ShoreBank. "They're often coming into distressed neighborhoods where everyone from the community activists to the aldermen to the local business people is just thankful."
Real estate investors can choose from a vast landscape of options that stretch from their own kitchens and bathrooms to rental properties and REITs. But wherever they venture, experts say, certain practices can increase the likelihood of reaping social and financial dividends: Know your goals, do your homework, and have a long-term strategy.
For many a homeowner, real estate investing begins literally at home, where improvements to one's primary residence can boost property value by tens or even hundreds of thousands. For the environmentally inclined, moves to benefit the earth can also reduce utility bills and attract buyers who aspire to keep operating costs down.
Priorities should begin with making a building as energy efficient as possible, according to Patty Rose, executive director of GreenHOME, a nonprofit that aims to make low-income housing more energy-efficient. Begin with weatherstripping for doors and double panes for windows, Rose says. Add appliances with an "Energy Star" seal, water-efficient fixtures, and plenty of insulation. For more tips, consult the United States Green Building Council's rating system (www.usgbc.org). Then expect to see a happy occupant as operating costs drop.
"If someone with a small amount of income gets hit with a big energy bill, it's one of the biggest causes for default on a mortgage," Ms. Rose says. Likewise, when renting to middle- class or low-income tenants who pay their own utility bills, "this is the sector of the housing market where better-performing housing will make the biggest difference."
In real estate, the environment has much at stake. Buildings consume about one-third of all energy, water, and materials in the United States and generate the nation's pollution in similar proportions, according to a 2003 report from the US Green Building Council. But investors can profit from proactive remedies. Efficiency measures can cut the energy costs of a commercial building down to as little as 30 cents per square foot per year, says Nadav Malin, editor of Environmental Building News, a publication for green builders. …