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Deep retrofits redux: crunching the numbers

Last quarter my article on “Deep Retrofits, Broad Paybacks” generated several questions about how these types of retrofit add value to a house over time. How does a deep energy retrofit compare to something like a kitchen remodel? Is it worth the cost of doing the retrofit? If I spend $50,000 on a deep retrofit will it add $50,000 to the value of my house? Probably not. Or, it depends. Maybe. Possibly. It’s a tricky question, with some complex answers.

Let’s start with whether you plan to sell your house soon or not. If you are planning to sell in the next few years, or are forced to sell, the ROI picture is probably pretty bleak. We can draw some clues from other big remodel projects. Looking at the numbers might scare you. At mid-range national averages for 2015, adding a steel door is the only remodel project that adds value. That is, you’ll recoup a little more than you spent to buy and install it. (Move quickly before a toddler dings up that new door!) All of the other remodel projects are a losing proposition. It’s even worse for upscale projects, where the best ROI is upgrading to fiber-cement siding, and it doesn’t recoup even 85% of the $15,000 average cost of the project.

But anyone spending $100,000 on a deluxe kitchen upgrade isn’t doing it to make money when they sell – they’re doing it to improve their quality of life while living in the house. A temporary reduction in full value because of a quick sale isn’t anyone’s best financial plan. I think this will be true for deep retrofits as well.

Some remodels do add value even when a house is sold soon after,

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Deep retrofits offer wide-reaching returns

I have long advocated for deep energy retrofits; as we developed the resilient investing system, this became an obvious Zone 4 activity (tangible assets, close to home). “Remodel your house so that it uses dramatically less energy,” I’d proclaim, “It’ll be more comfortable, and you can save money and the planet at the same time!” Experts like McKinsey assured me that insulation and heating systems pay off very quickly. After two years of actually tackling it at our house, the practicalities are—surprise!—a bit more complicated.

When you take a closer look at an older house you don’t see just outdated insulation; you also see drafty windows (and possibly mold), and a

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Locavesting website launched

new_logoAmy Cortese just launched and it looks like a great site and a valuable resource. We featured Amy in The Resilient Investor as one of the key champions of local investing and we’re thrilled she’s continuing to document and engage the movement. The website’s tagline is “Local Investing News, Education & Resources,” and that’s indeed what you’ll find—engaging tales of local investing successes, introductions to the many avenues now available to put your money to work in your local community, and topical coverage of key themes, including crowdfunding and growing the local investing ecosystem.

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Automated luxury communism?!?

In the scenario section of The Resilient Investor we talk briefly about the “Star Trek future,” where limitless energy, extraordinary but totally integrated tech, and breakthroughs of consciousness allow everyone to follow their highest calling and contribution. The Earth is without war or poverty (we need Klingons for dramatic conflict), racism and sexism are behind us, and benevolent scientists in concert with farmers, ranchers, and industry manage the climate. The dreamers who contemplate this possible future usually consider it hundreds of years in the future. Clearly we haven’t made much progress on transporters—or war, sexism, and racism, for that matter—but lately I’ve been thinking that the Star Trek future may be closer than we think.

An article in The Guardian provocatively titled “Fully Automated Luxury Communism” grabbed my attention recently. More like tickled my brain and scrunched my face into a “Say what?” Here’s the basic idea: robot tech and smart software is advancing rapidly and the time when we can dramatically reduce the need to work is soon upon us.  If so, let’s be sure this doesn’t benefit just a few; let’s share it with everyone. The article promises a near-future “where machines do the heavy lifting not for profit but for the people.” I also have to say that any article mentioning Star Trek, Red Mars by Kim Stanley Robinson, and A Pattern Language by Christopher Alexander et al is going to grab me. Let’s unpack what FALC is all about.

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How can we measure resilience?

Not long ago I wrote an article welcoming resilience as the new conceptual kid on the block. Sustainability’s lost its luster. It’s always been a little stale, lacking charisma and charm; who dreams of a “sustainable” marriage? I expected resilience to establish itself as THE go-to idea for years to come; heck, we even named our book after it. So imagine my surprise when the September 2014 edition of the journal Resilience, published by the Quivira Coalition, arrived with a cover article entitled “Beyond Resilience.” Wait, what? Is life really moving so fast that we’ve already moved past this crucial concept? Our book isn’t even on Oprah’s list yet; come on, people!

The truth is we also took the concept of resilience beyond its former boundaries. In his 2012 book Resilience: Why Things Bounce Back Andrew Zolli defined resilience simply as a capacity to withstand shocks. For us it’s not enough to just bounce back,—let’s aim higher, let’s try to bounce back better. As we shared last quarter, our definition is bouncier and more forward-looking: Resilience helps us to thrive by anticipating and preparing for disturbance, improving the capacity to withstand shocks, rebuilding as necessary, and adapting and evolving when possible.

In the Resilience cover article in question, Todd Graham writes about the continuous improvements seen on the Ucross Ranch in Wyoming. It’s an inspiring read, and I recommend it. The core of Graham’s critique is that resilience is difficult to count or measure. He asks “How does a manager quantify a resource’s preparedness for a disturbance when the incidence rate and duration are largely unknown?”

As a planner this is exactly what I hear most often about planning: how can I plan for the future when I don’t know what will happen?

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Christopher Peck speaking at ComCap Conference in Oregon

I’ll be speaking at the ComCap Conference in Portland, Oregon on May 5th. I’ll be outlining the map and framework of the Resilient Investor, and talking with Marco Vangelisti on local investing. It should be a fun time! If you are in Portland and want to meet up, let me know.

ComCap:Oregon | May 4-5, 2015
The First Statewide Community Capital Conference

Make Money. Make Oregon

Michael Kramer speaks at TEDxKamuela, “Resilience is the New Sustainability.”

Michael Kramer speaks at TEDxKamuela, “Resilience is the New Sustainability.”

Check this out! Michael Kramer recently gave a TEDx talk in Hawaii that outlines the primary thesis of our book, The Resilient Investor. The audio is not perfect and you cannot see most of the slides but the talk (and the humor) is top notch. This is Michael’s second TEDx talk, and we are justifiably proud.

In case you just recently learned about the internet, more about TED can be found here and more about TEDx here.

Our first book review!

In early December, The Resilient Investor was featured in the Santa Fe New Mexican.  We love that our first press came in the town where we all lived and met each other in earlier chapters of our lives!   And thanks to Nate Downey for capturing the essence of what we’re up to in his piece, entitled Bounce Back Better, 2014 and Beyond.  Here’s a taste:

The quick and easy read covers the complex subject of “investing” with clarity, structure, wisdom, and humor. It starts with the premise that the world, particularly the financial world, is in a significantly unpredictable state of potential discombobulation. Forget putting all of your eggs in a few baskets and thinking you’re done. “Resilient investors” use nine — count ’em nine — planning “zones” that make up the book’s Resilient Investing Map (RIM).