Environmental requirements impacting the future of REI?

[Thierry Van Roy]

So there's this thing that's been bugging me for some time.

I'm in two European markets. Legally, one is 'saturated' in that all rehabs need to cover a myriad of environmental concerns. For example: touch a roof that has asbestos isolation and you HAVE to take it out, whether you need to or not. Also, the fire department won't give you a permit before you vow to make it napalm-proof.

The other is very lax (different country). The fire department doesn't care. Environmental requirements are only compulsory with new construction. And so on.

The two differ like day and night, is what I'm saying.

Now, if the latter were to implement the requirements of the former, about half the inventory would be deemed unliveable. Because of EU and such, these requirements are set for 2020, which will be impossible. The current sellers aren't willing to take a decent haircut in anticipation of these requirements.

So I don't know how environmental requirements are enforced in the US, but I expect any market not prepped to be shellshocked if the law gets laid down.

This greatly affects any buy & hold strategy in the long run. I would have to reserve about 20% of revenues to cover any future requirements on some of the deals I've seen.

New construction ('green housing') is becoming more attractive because of this, but that usually isn't where private real estate investors like us are active.

So am I overthinking this? Do I underestimate government hypocrisy? Or is a storm coming?