Thursday, September 18, 2008

Why would I invest in my home now?

With the stock market seemingly schizophrenic, it’s fair to ask – where are you investing these days?If you knew you could make at least 10% return on your investment, would you do it? What about 20%? Higher? Most of us are overlooking the easiest return on investment we can make – in our homes. And no, I’m not talking about updating your kitchen – but in the most basic place imaginable – our energy bills.

Let’s take one small example: my utility bills average $280 a month. Based on an energy audit I had done, I could spend approximately $400 to close some of the gaps in my home and save in the neighborhood of $100 a year. So in 4 years time, I’ve made my investment back and in 8 years, I’ve doubled my money. Annualized, that’s a return of 9% a year. If I did the work myself, I’d probably double my money in half the time and achieve an 18% return or more. Even better is the fact that this rate of return increases the longer I live in the home and that’s before accounting for any rise in utility costs!

My audit identified even bigger savings with a bigger investment. This is on top of the fact that I’ve already made a number of energy improvements to my home and it had a high efficiency rating. If you are an investor in stocks, wouldn’t you be happy seeing this kind of performance in your portfolio? I know I would lately.

Many people will spend 100 times this much on a kitchen makeover that will never get them their money back. But it will look fabulous – for about 10 years. (Pick up a home trends magazine though, and they will crow about how homeowners will recoup nearly 85% of the cost of a kitchen or bath makeover in 3 years. That’s, uhmm, 85% recouped.)

I don’t mean to belittle nice kitchen makeovers and other design updates we do, I am merely questioning the priorities where we put our money first. Truth be told, it is difficult at best to sell a home that looks dated or worn out. And we all want a home where you enjoy the look and feel of the surroundings. My thinking is that if I save myself money by reducing my utility costs, I might actually be able to afford those updates when I want to down the road.

I’ve really become intrigued as to why we are overlooking this simple means of making money. I think part of it may be that most people believe we have to change our habits and be more conservation conscious to make a significant dent in our utility bills (not true by the way). Maybe an investment like the example above doesn’t cause enough “wow” to feel like it’s worth the time when I might otherwise hit the next Google stock. Maybe it’s because we don’t get the immediate gratification like we do from seeing those new appliances.

So, let me hear from you. What are the roadblocks to making even simple energy improvements in our homes?

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