Now more than ever, people are looking for ways to grow their wealth and ensure a fiscally comfortable future, without forsaking social responsibility. And while the answer for many is to invest, many manners of investing broach ethically uncertain territory. For instance, investing in the stock market can be lucrative, but there’s no way of ensuring that the companies you’re investing in are engaging in ethical business practices. Meanwhile, real estate is regarded as one of the most ethical forms of investing, and we get into the why of that belief below.
Successful real estate investing should stem from high ethical standards. Today on the blog, we talk about four ways in which real estate investing can be a socially responsible enterprise.
Ethical Real Estate Investing: Key Takeaways
- Real estate is regarded as an ethical investment avenue because it fulfils an essential and universal need for housing.
- Real estate investors can play a part in the economic recovery of deprived communities by developing and renovating housing in these areas. Improving a community’s housing market can lead to further economic growth.
- A socially responsible investor thinks beyond the building. Capital upgrades geared at energy efficiency can reduce a building’s carbon footprint, while ensuing long-term cost-savings and improving the property’s performance on the market.
- Affordable rental units are crucial to an inclusive housing market, but Ontario is in the midst of a housing supply shortage. A socially responsible investment choice is to add affordable housing to markets with low median income and chronically unanswered housing demand. Government-backed housing benefits exist to incentivize developers to focus on supplying and improving the quality of affordable housing in Canada.
- Investors should maintain fair and honest standards for their tenants. While annual rent increases are fair and legal, things like raising rents without proper notice, evicting tenants without cause, violating housing laws, and ignoring the reasonable needs of your tenants and the surrounding community are unethical and could end up harming your reputation as an investor and your relationship with your tenants.
Why Real Estate is an Ethical Form of Investing
Real estate is considered to be one of the most ethical forms of investing. At a fundamental level, real estate is regarded as a positive investment because it fulfils an essential, indiscriminate, and universal need for housing. Moreover, if you’re a serial investor or are running a real estate investment business, there is latitude to make ethical and environmentally responsible choices that will not only enhance the value of your investment, but enhance the lives of your tenants and the community at large.
Socially Responsible Ways to Invest in Real Estate
Revitalize Emerging and Neglected Areas and Underperforming Properties
Real estate investors and developers can play a huge part in the economic recovery of deprived communities. In emerging and/or neglected neighbourhoods, for instance, investors and developers have the ability to supplement and improve the quality of housing stock on the market, attracting people to move to those communities in greater numbers and potentially spurring further economic growth.
The key to this strategy is to identify areas that are already on track for economic growth, such as up-and-coming communities, communities where the job market is poised for future growth, and/or areas where there is chronic unanswered demand for housing. Real estate will be more affordable to acquire in emerging communities and your investment stands to have a more immediate social impact.
Invest in Eco-Friendly Retrofits and Strategic Capital Improvements
Being a socially responsible investor requires you to think beyond the building. This means making investments that will reduce your building’s footprint on the planet. Energy-efficient upgrades include installing a tankless water heater, utilizing a programmable or smart/learning thermostat, switching to multi-pane windows, and making sure your roofing and insulation are in working order at all times, amongst more.
As an added perk, strategic capital upgrades that encourage energy efficiency can also improve your property’s performance on the market by making it more attractive to prospective tenants. Energy efficiency can also ensue long-term cost savings.
Supplement Affordable Rental Stock
These days, one of the most efficacious ways to fulfill a social purpose while investing in real estate is by creating affordable and accessible rental supply. Rental units are crucial to an inclusive housing market. They pose an affordable and stable housing option for those who can’t afford to own property. But Ontario is in the midst of a deepening rental crisis. A rental market report from the Federation of Rental-Housing Providers of Ontario (FRPO) predicts that Ontario will register a shortage of 200,000 rental units over the course of the next decade.
To help add supply to markets that sorely need it, investors can target areas with low median income and chronically unanswered housing demand. Meanwhile, government-backed housing benefits exist to incentivize investors and developers to focus their efforts on affordable housing. For instance, the National Housing Strategy, launched by the federal government in 2018, provides funding and financing geared at creating new affordable housing supply, as well as modernizing existing supply.
Maintain Fair and Honest Landlord-Tenant Standards
Real estate investing is a business and should be treated as such. So, as important as it is to consider social implications when and where you invest, it’s also important to be profitable. As such, something like raising rents—though it may feel unfair from the standpoint of your tenants—simply comes with the territory. Moreover, it may be necessary to absorb operating expenses such as property taxes, insurance, and building maintenance.
Conversely, things like raising rents without proper notice, evicting tenants without cause, violating housing laws, and ignoring the reasonable needs of your tenants and the surrounding community are not only unethical, but could harm your business, your reputation as an investor, and your relationship with your tenants.
Invest with Crescendo Equity
The great thing about real estate investing is that anyone can get their foot in the door. That said, it helps to be backed by an experienced team of investors. So, get in touch to find out how you can get in on the action and invest through Crescendo Equity. Crescendo Equity is made up of a team of dedicated senior real estate investors committed to identifying high potential assets, repositioning them for maximum cash flow, and offering exceptional investment returns to partnered investors. Find out more about how Crescendo Equity makes real estate investing simple by visiting our website.