The latest benchmark for a luxury home rehab is achieving energy performance that exceeds that of a new home by more than 30%, and exceeds the performance of ENERGY STAR v3. The Builder behind this amazing energy efficient rehab and high performance G Home™ is John Luke, President of AAK Investments. Nestled into Camelback Mountain, the well-located Phoenix home features beautiful scenic city views of downtown and Papago Mountain.

The rehab of the 1962 house resulted in Emerald green certification as verified by the National Association of Home Builders Research Center (NAHBRC). Emerald certification recognizes pre-1980 rehabs that result in a 50% or better improvement to water and energy efficiency, and meet minimum requirements for ventilation and indoor air quality.

The energy measurement is based on The Home Energy Rating System (HERS) Index, which is an industry standard for a home’s performance. Some of the variables included in the rating are windows, mechanical systems, lighting, shading, insulation, and appliances. The lower the score the more efficient the home, in the case of the G Home™ by AAK Investments, the post score of 69 is 31% better than a new home built to code.
Luke says, “We not only wanted the rehab to result in showcasing the amazing city views from the property, but we also wanted to achieve
energy efficiency with lower electric bills. We also used materials, coatings and paints that do not contain harmful chemicals, and were careful to preserve the site and make best use of the natural
resources.”

Luke’s attention to detail paid off, the estimated annual electricity savings is $2500 and the green certification of Emerald is a statement to a quality project that is third party verified.

To assist in making a high performance and well-designed rehab, Luke consulted with the G Street™ design team, which includes a Landscape Architect, Mechanical Designer, Interior Design Professional, and green Consultant. For quality workmanship, Luke hired Knipp Contracting, a multi-State company that works with Rehabbers, Investors, and Builders.

Not long ago, Rob Anderson was a Commercial Insurance Broker for the Entertainment Industry. Based out of Los Angeles, Anderson was inspired to ditch his corporate job and align efforts with his business partner, Fred McNab and Rocking Horse Redevelopment (RHR). Now, and nearly four years later, the two entrepreneurs are redefining the housing industry by providing rehabbed homes that are custom in design, emphasize energy efficiency, green certified, and sell between $145 – $390k.

Anderson says he enjoys the rehab process, which resonates with his passion for creativity. Anderson’s motivation to create a near custom rehab for each house often means more work than a traditional fix and flip, but to him it is about more than just profit; it allows him to create cool design resulting in market differentiation.

Although Anderson and McNab are embracing success in the rehab market, not all has been a smooth road, and there have been obstacles to overcome during the past four years. Anderson says in 2009 there was a lot of available inventory and it was hard to do wrong, then it became more difficult to acquire properties. This, along with removal of the buyer tax incentive in 2010 and increased competition in the rehab market, contributed to RHR’s decision to stay ahead of the curve and make their rehabs green certified and include energy efficiency upgrades.

“A focus on energy efficiency meant spending more money in some cases, and investing in mechanical improvements,” says Anderson. Anderson believes this additional investment pays dividends in the form of less holding time and fewer days on market.

Anderson states that green certification can potentially add a distraction to the rehab process. In order to alleviate this issue RHR turned to G Street. Anderson states, “When making a property green certified we choose G Street as our resource. They make the process pain-free and turnkey.” Anderson says green certification is worth it because it underscores a quality product. When crossing paths with the occasional naysayer or critic of green improvements, Anderson says it usually means education is needed. He adds that many want to be competitors or ‘flippers,’ care only about money and often do not pay enough attention to detail or quality. Anderson says that Buyers should expect a lot more from a remodeled home than just lipstick; including low utility bills, improved air quality, and good design.

Moving forward, RHR plans to take their formula for success and eye the residential new construction and the commercial rehab markets. Anderson states, “We plan to continue with a quality and well designed product. It’s our hope that the marketplace continues to take notice and that RHR can continue to increase buyer expectations when it comes to investor-owned homes, new construction, and commercial properties.”

A few simple strategies guide the G Home process and can be accomplished in phases depending on your budget, schedule, and priorities. The foundation of the G Home strategies are centered around better indoor air quality, better energy and water efficiency, and better aesthetics compared to average construction practices.

The following six steps will help guide you:

Step 1: Energy
Make your home energy efficient. Every home has different issues,and the best way to resolve them is to schedule an energy audit. Many utilities offer a $99 incentive to have an approved provider test your home and offer suggestions for the energy efficiency improvements that have the highest return on investment. If you are replacing your mechanical system, be sure the Contractor is designing according to Manual J, D, and S.
Budget for a 1500 square foot home: $300 – $8500

Step 2: Water
Improve water efficiency by reducing turf, using non-invasive plants and a professionally designed irrigation system. When replacing fixtures inside the home, look for the WaterSense label.
Budget: $3500 – $12,500

Step 3: Air
The good news is, most of the things you did in Step 1 improve your indoor air quality. This could be attributed to tighter ducts, envelope sealing, fresh air intake, improved filtration, and improved ventilation. Be sure your wet rooms are well ventilated, along with gas water heaters and clothes dryers. When selecting adhesives and coatings, choose those that contain low volatile organic compounds.
Budget: $1000 – $2500

Step 4: Location
Choose a location that has a Walk Score of 40 or better. Reducing
commute time will save you money, and will create more time for you
to participate in the things you enjoy.

Step 5: Curb Appeal
Make your home look good, ‘curb appeal’ can be achieved with professional landscape design.
Budget: $2000 – $15,000

Step 6: Interior Design
Make your home comfortable and feel good, by choosing the right paint colors, cabinets, countertops, flooring, and space design.Consider materials that are durable, within your budget, easy to install, and manufactured locally. There are many good Architects or Interior Designers to choose from, who can make this step easier.
Budget: $9500 – $50,000

Some relatively simple and low cost improvements include replacing incandescents with CFL or LED lighting, box gardens, a ‘nest’thermostat, an ENVI energy meter, recycle bins, or composting strategies.
Budget: less than $1000

As always, the greenest building is the exiting one, so if you are remodeling you are one step ahead in making your home green compared to building new.

If you want solar, only install once your home’s HERS Index is 70 or lower. Contact a RESNET approved contractor for your home’s HERS Index.

Lastly, improve your home’s marketability or bragging rights and get it green certified by a nationally recognized rating system, which requires third party verification.

If any of the above strategies sound complicated, or like too much work, then G Street is here to help.

Finally, when ready to begin your project be sure to screen your contractors, or look for a reputable referral source such as ROTH.

Green does not have to be more expensive, as a matter of fact, three of the most important green remodel strategies cost nothing.

Typically, the four most referenced environmental impact areas of green building are energy, water, indoor air and materials. But three of the most important strategies are often overlooked, which include location, design, and preservation. And, barring assumed zip code exclusivity, these three green strategies reduce costs.

Expenses of a home are defined by the mortgage or rent, and operating costs or the utility bills. The average annual household electricity cost in the United States is $2600 or over $200 per month. Utility costs are not as great as transportation costs of a home.

The average annual transportation cost for a home in the United States is $10,000, varying widely from a low of $5,053 in New York City’s most well-connected neighborhoods, to a high of almost $17,807 in Olympia, Washington’s low-density suburbs.
The less car dependent, the less the estimated transportation cost.

A good reference for a numeric value of a home’s car dependency is the walk score, one can input an address and receive a value 1 – 100 depending on the degree of being less car dependent. The higher the score, the greater the availability of mass transit and community services such as schools, grocery stores, parks, and entertainment.

The second most important green strategy is design, meaning fewer square feet and more bedrooms. The most efficient design is flexible, open, and requires fewer square feet to live comfortably. Often, well planned space design will give a smaller space a ‘bigger’ feel. Chris Browning, a Builder from Prescott Arizona, will be completing a newly constructed G Home later this month. Browning states that his custom green home is 2200 square feet, but is almost always perceived as feeling 3000+ square feet. In order to provide a bigger feel, Browning implements construction strategies such as a wrap around porch and other creative design techniques.
With this in mind, values are shifting, says Shannon Scutari, from Scutari & Co, “the public is shifting from the desire to own fewer McMansions with four car garages and more well insulated, better designed homes.”

Preservation is the third most important, no cost green strategy. The greenest home is the existing one. There is no need to tear down a perfectly good structure when it can be made better than a new home with a small investment, good planning and professional design.

Based on the above three green strategies, is a brand new net zero home located in the suburbs a green home?
Or, is the greenest home the existing one, when it is well located and designed to be more efficient with fewer square feet?

As many municipalities move to adopt the 2012 Energy Code (2012 IECC), resistance is being stirred up. Among those resisting are builders, state government, municipalities, and code officials. The reasons for resisting vary, but they include financial, political, or misperception.

Recently we conducted a training session to 86 builders on the 2012 IECC. During which, a pre and post survey was conducted. The results of the pre session survey showed that 61% of the attendees objected to an energy code because of perceived costs, 18% said it was not practical or they were not familiar with the energy code, 13% said an energy code conflicts with their political beliefs, and 8% of the respondents said they did not object and/or were already implementing it in their new homes or renovations.

The strategies of the 2012 energy code include:

• Better insulation, including pipes
• A tighter envelope
• Tighter ducts
• Better windows
• More efficient lighting
• Blower door test requirements

When the above are implemented during new construction or renovation, it results in reduced operating costs, healthier indoor air quality, greater comfort, and a higher standard of construction compared to traditional building practice. Furthermore, prospective homeowners are responding with greater demand to homes that feature improved energy efficiency.

Once the strategies of the 2012 IECC were identified, the post session survey results were dramatically different compared to the pre session survey; 45% of the attendees said they were already implementing energy code strategies, and of those not currently implementing the 2012 IECC, 33% said it made economical sense, is practical, and would adopt the strategies moving forward. In other words, prior to sharing the strategies of the 2012 IECC only 8% of those surveyed were in favor, afterwards 78% were in favor.

The biggest obstacle in advocating energy efficiency and the 2012 IECC, is related to misperceptions such as costs, practicality, and political affiliation.

Once the energy efficiency strategies of the 2012 IECC are effectively messaged and correlated with successful case studies, then the overwhelming response is, ‘it makes good business sense,’ or ‘we are already doing it!’

As recent as 2006 builders could not produce homes fast enough, and they were able to experience unit profits of 100% in some cases.
Today, the profit margins are much slimmer, and sales of new homes have slowed by more than 80% in some markets.

Many conversations surrounding ways to improve the housing market buzz with redundant ideas. The most common pleads are for the loosening of credit so builders can build again and consumers can buy. Others discuss the hardships builders face because they are unable to attain appraisals.

The traditional business model of build it and it will sell or attain financing is long gone. Today, in order to compete, a project must meet the demands of the consumer. There is a lot of opportunity for those who are willing to put more effort forward and provide a product that is in demand.

Even in the most challenged markets, there is a lot of opportunity for building professionals. The path to profits is not as easy as it was during the days of sub-prime or heartbeat lending. But, by executing a business model that meets the demands of the market, including affordability, professional design, conveniently located, energy and water efficiency, and comfort of the remodel or new construction, then one does not have to wait for the loosening of credit or the blessing of an appraiser to create a thriving business.

In fact, if the above strategies are implemented then the appraiser will need no justification for higher appraised values and may assign the label of ‘unique property’ as is done with every G Home.

No longer is it possible to build or remodel a structure without it being the best, and expect the market results of 2006. But, by planning and designing according to market drivers one does not have to worry about appraisals or buyers. The buyers will follow, as will the higher appraised values.

This difficult economy maybe the best test for ones product or business model. Last week, a major production builder reported losses of 3.4M. Maybe the problem does not lie in the economy but rather in an outdated product or business model that has lost touch with the market.

If one is willing to put a little more effort into a project, then the result will be a lot more in return, including a higher appraisal.

size matters

Price per square foot has long been equated with defining a home’s value or degree of luxury. Pre-2008, many luxury communities experienced sales of more than $800 per square foot, while tract homes, or houses in so-called less desired areas, would sell for less than $80 per square foot.

Usually, higher square foot values are tied to the level of finish work, zip codes, materials, an 8+ car garage, a clothes washer in the master closet, a master closet larger than most living rooms, and an 8000 square foot or more structure placed on a 1 or 2 acre lot.
Although not always the case, these homes also come with enough space to fit the egos of the occupants, and sometimes a monthly electric bill of five figures.

Now more than ever, and in light of the struggling housing market, the value of a home relies not on what someone is willing to pay, but on the appraisal. Unless, someone is paying cash.

An interesting shift is occurring in communities that were previously labeled luxury, such as zip codes 33109, 92657, 92067, 90210, or 85253. Many of these communities are showing that they are not immune to the struggles that were previously reserved for tract homes, some inner cities, and suburbs that were the first to experience the waves of distress in early 2007. Such distress is signaled by plummeting values, foreclosures, default notices, a decline in permits of 70% or more, and empty houses.

For example, in the perceived luxury community of Paradise Valley or zip code 85253, nestled between the boundaries of Scottsdale and Phoenix, AZ, single-family building permits have plummeted from 139 in 2006, to 25 in 2010, or a decline of 82%. As of September of this year, this trend is not improving, with only 15 single-family building permits recorded.

In the twelve-month period between October 2007 and October 2008, Paradise Valley had twelve homes sell in excess of 5M dollars. In the past 12 months, there has been only one. Many of the 10,000 square foot homes intended to sell for 5M+, are now selling in the 2M range, and in some cases for less than $200 a sf.

Square foot cost has long defined a homes value or level of luxury.

Last month, a newly remodeled G Home by Firefly sold for $180 a square foot, which is comparable to recent transactions in the zip code of 85253 or Paradise Valley.
The G Home is located in the heart of Phoenix, and is just a short distance from Biltmore Fashion Park and downtown Phoenix, and features a $36 a month electric bill, professional design, no-VOC materials, JELD-WEN windows and doors, a 15 SEER HVAC, BOSCH appliances, real time energy use monitoring, a medicinal and herb garden, non-invasive landscape design, reused materials, and soy stained concrete.
And maybe most significant, the remodel transformed a $60 a square foot bank owned house into a $177 per square home, resulting in improved neighborhood values and one less unoccupied structure. And in fact, the post remodel home appraised for nearly triple the bank owned price.

The new owner of the remodeled G Home, Christine Fisk, is an advocate of a healthy lifestyle, drives a hybrid, and left a 2800 square foot home in the suburbs in exchange for her newly remodeled 900 square foot home, which she says, aligns with her lifestyle. Ms. Fisk says less can be more and that, “the biggest luxury might be the 9 hours a week I save in commuting to work and now dedicate to visiting with friends or taking a couple extra yoga classes a week.”

The time to redefine luxury is now. Maybe the idea that a 10,000 square foot home for two adults and one or two children, is less a symbol of success and more a statement of excess. During a tough economy, lower electric bills, less fuel consumed during ones commute, more time with family and friends and less time on freeways, a backyard garden, environmental responsibility, improving neighborhood values, job creation through renovation, and rebuilding communities and walkable neighborhoods, maybe the best luxury of all.

Watch for upcoming G Street blogs:

• An Energy Efficient Home Means Fewer Trips to the Doctor
• How to Choose an HVAC Contractor
• All Homes Are Net-Zero
• The Importance of The Landscape Designer/Architect
• No Such Thing as a Green Contractor
• Beware of Green Titles and Self-Appointed Green Experts

Despite claims by green rating systems such as LEED and Earth Advantage, green homes do not sell for more.
On the other hand, well-located, green-certified homes that implement the recommendations of a good, licensed Interior Design professional sell for more (assuming a good Landscape Designer or Architect is also implemented).

Ultimately, the consumer defines a home’s value. A home is worth what someone is willing to pay, assuming the appraisal supports the purchase price.

There has been much discussion about green certified homes selling for more. The fact is, if a home is not aesthetically pleasing inside and out, well designed, and livable, then it will most likely not demand a premium. A qualified Interior Design professional is the one who is best qualified to maximize the above.

The majority of green rating systems encourage or require a pre-construction design meeting that recommend a Landscape Designer, Mechanical Specialist, Architect, Contractor, Framer, Plumber, and Electrician; this meeting could be considered the most important strategy to a remodel that maximizes return on investment. However, often missing from the pre-construction meeting or team Charrette is the Interior Designer.

A qualified Interior Design Professional is the most important team member in creating a well-designed remodel that is aesthetically pleasing, comfortable, and adds value to the sales price. In a tough market, if one intends to sell his or her remodel, then it is important to make the best choice of materials based on budget, along with attaining a nationally recognized green certificate.

The majority of consumers desire an efficient home that costs less to live in, but typically buyers are not going to sacrifice design, aesthetics, or comfort.
A LEED-certified Platinum home with bad choice in paint colors, countertops, cabinets, design, and finishes will not meet the demands of the market or a premium in sales price if it cannot attract a buyer who is willing to pay more compared to a traditional listing.

Green certification is not enough to make the claim that a home sells for more. The more accurate claim is, if a green-certified home follows the recommendations of a qualified Interior Design professional early in the project, then it will most likely demand a higher purchase price compared to a home that does not make the best choice of materials, space design, or staging.

Watch for upcoming G Street blogs:

• The New Luxury Home, Small and Well Located
• An Energy Efficient Home Can Mean Fewer Trips to the Doctor
• How to Choose an HVAC Contractor
• All homes are net-zero
• The importance of the Landscape Designer/Architect

Since 2009, the G Home has consistently outperformed traditional remodels, appraising for higher values, experiencing fewer days on market, and improving neighborhoods with appraisals that reset most recent square foot values.

The buyers of G Homes report back that the reason they were willing to pay more for their newly remodeled home was due, in order, to aesthetics and comfort, location and perceived value, and efficiency.

When interviewing G Home buyers, the overwhelming response to the reason they made their purchase was aesthetics and comfort. Michelle Gibbons, a recent G Home buyer says, “the G Home looked so much better than anything else on the market in my price range, that it made the buying decision easy.”

The key to creating a better remodel is the team. The instrumental players include the Project Owner, Real Estate Professional, Green Consultant, Energy Rater, Mechanical Specialist, Interior Designer, Landscape Designer, Manufacturers Representative, third-party Verifier, and Contractor. The above team is implemented on every single G Home remodel.

During a traditional remodel, a Contractor may be assigned to make all of the remodel decisions. Many Contractors are capable of remodeling a home and attaining good results, but the best results are reserved for those remodels that implement the team approach.

Implementing a team approach may seem like a lot of work, however, in a tough market it is necessary to distinguish one’s remodel from the competition if achieving maximum value.

The first step to executing a remodel team is to have a Project Owner who is progressive and understands the value of working with a remodel team of professionals, and that investing a little more will result in a better return. The Project Owner will rely on a savvy Real Estate Professional to acquire the best properties, assess exit price, and to create a marketing plan.

Once the house is acquired and ready for the remodel, executing a team meeting is an effective strategy in attaining the most informed decisions and design. Those present will include the Energy Rater, HVAC Specialist, Green Consultant, Interior Designer, Real Estate Professional, Contractor, and Landscape Designer. This team will assess the best improvements to make based on the remodel budget.

The team approach may seem like too much work for a single remodel, but the end result is guaranteed to be better than remodeling in the traditional manner, including financially and environmentally.

Watch for upcoming G Street blogs:

• Green Homes Do Not Sell for More
• The New Luxury Home, Small and Well Located
• An Energy Efficient Home Can Mean Fewer Trips to the Doctor
• How to Choose an HVAC Contractor

The G Home program is a comprehensive tool for agencies and investors, and is intended to improve the remodel process and market performance.

The most recent remodel to complete the G Home program is owned by Rocking Horse Redevelopment and is located in Phoenix, at 1722 W Heatherbrae Drive. The remodel achieved Emerald certification, which is the highest green rating a home can receive. The Emerald rating was accomplished by reducing energy and water use by over 50%, and installing features that improve indoor air quality. The house is also centrally located, and will be listed for an affordable price, less than $160,000.

“When done right, green can be affordable,” says Rob Anderson of Rocking Horse Redevelopment. “We have renovated over twenty homes in the Phoenix and Denver markets, and making them green is something we are passionate about. Experience has taught us that the key to a successful project is delivering a reasonably priced home that performs and looks better than its counterparts.”

A first look of 1722 W Heatherbrae and catered reception, will take place on September 8, 2011 from 5 – 7pm. RSVP to rob@rhredevelopment.com