Energy Efficient Upgrades That Save Landlords Money: A Complete ROI Guide

By PropsManager Team · Maintenance & Repairs · May 11, 2025

I spent $4,200 upgrading a duplex in 2021 with energy-efficient improvements. Within 18 months, I'd recouped every dollar — and the property appraised for $11,000 more than comparable units on the same block. That's not a typo.

Energy efficiency isn't some feel-good green initiative for landlords. It's a cold, hard investment strategy. Lower operating costs, fewer maintenance calls, higher tenant retention, and increased property value. Every dollar you spend on the right upgrade comes back multiplied.

Even when tenants pay the utilities directly, efficiency matters more than most landlords realize. A tenant who sees a $240 electric bill in July starts browsing Zillow by August. A tenant who sees a $140 bill? They renew the lease without a second thought. Turnover costs you $3,000 to $5,000 per unit between lost rent, cleaning, repairs, and marketing. Keeping that tenant happy with lower bills is the cheapest retention strategy you'll ever find.

Let's break down the upgrades that actually move the needle — with real costs, real payback periods, and the order you should tackle them.

LED Lighting: The Easiest Win You'll Ever Get

Start here. Always start here. If you haven't replaced every single bulb in your rental with LEDs, you're leaving money on the table.

The math is embarrassing in how obvious it is. A standard 60-watt incandescent bulb costs about $0.50. An equivalent LED costs $1.50 to $3.00. But that incandescent burns through 60 watts an hour and dies in roughly 1,000 hours. The LED uses 8 to 10 watts and lasts 25,000 to 50,000 hours.

For a typical 2-bedroom apartment with 20 light fixtures, switching to LED saves approximately $150 to $200 per year in electricity. The total cost to replace every bulb? Maybe $40 to $60. That's a payback period measured in months, not years.

But here's the part landlords overlook: maintenance calls. I used to get 3 to 5 calls per year per unit for burnt-out bulbs in hard-to-reach fixtures — stairwells, exterior floods, bathroom vanities with specialty bulbs. Each call cost me $45 to $75 if I sent a handyman. LEDs last 15 to 25 years. Those calls essentially vanish.

LED Quick Checklist

• Replace all interior bulbs with LED equivalents (warm white 2700K for living spaces)
• Swap exterior floods with LED PAR38 or BR30 bulbs
• Install LED-integrated fixtures in kitchens and bathrooms during turnovers
• Switch to LED tubes in any fluorescent fixtures (garages, laundry rooms)
• Use motion-sensor LED bulbs for hallways and exterior areas

Total investment per unit: $40 – $100 Annual savings: $150 – $250 Payback period: 2 – 6 months

Low-Flow Water Fixtures: Slash Water Bills Without Tenant Complaints

If you're paying the water bill — and roughly 35% of landlords in multifamily properties do — low-flow fixtures are your second-best ROI after lighting. Even if tenants pay water, these upgrades reduce strain on your plumbing and hot water systems, extending equipment life.

Toilets

Old toilets from the pre-1994 era use 3.5 to 7 gallons per flush. Modern WaterSense-certified models use 1.28 gallons. That's a 60% to 80% reduction.

A household flushes roughly 5 times per person per day. For a 2-person household, upgrading one old toilet from 3.5 GPF to 1.28 GPF saves about 16,000 gallons per year. At an average water rate of $0.015 per gallon (which varies hugely by municipality), that's around $240 annually per toilet.

A solid WaterSense toilet from American Standard or Kohler runs $130 to $250. Installation takes a plumber 30 to 45 minutes. You're looking at $200 to $350 all-in, with a payback period under 18 months.

Showerheads and Faucet Aerators

This is the upgrade tenants literally won't notice. Modern 1.5 GPM showerheads use air injection to maintain water pressure while cutting flow by 40%. A $15 showerhead swap saves 5,000 to 8,000 gallons per year per unit.

Faucet aerators cost $3 to $8 each and take 30 seconds to install. Put them on every kitchen and bathroom faucet. They reduce flow from 2.2 GPM to 1.0 or 1.5 GPM without any perceptible difference in performance.

Water Fixture Savings Summary

Smart Thermostats: The Upgrade That Markets Itself

Here's something I've noticed across my portfolio: listings that mention "smart thermostat included" get 15% to 20% more inquiries. Tenants love them. They feel modern. They feel premium. And they genuinely reduce heating and cooling costs by 10% to 15%, according to EPA and Nest's own data — roughly $130 to $150 per year for an average unit.

A basic smart thermostat like the Google Nest Thermostat runs $130. The Ecobee Lite is around $170. Installation is straightforward if you have a C-wire (common wire) — most HVAC systems from the last 20 years do. If not, budget an extra $50 to $100 for an electrician to run one.

The real value for landlords goes beyond energy savings. Smart thermostats let you set temperature limits during vacancy. I've caught frozen-pipe situations because a smart thermostat alerted me that a vacant unit dropped below 45°F. That one alert saved me $8,000 in burst-pipe repairs. One alert. $8,000.

Smart Thermostat Tips for Landlords

• During turnover: Set the thermostat to a vacation hold (55°F heating, 85°F cooling) to prevent extreme temps without wasting energy
• Choose models with landlord/property manager modes that prevent tenants from disabling the schedule entirely
• Pair with a property management platform that lets you track utility data and maintenance alerts from a single dashboard
• Keep it simple — tenants don't need the $300 Nest Learning Thermostat; the $130 base model does the job

Total investment per unit: $130 – $250 Annual savings: $130 – $180 Payback period: 10 – 18 months

Seal the Building Envelope: The Biggest Bang for Your Buck

This isn't glamorous. Nobody's going to see your caulk job on Instagram. But sealing the building envelope — windows, doors, attic, and crawlspace — is hands-down the most cost-effective way to improve a rental property's energy performance.

The Department of Energy estimates that air leaks account for 25% to 40% of the energy used for heating and cooling in a typical home. That's staggering. You could have a brand-new $6,000 HVAC system, and if the building envelope leaks like a sieve, you're conditioning the outdoors.

Windows and Doors

Caulking windows costs about $3 to $5 per window in materials. Weatherstripping a door costs $8 to $15. For a 3-bedroom house, you're looking at maybe $50 to $80 in materials and 2 to 3 hours of labor. The energy savings? The EPA estimates properly sealed windows and doors reduce heating and cooling costs by 10% to 20%.

On a unit where heating and cooling runs $1,800 per year, that's $180 to $360 in annual savings from a $100 weekend project. It doesn't get better than that.

Don't bother replacing windows unless they're single-pane or visibly damaged. Window replacement costs $300 to $700 per window and the ROI takes 15 to 20 years to materialize. Seal what you have first.

Attic Insulation

If your property was built before 1980 and you haven't touched the attic insulation, it's almost certainly insufficient. Modern code requires R-38 to R-60 depending on your climate zone. Many older homes have R-11 or less.

Blown-in insulation costs $1.50 to $3.00 per square foot. For a 1,000-square-foot attic, that's $1,500 to $3,000 professionally installed. DIY with a rental blower from Home Depot brings it down to $800 to $1,500.

The payback? Typically 2 to 4 years. And the insulation lasts 20 to 30 years with zero maintenance. It's a set-it-and-forget-it upgrade that quietly saves money every single month.

Crawlspace and Basement

Sealing and insulating crawlspaces is often overlooked but critically important, especially in humid climates. Encapsulation (vapor barrier plus insulation) runs $2,000 to $5,000 for a typical crawlspace but prevents moisture damage, mold issues, and dramatically improves ground-floor comfort. If you're dealing with tenant complaints about cold floors in winter, this is almost always the culprit.

Appliance Upgrades: Time Them Right

Don't rush out and replace working appliances. But when something dies — and it will — replace it with an ENERGY STAR-rated model every single time. The incremental cost over a baseline model is minimal, and the savings add up fast.

Refrigerators

A fridge from 2005 uses roughly 500 kWh per year. A new ENERGY STAR model uses 300 to 350 kWh. At $0.14 per kWh, that's $21 to $28 per year in savings. Not world-changing on its own, but over a 15-year appliance life, that's $315 to $420.

Water Heaters

This is where real money hides. Water heating accounts for 18% of a home's energy use — second only to HVAC. When a tank water heater fails, consider replacing it with a heat pump water heater. Yes, they cost more upfront ($1,200 to $2,000 vs. $600 to $900 for a traditional tank), but they use 60% less energy. That translates to $300 to $400 per year in savings.

The payback period is 2 to 4 years, and the units typically last 13 to 15 years. That's a decade of pure profit after break-even. Plus, federal tax credits under the Inflation Reduction Act can cover up to $2,000 of the cost for qualifying heat pump water heaters.

HVAC Systems

When your HVAC dies, don't cheap out. A 16 SEER2 system costs maybe $800 to $1,200 more than a 14 SEER2 baseline, but saves 12% to 15% on heating and cooling annually. For a home spending $2,000 per year on HVAC, that's $240 to $300 saved per year. The upgrade premium pays for itself in 3 to 5 years.

Mini-split heat pumps deserve special mention for landlords. They're perfect for additions, converted garages, and multi-zone buildings. A single-zone mini-split runs $3,000 to $5,000 installed and eliminates ductwork entirely. For properties without existing central air, this is far cheaper than installing a full ducted system.

The Priority Matrix: Where to Spend First

Not every upgrade makes sense for every property. Here's how I prioritize across my portfolio:

Tax Credits and Rebates: Don't Leave Money on the Table

The Inflation Reduction Act of 2022 created massive incentives for energy efficiency upgrades. As a landlord, you can claim up to $1,200 per year in energy efficiency tax credits for insulation, windows, doors, and air sealing — plus an additional $2,000 for heat pump water heaters or HVAC heat pumps.

Many state and local utilities also offer rebates. Con Edison in New York offers $50 to $100 rebates on smart thermostats. Pacific Gas & Electric in California offers rebates on heat pump water heaters. Check your local utility's website or the DSIRE database for a complete list of incentives in your area.

These credits and rebates can cut your effective cost by 30% to 50%, dramatically improving the ROI on every upgrade in this guide.

Tracking Your Energy Efficiency ROI

Here's where most landlords drop the ball. They make the upgrades but never actually track whether they're working. You need to compare utility costs before and after, monitor maintenance call frequency, and watch your tenant retention rates.

A platform like PropsManager makes this straightforward. You can log capital expenditures against specific properties, track utility data over time, and generate reports that show exactly how much your efficiency upgrades are saving. When tax time rolls around, all your documentation for energy efficiency credits is already organized. No scrambling through shoeboxes of receipts.

If you're managing more than a handful of units, tracking this manually in spreadsheets quickly becomes unsustainable. Check out PropsManager's pricing plans to find a tier that fits your portfolio size.

Marketing Energy Efficiency to Tenants

Smart landlords don't just make these upgrades — they market them. "Energy-efficient appliances," "smart thermostat included," and "low utility costs" are phrases that belong in every listing description.

According to the National Apartment Association, 73% of renters say energy efficiency features influence their rental decisions. That number jumps to 81% among renters aged 25 to 34 — the demographic most likely to be first-time renters signing longer leases.

Include estimated utility costs in your listing. "Previous tenant averaged $95/month in electric" is a powerful selling point, especially when comparable units in your market average $160. That $65 monthly difference lets you price your rent $30 to $40 higher and still offer tenants a better total cost of occupancy.

Don't forget about preparing your property between tenants — energy-efficient turnovers go faster and cost less. For more tips, check out our guide on creating a preventative maintenance schedule to keep your upgrades performing at peak efficiency.

Common Mistakes Landlords Make with Energy Upgrades

Over-improving for the neighborhood. A $15,000 solar panel installation on a C-class rental in a $900/month market is never paying for itself. Match your upgrades to your property class and rent level.

Ignoring the building envelope. Landlords love buying shiny new appliances but skip the $100 caulking job that would save more energy. Seal first, then upgrade.

Not documenting for taxes. Every receipt, every invoice, every before-and-after photo. Energy efficiency tax credits require documentation. Keep it organized from day one.

Doing everything at once. Spread upgrades across budget cycles. Hit lighting and sealing in year one, fixtures and thermostats in year two, and time major appliance replacements for end-of-life.

Choosing the cheapest option. A $60 no-name smart thermostat that breaks in 6 months costs more than a $170 Ecobee that lasts a decade. Buy quality. This is a rental — it needs to be tenant-proof.

Explore More PropsManager Resources

Looking for the right property management software? Check out our in-depth guides:

• Compare Property Management Software — See how PropsManager stacks up against Buildium, AppFolio, Rent Manager, and Propertyware.
• Software for Small Landlords — Built for landlords managing 1–50 units without the enterprise price tag.
• AI-Powered Property Management — Discover how automation can save you 5–10 hours per week.
• Solutions for Property Managers — Scale from 50 to 500+ units without scaling your costs.

Frequently Asked Questions

What are the best energy efficient upgrades for rental properties?

The highest-ROI upgrades for rental properties are LED lighting (payback in 2 to 6 months), air sealing with caulk and weatherstripping (payback in 4 to 8 months), and low-flow water fixtures (payback in 8 to 16 months). These three upgrades combined typically cost under $500 per unit and save $400 to $700 annually. Smart thermostats and attic insulation round out the top five, with payback periods under 3 years. Always prioritize sealing the building envelope before upgrading appliances or HVAC systems.

Can landlords claim tax credits for energy efficiency improvements?

Yes. Under the Inflation Reduction Act, landlords can claim up to $1,200 per year in tax credits for qualifying energy efficiency improvements including insulation, exterior windows and doors, and air sealing materials. An additional $2,000 credit is available for heat pump water heaters and heat pump HVAC systems. These are non-refundable credits that reduce your tax liability dollar-for-dollar. Many states and local utilities also offer separate rebates that can stack with federal credits.

Do energy efficient upgrades increase rental property value?

Absolutely. Studies from the Appraisal Institute show that energy-efficient homes appraise for 3% to 5% higher than comparable properties. For a $250,000 rental property, that's $7,500 to $12,500 in added value. Beyond appraisal value, efficient properties attract higher-quality tenants, experience lower vacancy rates, and command rent premiums of $25 to $50 per month in competitive markets. The combination of lower operating costs, higher rent potential, and increased property value makes energy efficiency one of the best investments in a landlord's toolkit.

Should I make energy upgrades if my tenants pay utilities?

Yes, and here's why: tenant retention. High utility bills are one of the top five reasons tenants don't renew leases. Even when you're not paying the electric bill directly, a tenant who moves out costs you $3,000 to $5,000 in turnover expenses. Energy-efficient properties also attract better applicants during screening, because tenants who care about utility costs tend to care about the property overall. Additionally, some upgrades like building envelope improvements protect your asset regardless of who pays the utility bill.

How do I prioritize energy upgrades across multiple properties?

Start with a quick energy audit of each property. Focus first on the oldest, least-efficient buildings where upgrades will have the biggest impact. Within each property, follow this order: LED lighting, air sealing, low-flow fixtures, smart thermostat, then insulation. Leave major appliance and HVAC replacements for end-of-life timing. Use a property management tool like PropsManager to track expenses and savings across your entire portfolio, so you can see which properties need attention and measure the actual ROI of completed upgrades.

Start Saving With Smarter Property Management

Energy efficiency upgrades are a proven path to higher NOI, better tenant retention, and increased property value. But the landlords who win aren't just making upgrades — they're tracking every dollar, documenting every improvement, and using data to make smarter decisions about where to invest next.

PropsManager gives you the tools to manage capital expenditures, track maintenance costs, and monitor property performance across your entire portfolio. Stop guessing which upgrades are working and start measuring.

Request a demo today and see how PropsManager helps landlords like you turn efficiency upgrades into measurable profit.