Can your properties compete in the netzero housing market?

[Kevin Keith Beck]

Tick-tock!

Are your California investments ready for the new 2020 net-zero Building Code requirements ahead?

It’s only one year away. Come January 1st, 2020 California's Building Code will MANDATE that ALL newly constructed single-family homes be net-zero (homes that are able to produce as much energy on its roof as it consumes in a year).

See: https://www.latimes.com/business/la-fi-solar-power-new-homes-20181206-story.html

As real estate investors, building/home owners, rehabbers and flippers, those who play in California will, come January 1, 2020, be competing for potential renters against much more energy efficient homes, “Super-homes”!

Biggerpockets Flippers know that in order to compete, we must remodel our homes as good and or better than the new home development across the street in order to achieve top dollar. Historically, we just had to use the same color palette, the same carpet, the same tile, the same appliances, etc., etc. If a potential home buyer or renter could get the same features as a new home for less money, most would. That’s the beauty of our business. By finding deals and adding value we can theoretically compete against new homes.

Now, us flippers will have to make a choice. If you are a flipper and your competition is a newly constructed home, you will at some point have to make changes to the stuff that’s “behind the walls” (adding more insulation, energy storage, pipe insulation, HERS ratings, equipment and appliance change-outs, etc.), stuff that we could never capture a good return on the investment for. How do you sell better insulation?

For newly constructed homes to be able to pass the upcoming 2020 Building Codes here in California, builders will be making the house itself differently than it has in the past. Some of these new construction changes will include: requirements for beefier 2x6 walls that are thicker to provide more insulation depth, installing more attic insulation, installing tighter and more efficient HVAC systems and water heating equipment that may need to be certified by third-party Inspectors for compliance. In addition to all these features that the buyer may never see, they are also going to get enough solar PV panels on the roof so that they’ll have NO ENERGY BILL every single year! Not just a few panels, but enough panels to offset ALL their home’s electrical energy needs.

How is your property going to compete with that?? I can tell you as an Energy Consultant, you don’t have enough roof space to simply add PV panels and achieve net-zero. You are going to have to make lots of changes to lots of different areas to be able to make the PV production work and be compliant.

Take a look at your own inventory. How old is it? How much roof space is there to install PV? Can you increase the wall/attic insulation values? Can you change all the HVAC and water heating equipment? Will your rehab math still work if now you’ll have to add solar PV to all your flips? If your investments are older than 1980, you’re going to have huge upgrade projects ahead if you want to compete against the new home offerings across the street.

For large multi-family property investors, you have a little more time. By 2030 ALL existing commercial buildings will be required to be net-zero. These retrofit projects will be BIG.

I wanted to bring this up to the Biggerpockets community because I want us all to succeed and not be blindsided when these requirements affect our livelihoods.

These changes are not impossible but will take careful planning and consideration.

Take heed friends and be careful out there.

Kevin Beck