Using Tax Rebates from a Solar Loan to invest or pay off debt

3 Replies

So this is going to seem non traditional but I thought I would share as I am always looking for creative ways to help my bottom line. I am installing solar on my primary home but this post isn't about why or why you shouldn't go that route. The state that I live in offers credits currently along with the federal credits for solar installation. The credit is 55% of the total cost of the system but of course you have to pay enough in taxes to redeem that money come tax time. The Mosaic loan is structured to where you can take the tax rebates you receive and pump them into the loan to keep the initial payment (lower than your average electric bill) at the same rate. If you spend the rebates or save the money then at the end of 18 months the payment will increase but the rate (5%) will remain the same for a 20 year period. So here comes the creative part! I will be using the tax rebates to pay off other personal debt that are shorter terms with higher rates which will decrease my monthly expenses. It is also allowing me to start a large snowball on personal debt that will allow me to gain about 2k a month back in cash flow during the first 18 months. At that time the loan payment will go up by around 200 bucks a month but at that point I will have added 10x back in cash flow which will go a long way in investing in real estate. If someone were to use this strategy that did not have personal debt to pay off it could very quickly allow them to fund real estate deals and jump start their investing career. Along with all of this I will be having 8k worth of trees taken down with the loan that will also be included in the 55% rebates. The trees need to come down as they are near the end of their life but 8k out of pocket is a big hit. Doing it with the solar means nothing out of pocket and a huge discount on getting it done. Its a win all the way around.

Daniel, I have worked with homeowner's for the last 7 years setting them up with solar through loans such as Mosaic and others that allow you to either apply your solar tax incentive to the loan or to keep it for something else. I've always mentioned to solar buyers that if they have other debts with higher interest than their solar loan, that they should apply the incentives to those debts... or use it to invest just like you are saying. Definitely a great strategy. 

The only downside to consider, is that MANY of these solar loans secretly include "dealer fees" that the bank charges to the solar company that you are working with, and so of course these fees are baked into your solar purchase. Basically, your solar gross cost will be about 10-20% higher from your solar company by using loans like Mosaic as compared to secured methods such as using a refi, heloc, etc which would be considered cash deals to your solar company. The upside to this downside is the higher the price of the solar (including these loan fees), the greater the tax incentives are!

Again, overall as long as the tax appetite is there, I think its a creative and great strategy. Thanks for sharing!

Originally posted by @Robert Lubell :

Daniel, I have worked with homeowner's for the last 7 years setting them up with solar through loans such as Mosaic and others that allow you to either apply your solar tax incentive to the loan or to keep it for something else. I've always mentioned to solar buyers that if they have other debts with higher interest than their solar loan, that they should apply the incentives to those debts... or use it to invest just like you are saying. Definitely a great strategy. 

The only downside to consider, is that MANY of these solar loans secretly include "dealer fees" that the bank charges to the solar company that you are working with, and so of course these fees are baked into your solar purchase. Basically, your solar gross cost will be about 10-20% higher from your solar company by using loans like Mosaic as compared to secured methods such as using a refi, heloc, etc which would be considered cash deals to your solar company. The upside to this downside is the higher the price of the solar (including these loan fees), the greater the tax incentives are!

Again, overall as long as the tax appetite is there, I think its a creative and great strategy. Thanks for sharing!

What has been your experience on how much appreciation a homeowner will see from a solar install? I plan on getting an appraisal done afterwards and if able I will do a HELOC to invest in other properties as well. This us assuming I can get a higher appraisal from having solar.

@Daniel Rutledge My experience has been if the solar is owned, there is nothing but benefit. Obviously, a home with a lower cost of energy than the same home with higher cost of energy is a no-brainer comparison from a buyers perspective, especially in areas with high utility rates. As far as appraisals go, Fanny Mae now directly backs up the added appraised value of solar on homes with its HomeStyle Energy loan.  

https://www.fanniemae.com/content/fact_sheet/homestyle-energy-product-matrix.pdf

In many solar markets you'll find solar PPAs (Power Purchase Agreements) and solar Lease programs. It's in these type of 3rd party ownership solar programs where, while there is still a cost savings benefit to the buyer, appraisal value is arguable and divided among appraisers. 

Obviously, for real estate investing, solar purchase option is the only way to go. 

Also to add to that, for investors with rental property, there are energy monitoring and tenant billing services that allow an investor to put solar on their rental and MAKE money by selling energy to their tenant. In areas with high retail cost of energy, this strategy adds a lot of cashflow value to rental properties as well as marketability (lower energy rate for tenants). 

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