Thoughts on solar panels?

[Heather Schmidtknecht]

I’m intrigued by solar panels and if this is an opportunity to add value to my property as well as increase monthly income. However, I really don’t know anything about them and am relatively new to being a landlord, so I’m seeking your thoughts!

Here are the numbers I have so far:

Solar panel & installation quote: $18k

Average electric bill $100/month (which tenant pays)

Supposedly, there are incentives from electric company as well as potential tax deductions... am waiting to see these things in writing.

I was thinking if the cost of electricity is $100/month and that would go away, I could raise my rent since the tenant would not have to pay electricity. Plus, I’m thinking it would add value for resale someday? Not sure?!?

[Andrew Smith]

Just to clarify the tax credits.

This year (2019) the tax credits are scheduled to decline annually not expire. They will decline from 30% to 26% at the end of 2019.

The Federal tax credits are for primary residences and do not apply to rental properties/second homes. However, you can depreciate the cost of a system on a 5 year depreciation which is definitely a big deal.

The numbers vary from property to property for a number of factors, so run the numbers specific to each property. There are some "global" trends but literally each home has different numbers.

Leasing solar does not allow you to appraise that system as part of the property value. Ownership does and Fannie Mae explicitly allow appraisal of systems IF owned (cash or financed).

You are investing in the property with other's money if the tenants are paying for the system instead of their paying a utility. Depreciation is a big advantage if tax conditions make that so.