During times of economic uncertainty, we need to expect more out of every investment. Whether as a homeowner making small improvements or as a business owner making multimillion dollar improvements, we must make highly informed decisions to capitalize on the investment. Buildipedia's new series on ROI (return on investment) driven products looks to provide the information to help make these decisions. This step-by-step approach to a product's cost as well as its ROI will aid both new builds and retrofits. Here we focus on windows and toilets, both of which play big roles in energy and water usage in our buildings and provide different opportunities to reduce expenses.
Replacing the windows in a home or business is one of the most common remodeling jobs an owner will have done. It can also be one of the most expensive. The owner of a typical two-story home can expect to replace between 15 and 20 windows total. Each window will usually cost between $500 and $700 installed. (Please note that this price is an estimate : prices will vary depending on region, manufacturer, type of window installed, and type of window being replaced). That puts the average total cost of replacing windows for a two-story home at more than $10,000 in most cases. However, if the replacement windows installed are upgraded (such as with low-e glass, triple-pane windows, and argon gas) for appearance and energy efficiency, the total can easily approach $20,000.
Calculating Payback: Windows
In order to approach replacement windows from a ROI perspective, you must first know what “return” you are analyzing. The obvious answer for windows is the energy savings that the replacement windows provide. According to Energy Star, an energy-efficient products program of the U.S. government, the savings can be significant depending on your part of the country. For example, replacing single-pane windows with new Energy Star-rated windows in the New England region can provide an annual energy savings of up to $501. If replacing double-pane, clear glass windows with new Energy Star-rated window,s an annual energy savings of up to $208 can be expected. (That annual energy savings is reduced to $146 in California when replacing single-pane windows and $71.00 when replacing double-pane, clear glass windows due to the region’s climate.) This savings appears to be significant. However, remember the average installation cost of $10,000 mentioned above? In examining the ROI of replacement windows in terms of payback, we see that a region such as New England should expect around 20 years, while California could be more than 60 years when replacing single-pane windows (around 50 years and 140 years respectively if replacing double-pane, clear glass windows).
Water consumption and reduction is a hot topic in many parts of the world these days. Often times, simple methods can lead to major reductions in water consumption. Most people don’t realize that toilets alone can account for nearly 30% of a home’s indoor water consumption. In addition, a toilet made before 1994 can use over three times the water a new toilet uses. It is for those reasons that a toilet replacement makes perfect sense.
Calculating Payback: Toilets
A typical toilet replacement is a candidate for a do-it-yourself project, but to make things simple we will look at a toilet replacement that includes the standard labor charges associated with a plumber. Those charges can be between $250 and $500 on average for labor alone. The price for the toilet and other installation materials can vary greatly depending on quality, preference, and performance. A standard high-performance toilet that uses only 1.28 gallons per flush can be purchased for between $150 and $500 on average. This puts an average toilet replacement at $500 with both labor and materials.
The return on investment for a toilet replacement can be measured in the water and sewage savings that the new toilet creates. According to the EPA’s WaterSense program, a family of four that replaces older toilets with new WaterSense labeled toilets can expect a savings of up to $90 per year, and $2,000 over the lifetime of the toilets. Also, utility companies in many areas offer rebates that can lower the price of a WaterSense toilet. That puts the payback on an average toilet replacement at just over five years. Since the life of the toilet can be 20 years or more, this investment equates to significant savings with a reasonable payback period.
As you can see, looking at two completely different products can really open a decision-maker's eyes in terms of ROI. Replacement windows, which most would consider a good buy, lack the numbers to support an ROI driven investment. However, a toilet replacement, which to most is done out of necessity, not investment purposes, actually proves its economic case. This just shows that the return on investment of many of our most common construction products must be analyzed, not assumed, in order to make the most educated and informed decisions.
Michael Tolson is an entrepreneur focusing on "green" real estate development in Toledo, OH and surrounding areas. He currently owns Tolson Construction, and The Tolson Development Company. In an attempt to further drive businesses, Michael has completed an Executive MBA and a Graduate Specialization in finance from the University of Toledo. His companies focus on commercial and residential buildings using the United States Green Building Council’s LEED rating system. With this in mind, Michael has earned his LEED Accredited Professional designation.