Investing in Home Performance - Rates and Reasons
Why don’t more people jump at the opportunity to make their home more comfortable, healthy and energy efficient? That question has kept me awake at night more often than any other marketing challenge. It finally dawned on me. Home Performance is a less than glamorous home improvement and people generally lacked information and knowledge to make a sound financial decision.
Stick with me here as I walk us through a rather unglamorous but compelling case...
Listening to smart financial people, the kind that Invested $3000 in little known startup Microsoft’s IPO, and I noticed hearing the term “Rate of Return” quite a bit. So what exactly is this rate of return, and why is it the fundamental question when evaluating an investment?
Understanding rate of return sounds complicated, but its basic theory is so simple; a cave dwelling Neanderthal can do it! To keep it that way, let’s consider various $100 investments.
- A $100 deposit into a CD may pay 2% interest or $2.00 in interest income per year. The rate of return on your investment is 2%.
- A $100 investment in a municipal bond may earn $5.00 a year in interest. You guessed it, rate of return of 5%.
- The same $100 investment in fairly safe corporate bond may pay $7.00 a year in interest, Yep, 7% Rate.
- A $100 investment in a little known, and possibly risky startup, may pay upwards of a 30% rate. The problem, you may also lose your entire investment. Risk has its rewards as they say.
Safe and attractive long term investments usually hover in the 6-8% range.
The average rate of return on 100 of our randomly chosen Home Performance clients was 16.5%. Not bad at all, especially since that number was before any incentives. At a 28% incentive level, our clients would receive a rate of return of 23% on their investment.
Unfortunately, you can only invest once in home performance, and you can’t get rich by compounding your earnings like you can with bonds. As a consolation, if you bet on rising energy prices, returns will become more attractive over time. If the price of energy were to double, your rate would also!
Do you think energy prices will continue to climb?
Enough of the boring financial reasoning, let’s examine some of the other compelling reasons to undertake Home Performance work.
- If every home in America improved energy efficiency by a very conservative 20%, it would be the equivalent of eliminating the entire energy consumption of Australia.
- Reduced energy demand means reduced reliance on foreign energy sources. The simple fact is, we need energy, and assuring a continuous supply of it is of national importance. Threaten shipping around the Horn of Africa and you are a pirate, threaten it in the Persian Gulf, and it is full scale military crisis, usually followed by the following Presidential question, “Where are the Carriers”.
- Home Performance can reduce CO2 emissions by around 1000 pounds a year for a typical home.
- Home Performance results in a safer, more comfortable home. Properly done, Home Performance can solve issues ranging from dust to mold and mildew.
- The average price on home performance work is around $2.50 a square foot. The average granite countertop, up to $100 a sq ft.
Ask for or calculate return on investment (Yearly savings divided by Out of pocket cost), weigh the social factors and the choice is usually simple, Home Performance Work is a wise investment on multiple levels!
You can help assure the safety of your investment by hiring only BPI accredited companies to perform the work on your home. A company attaining BPI accreditation means they have a rigorous commitment to quality, education, value, and customer satisfaction. It means they have invested in their business, just like they are asking you to do in your home.
Our country is on the verge of a major investment in efficiency. The money we are investing is borrowed, ultimately from our children.
“Green” is in; it is the marketing term a generation! Unfortunately, to many companies, “Green” is the color of money first and a philosophy second. Home Performance work is “green” through and through.
Home Performance contractors have an obligation to help invest that money safely, while providing a great return on our national and personal investments. We have an obligation to create much needed jobs, solve some of society’s most pressing issues and do it all in a highly efficient manner.
Look at the big picture surrounding your home performance investment. BPI accreditation is all about a Home Performance company’s commitment to make our national investment worthwhile. Is your Home Performance contractor BPI accredited? Should they be? You be the judge!
Steve McKenna
Director – Building Efficiency.
Murtha Construction.
Link to this article:
http://www.murthaconstruction.com/BuildingEfficiency/Articles/InvestinginHomePerformanceRatesandReasons.aspx