Why Have a Commercial Energy Audit Performed?
There are several reasons for having an energy audit. The primary reason is it improves instant profitability.
Reducing Your Operation Expenses, Increases Your Profit
Let's face it. The low hanging fruit has been taken care of. What else is there. This is a good question. It's just the wrong question. The question is how can I improve my cash flow?
You have a 150,000 SF office building. Your average annual energy bill is $200,000. Your cap rate is 5%. You spend $300,000 reducing your annual energy use and reduce your energy bill by $170,000. That's a increase in your Net Operating Income (NOI) by $1.14/SF. That does not sound like much until you realize that just added $22.67/SF to the value of your property and just increased your equity by $3.4 million.
Then you realize that $400,000 capital expense just created another $175,000 in income deductions which just saved you $35,000 in income tax, assuming a 20% tax rate and $10,000 in potential capital gain tax.
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