There was this idea gnawing at me for a couple of years. Why can’t you find a sustainable, affordable home, basically anywhere? The tech is here, the renewable and efficiency prices have come down, smart home products are advertised all over, and you just can’t seem to find anything.
It just seemed to make sense all around that this would exist. It saves on monthly bills, is sustainable, is fun, and modern. A more comfortable home and lower ownership costs ultimately create a more valuable home as well, along with the opportunity for wealth building over time.
Aside from a few homes here and there, which are mostly priced out of reach from the average working family or first-time millennial buyer, this doesn’t really exist yet.
So what if the above goals were possible? I didn’t know what would happen when I set out a year ago to make this a reality. While I have experience as a real estate investor with some solar design and energy efficiency, I had never renovated a house before. I was coming at it from a non-expert starting point.
Nearly a year later now I’m writing this from inside a fully renovated, net-zero, and hurricane-proof home under the area median average home price. It was definitely a roller coaster start to finish, but ultimately very rewarding.
While this article covers much of the project’s summary, there will be many more after it covering all the details.
Why do this?
There has been all this talk about net-zero, carbon neutrality, Teslas and EV’s, and sustainability. By now, we all know about climate change and sea-level rise.
We also know about the housing affordability problem and widening wealth gap, which is now totally amplified with the onset of the pandemic.
And you can see awesome renewable and efficiency projects on a country-wide scale going up around the world. Still, it seems like individual homes themselves have been left behind.
Millions of Inefficient Homes
There are something like 82+ million single family homes in the United States, and hundreds of millions across the world. Nearly every single one of them is inefficient by today’s standards and technology. This also means wasted energy and ongoing costs.
Tens of millions of millennials and younger buyers are also now looking to buy a house for the first time. We love Tesla, we love smart home tech, solar energy, and most of us do have an interest in making a difference and caring for things like the environment if at all possible.
We love more mid-century modern or farmhouse-style homes, with Ikea products and Amazon boxes all over the house. But when you’re looking on Zillow or at houses for sale, the reality is that this doesn’t exist yet, especially in your price range.
Hard to Do But Totally Doable
The truth is, and as I found out over this 9-month renovation project, it’s near impossible to bring all this together. Don’t get me wrong – people are doing it, and there are many cool projects out there. But how are we going to tackle each of these existing homes one by one? That’s what I wanted to go for. To create something that can be used to intertwine personal finance, wealth building, and sustainable living and to prove that it was possible.
While a lot can be focused on with regards to all the ideas, the actual and functional goals of the project were very concrete:
1) Keep the total cost under the median average home price of the area.
The first goal really covers the traditional wealth-building aspect. If you have a home under or at the median average home of your area, even with all these bells and whistles, you will have a really good chance of being sheltered from recessions and temporary market declines as compared to more expensive homes. You also benefit from riding the home price appreciation wave up over the long run as well.
2) Ensure that it can rent out for 10-15% above all ownership costs, including long-term maintenance.
Goal #2 is really the first and most important traditional real estate investing rule when buying rental homes, in my opinion. While this is most likely going to be your own home, if anything were to happen in your life, such as a new job, a family member unfortunately gets sick and you have to move, or if a market decline hits for 5-10 years, you’re able to rent it and cover all costs to own it. This allows you to ride out any temporary setbacks or market cycles while also benefiting from long-term homeownership and wealth-building.
3) Be fully net-zero, with efficiency and renewable energy (solar) powering the entire house.
The third rule has to do with sustainability, cool technology, and otherwise the fact that costs have come down now to the point where it can make financial and environmental sense to have homes save and produce their own power. To the point even where it’s making homes more valuable and that you get a better risk-free return on your investment. Better than the stock market, bonds, or other traditional measures even. While it’s not all for the money, the money has to make sense.
4) Bonus – Have enough budget and power production potential to also power an electric car fully.
For the last goal of powering an electric car is really where the world is going next within 10-15, so why not do it now? It wasn’t initially on the radar, but after the initial planning and crunching numbers, it ended up being a possibility.
While this part about powering your car isn’t included in the traditional net-zero definition, why not do it if we can? This will become the standard within a decade or so, and I am elated to say that it was accomplished on this project as well.
Beyond that, it was a personal goal of mine to not only go full net-zero on the house but to sell the gas car and to get a Tesla Model 3. The numbers luckily worked where the system could be designed to power the Tesla for 10,000 miles per year, but the solar production now shows that it can actually go much further than that. This wasn’t going to happen without meeting the first three goals however.
Finding The Home
It took a long time to find the house itself due to the criteria needed. Not only has the real estate been red hot for years, even before the pandemic, but you want to look for some specific things when going for full net-zero.
A big south-facing roof, which ideally has recently been redone (new shingles), is high on the list. If you’re not a wholesaler or a full-time real estate professional doing flips all the time, good luck finding a good deal in a hot market.
Choose A Solid, Fast Growing Market
I also wanted to do it in an affordable, growing real estate market. Someplace where if a recession hit and I screwed up royally on my budgeting being a first-time fix-n-flipper, I might be able to get out of it alive.
After scouring the MLS in many cities, the best option ended up being in the Cape Coral/Fort Myers area in Florida, for this project anyway. It was a combo of the overall growing real estate market and the house itself, having a near-perfect roof for installing solar. It was also my hometown, so I knew it reasonably well.
As long as you catch the wave in any of the many growing cities, along with the economy not falling out from below your feet, you should be good.
It was a pretty crazy full-time nine-month project, especially being my first one. For the first three months, I was actually stuck in planning and admittedly perhaps panic mode. The pandemic just hit, and the world was seemingly ending in March/April. There will be many more write-ups, but here is a rundown of some of the progress:
Some Before Pictures:
I had just driven across the country from Denver, CO to Cape Coral, FL, with the idea of moving into the home and running the project as my primary residence (more on these tax benefits later). Certainly, I did not anticipate a full pandemic lockdown when first trying to get started. It was pretty hard to think about tackling a home renovation at the time, but ultimately we all have to plow forward.
The house itself is a near-original 1984 built wood-frame home. Being a typical three-bedroom two-bathroom home, it was a good candidate for a full fix and flip type of update.
The idea was to combine these usual fix and flip things with efficiency, hurricane-proofing, solar energy, and then furnish it with lots of smart home tech.
The project included everything from new paint inside and out, flooring, plumbing, electrical, a new kitchen down to the studs, busting walls down, drywall repairs, new showers, and all the rest.
Hurricane Impact Windows & Doors
There’s a really long list of stuff packed into the project, and I’ll be doing a deep dive of every single one of these over the next weeks and months. In short, as I look back on it now – it was incredibly fulfilling.
Living in a Project House is Insane
I’m not going to sugarcoat it though, as I feel it’s essential for people to know what they’re getting into. Living in a project house is insane. The stress of living in a dust bowl, along with having no kitchen for weeks, all while a pandemic is going on outside was too much to handle sometimes.
Having contractors and people in and out, material delays, and working twelve-hour days gets to you. While it’s rewarding in its own right to have it done, just know what you’re in for.
Would I do it again? Yes, for sure, especially given the numbers (see below).
As they say – Will it be easy? Nope. Is it worth it? Absolutely.
Living here during the project was beneficial in many ways, though. It allowed for more hands-on management, learning, and saving on rent and vs. living somewhere else. Other benefits included tax benefits of being a primary residence, security (materials not getting stolen), being on site all the time, getting to know the house, and more.
And for the next one and if I take a more business-like and experienced approach to it, I could easily see a couple of months and $10,000+ shaved off just due to this being my first one.
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Sustainability – Energy Efficiency and Solar
While all of these things were added costs onto the project, the goal was to achieve full net-zero while still making financial sense for the average home buyer.
It was a real challenge given that there’s not much out there yet in terms of organized resources or examples of it being done. Though I have a background in solar, energy efficiency, finance, and real estate, the combo of it all was all new.
There was also not much to go by. The appraiser actually had no homes to compare it to when I went for the cash-out refinance at the end of the project. This was literally the first home in town going for this. This led to many nervous discussions between the lender and the appraiser. It also led to a slightly suppressed home value vs. what I spent (on paper) for the new mortgage. This is something that you all might run into in your area as well.
Tackle the Lowest Hanging Fruit First
Nonetheless, there was a good way to tackle it. When you’re doing efficiency or renewable projects and trying to make the financing work, start with the lowest hanging fruit. Chip away at all the items with the lowest payback on your money and highest return on investment first. This will, in turn, bring down the overall costs for the complete project.
Just like in personal finance – the more you’re able to save, the less you need to produce.
I tried to tackle all of it, but a quick list includes energy modeling, blower door tests, air sealing, insulation, the hot water heater, HVAC calculations, appliances, and correct solar design and system sizing as the last piece.
All The Data
The home has been outfitted with either affordable or totally free monitoring systems and apps that show all electricity production and usage over time. Every electrical circuit and every individual solar panel is monitored, allowing you to see exactly what the house is doing!
There’s a lot there, but I’ll be writing up each part of the project separately and plan to make available calculators and systems so you can do this yourself as well. Stay tuned!
I went into this thinking that I would lose money on it after everything was said and done. At some point you have to be willing to do this just to get the idea jump-started. Not just with homes but with anything you go after.
So here’s how it turned out:
3 bed / 3 bathroom / 2.5 car garage 1,836sq ft home in Cape Coral, FL built 1984
Purchase price: $199,900
Total project cost: $84,357.14
Total spent: $284,257.14
Per Zillow the average area home for this zip code is $318,301, meeting goal #1.
Yearly home electricity savings: $1,800 ($150 per month)
Yearly Tesla/EV savings from not buying gas anymore: $592 ($49 per month)
Total yearly electric and gas savings: $2,392 per year
Total on-paper appraised value for the loan: $275,000 (there were no comps in town)
Value if I were to list the house on the market per the appraiser’s opinion: $305,000-$310,000
Mortgage payment with 20% at 2.99%: $926.34 per month
Property tax payment per month: $95.98
Homeowner’s insurance per month: $147.17
Water bill per month: $85 (ridiculous)
Monthly utility solar net-metering hookup fee (they still want your money) even if net-zero: $21.69
Assume $1,000 per year in ongoing maintenance (to be safe): $83/mo
Total monthly cost to own: $1,359.18
A house like this rents out for $1,750+ per month unfurnished, and over $1,900+ per month furnished/AirBnB type of thing in this area. This number is to again cover goal #2.
The monthly cost to own and what it rents out for is really the key to long-term wealth building. Even with all the extra net-zero home expenses of $35-40,000, the numbers work.
It meets all the goals described above. Whew!
I don’t include any home price appreciation into any calculations because this number can go north or south quickly, and nothing is guaranteed. If houses go up in value over time, that’s an added bonus.
At the moment, though, we are in an inflationary economic environment, with single-family homes flying off the shelves. Things are good now, but that can change. The average home value increase usually follows inflation over time, which is 3% or so. So I’ll stick to that, which would be about $8,000 this year.
This is now a full net-zero asset and home, whereby the home and my lifestyle uses zero-emissions net-net (after a short period to recoup the building costs and emissions). It’s also set up as a great home to either live in or rent out. And beyond that, it checks all the boxes of using real estate for long-term wealth building and asset ownership as well.
There’s a lot more to share, and again, I’ll be writing up every piece of the project individually for more of a deep dive.
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