Real Estate

Building a Better World Happens Brick by Brick

Man holding up a model of a home on a tray
Credit: Shutterstock

By Matt Picheny

Picture an ethical investment opportunity, and what springs to mind? You might imagine startup founders finding innovative ways to curb carbon emissions or promote renewable energy, or ESG funds pledging to avoid controversial industries like fossil fuels, weapons, or tobacco.

One thing you probably don’t think about is real estate — and that’s a missed opportunity. There aren’t many sectors, after all, that touch as many people or as many aspects of our daily lives. Think of just about any social or environmental challenge, and the built environment will have a critical role to play in developing scalable and effective solutions.

The trouble is, ethical real estate is currently seen as a luxury: a flagship store or high-end condo building might trumpet its LEED certification, but you don’t see many mass-market developments built with a serious commitment to social and environmental impact. That needs to change: prestige projects are wonderful, but to drive impact at scale, responsible investors need to focus their attention on more mainstream and affordable real-estate developments.

A better way to invest

Before we dig deeper, let me acknowledge the elephant in the room: yes, I’m a real estate investor, and yes, I make my money buying apartment complexes for middle-income families. When I tell people that, they often assume they know the whole story — they think of predatory landlords exploiting people and offering shoddy housing to those who’ve fallen on hard times.

That stereotype is part of the problem. The reality is that I got my start in this industry after winding up down on my luck myself. When I got kicked out of my apartment, I realized just how dehumanizing losing one’s home can be.

I managed to put together the money to buy and fix up a unit in a run-down building in Washington Heights. Having dealt with my fair share of dodgy landlords, once I got involved in real estate I wanted to do things differently — to show that property owners don’t have to be villains, and that investing in real estate can be a force for good in the world. I knew, though, that if I wanted to show that real estate investment could be a form of activism, I couldn’t just buy and run swanky condos for rich folks. I needed to show that it was possible to make money and do good by developing clean, healthy, sustainable places where people who are anything but wealthy can live with dignity.

Four strategies for success

So what is required to alter the method of managing real estate investments? Naturally, it involves a transformation in mindset, and an absolute commitment to contribute positively rather than to exploit individuals. But it also takes a few actionable strategies designed to turn mainstream property investment into a win-win for property owners, the residents, communities, and society as a whole. Here are four key methods that investors can use to turn real estate into a force for scalable social change — while still bringing in strong ROI:

1. Aim higher

As investors, we’re used to thinking about deals in terms of the money they’ll bring in, and that’s perfectly reasonable. But as responsible investors we need to aim higher, and find ways to drive both profits and social change.

Plenty has been written about doing well by doing good in other industries, but in real estate we’re still feeling our way through this maze. That’s a big opportunity, though: investors that find ways to create win-win deals, with responsible underwriting and property management, will stand out from the crowd and emerge as leaders in the responsible real estate sector.

2. Use the campsite rule

Anyone who spends time in the great outdoors knows that campers should always strive to leave their campsite in a better condition than they found it. That’s a basic moral principle that can be applied to many walks of life — including real estate projects.

Especially when investing on the lower end of the value spectrum, there are often opportunities to complete long-overdue updates, or to add simple amenities that dramatically improve the quality of life for residents. A little thoughtfulness goes a long way: something as simple as a fresh coat of paint or new planters in common areas can have a big impact on the way people feel about themselves and their homes.

3. Make sustainability pay

By taking advantage of tax credits, grants, or preferential loan rates, it’s often possible to turn environmental improvements into a net-positive for your bottom line. The key is to use this as an opportunity to bring benefits to everyone involved: more efficient lighting or water fixtures can reduce utility bills and significantly lower the overall cost of living for residents, for instance.

Again, it’s important to find ways to promote sustainability not as a luxury for the wealthy, but as a fundamental part of the way we now live. Bringing green spaces and sustainable building practices into affordable projects can be a great way to have a broader social impact — by showing that it’s possible to build green in any community, and that people of all income levels want and deserve healthy, clean, and sustainable living spaces.

4. Find your tribe

It’s vital to remember that not everyone sees things the way you do. Not all investors care about the environment or social impact, so to maximize your impact you’ll need to find people who share your values. Real estate provides a great way to do this since many projects are developed through syndication, with groups of people coming together to bankroll a major project. That’s a powerful force-multiplier for responsible investors: find partners who share your values, and you can amplify the impact of your own investments to drive change on a far larger scale.

Keep on building

If you’ve read this far, you’re clearly curious about the ways that you can help make the world a better place. I’d urge you to consider real estate. It may not be the most obvious responsible investment option — but precisely because of that, it’s a place where individual investors can have an outsized impact.

As responsible investors, after all, we’re always trying to leverage our capital to generate returns while also driving positive social change. Real estate is a great way to do this, because the projects we create endure over time touch the lives of many, many people — and help to reshape entire communities for the better.

By Matt Picheny, Real Estate Investor, Coach, #1 Best-Selling Author of Backstage Guide to Real Estate, and Tony Award Winner. As the Founder and CEO of Picheny, Matt helps investors achieve financial freedom and create positive social impact through passive real estate investing. He has over 15 years of experience in acquiring, managing, and improving multifamily properties across the US, with a portfolio of over 10,000 apartments.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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