Would you install Solar? Any tips?

29 Replies

This is a general question... Do you think solar is worth it, for an area like a desert with plenty of sun and hot summers (AC blasting) raking up big electricity bills? 

But also more specific... Would you think that it would increase the value of a rental?

I'm considering buying them for our house and would likely break even in about 4years. The issue is that I plan to rent this house out in within the next 2 years (ie. before breaking, leaving the tenant reap the rewards). 

Would love to hear your thoughts.



@Rafael Ro  Tenants traditionally pay their own electric, so investing so much money into a system that the tenant typically covers himself doesn't make much sense. If you do decide to do it, I would NOT recommend charging a flat fee; your tenants will abuse it. Meter the solar and charge tenants for what they use. Just my 2cents :D 

As much as I would like to say.. yes you should! I can't if you are going to rent the property. You probably won't be able to charge much more rent for having solar on it.

No, solar is not worth it. Do the math. How much will it cost you up front? How much will you save? How many years would it take for the savings to equal the cost of installation?

In a place like Vegas, it will cost you about $15,000 to install the system and it will take about ten years to pay for itself. But that doesn't take into consideration the maintenance costs. If I understand correctly, the batteries are only good for 5-7 years. Other parts can wear out, fail, or be damaged and require replacement. Then you have to consider the environmental costs because solar panels do not grow on trees and there is a big impact to mining the materials, transport, production, delivery, installation, and disposal that nobody seems to talk about.

Personally, I wouldn't recommend it for financial reasons. The only purpose I see with today's systems is for living off-grid.

No, I think you just stick to the usual. It would benefit you if you are living in the property but if you are renting it out. It would be just fine not to opt for solar power, you are not paying for the electric bill anyway - the tenant.

@Rafael Ro

I did here in Canada. They used to have 20 year contracts that pay you per your generating electricity far above the cost of using the electricity.

I make money on it. But I wouldn’t do it again. Adds a lot of complications, like if something breaks, or doing the roof, and it might limit who buys your place in the future.

Thank you so much all!

It sounds pretty straightforward but I can't help but run the numbers and wonder.

I haven't lived in the house yet to know actual numbers but based on what I'm hearing I'd be looking at about 400$/month on average. It's in La Quinta, so the summers are hot and winters cold. So that's 5k/year. 

Solar would cost me roughly 20k. But CA will reimburse me for 26% of that if I do it this year. So we're looking at a cost of about 15k. 

This means that in 3 years I would have made my money back and keep getting free electricity for several more years. 

The tricky part is that I plan to rent this within 2 years. But doesn't a rental with solar become a little more attractive? Or wouldn't it be a little bonus for the renters to stay longer? 

On the flipside, just to make things more confusing, I'm reading that La Quinta is also serviced by something called Imperial Irrigation District which would be about 40-50% cheaper than Edison which is the standard provider for the county. Not sure if it's our choice to be serviced by them or if I have to find out who we're "sectioned" for, but that would make it an easier decision to skip solar. 

Let me know what you think, based on these numbers. The house is about 3k sq ft. 

Thank you again all!!




Buy a different house if the electric is $400/mo!  Here in vegas, where it’s  probably a little hotter than there. I pay $60-80/mo 8 months out of the year and $130-$200 during the summer. That’s with 3 pool pumps and a electric car. 

If those are real numbers and you have to buy that house then you’d have to buy solar. But to average $400/mo in electricity over a year is insane. maybe somewhere really cold using electric heat, but not for mainly cooling. I’m a little over $100/mo and I’d bet 20-30% of that is pool/car and more than 10% is fixed connection and service costs. 

Wondered about this for a long time myself. Another wrinkle I don't see mentioned here yet is legislative risk. 

Here in MI, DTE was finally successful in getting their way with the state legislature. They basically castrated the net metering policy and the new payback period is garbage.

I don't recommend it; it has been a major issue in roof replacements and repairs. The panels need to be removed but the roofer isn't going to re-install the solar - nor warranty roofing material that has panels on it.  I love the idea; intellectually embrace it - but reality just kills the whole thing...

Originally posted by @Rafael Ro :

I haven't lived in the house yet to know actual numbers but based on what I'm hearing I'd be looking at about 400$/month on average. It's in La Quinta, so the summers are hot and winters cold. So that's 5k/year. 

Solar would cost me roughly 20k. But CA will reimburse me for 26% of that if I do it this year. So we're looking at a cost of about 15k. 

This means that in 3 years I would have made my money back and keep getting free electricity for several more years. 

The tricky part is that I plan to rent this within 2 years. But doesn't a rental with solar become a little more attractive? Or wouldn't it be a little bonus for the renters to stay longer? 

On the flipside, just to make things more confusing, I'm reading that La Quinta is also serviced by something called Imperial Irrigation District which would be about 40-50% cheaper than Edison which is the standard provider for the county. Not sure if it's our choice to be serviced by them or if I have to find out who we're "sectioned" for, but that would make it an easier decision to skip solar.

26% rebate is Federal. 22% next year. There's no battery for your system, there's really no repair and  maintenance. Batteries are only rarely installed on solar systems.We've had solar on our rental since 2011.

The majority of nay-sayers don't have panels themselves on threads here (there are MANY MANY "should I install solar" threads!!). We do have panels, on our rental, and the numbers work well for us.

If you install solar, make sure your roof is relatively new. We put our solar panels on one month after our roof was replaced.

Not sure if in your area it would be a bonus for renters to rent your place and to stay longer, it depends on  your market and on other things about your property, too. In our market,definitely yes. But we do all sorts of other green things to get our green-minded tenants to stay longer.

Before you run the numbers, install better attic insulation. You have an insulation problem with $400 electric bills. Your money will be well spent there. That will save you a ton of AC costs, solar or not. I'd do that first.

 

Originally posted by @Tanya F. :
Originally posted by @Rafael Ro:

I haven't lived in the house yet to know actual numbers but based on what I'm hearing I'd be looking at about 400$/month on average. It's in La Quinta, so the summers are hot and winters cold. So that's 5k/year. 

Solar would cost me roughly 20k. But CA will reimburse me for 26% of that if I do it this year. So we're looking at a cost of about 15k. 

This means that in 3 years I would have made my money back and keep getting free electricity for several more years. 

The tricky part is that I plan to rent this within 2 years. But doesn't a rental with solar become a little more attractive? Or wouldn't it be a little bonus for the renters to stay longer? 

On the flipside, just to make things more confusing, I'm reading that La Quinta is also serviced by something called Imperial Irrigation District which would be about 40-50% cheaper than Edison which is the standard provider for the county. Not sure if it's our choice to be serviced by them or if I have to find out who we're "sectioned" for, but that would make it an easier decision to skip solar.

26% rebate is Federal. 22% next year. There's no battery for your system, there's really no repair and  maintenance. Batteries are only rarely installed on solar systems.We've had solar on our rental since 2011.

The majority of nay-sayers don't have panels themselves on threads here (there are MANY MANY "should I install solar" threads!!). We do have panels, on our rental, and the numbers work well for us.

If you install solar, make sure your roof is relatively new. We put our solar panels on one month after our roof was replaced.

Not sure if in your area it would be a bonus for renters to rent your place and to stay longer, it depends on  your market and on other things about your property, too. In our market,definitely yes. But we do all sorts of other green things to get our green-minded tenants to stay longer.

Before you run the numbers, install better attic insulation. You have an insulation problem with $400 electric bills. Your money will be well spent there. That will save you a ton of AC costs, solar or not. I'd do that first.

 

Thanks for that and thank you all again! 

So what's interesting is that a lot of people I ask and that live in these areas with big houses and pool heaters seem to range around these numbers. But I think the best plan is to move in (we're in escrow now, just trying to be proactive), see what our costs would be for the following few months (which would be more average/lower than summer of course) and then see what we can do to increase efficiency and then decide if it makes sense to go solar. 

 

@Rafael Ro

Did you really just say la Quinta is cold in winter? Haha more like 70’s and sunny durning the day.

Anyway if the numbers are what you stated and it's not going to look ugly/lower value (should probably raise value but is often ugly in my  opinion).or mess up your roof it's a 33% COC investment you could always figure out how to get paid for power with tenants . To be honest I would be more concerned about doing a LTR in California on 3,000 SF house I would say more than likely you would be better selling with tax free gains if you live there two years. What's the rent to price ratio on the house?

Originally posted by @Zachary Beach :

@Rafael Ro

Did you really just say la Quinta is cold in winter? Haha more like 70’s and sunny durning the day.

Anyway if the numbers are what you stated and it's not going to look ugly/lower value (should probably raise value but is often ugly in my  opinion).or mess up your roof it's a 33% COC investment you could always figure out how to get paid for power with tenants . To be honest I would be more concerned about doing a LTR in California on 3,000 SF house I would say more than likely you would be better selling with tax free gains if you live there two years. What's the rent to price ratio on the house?

Lol I just assumed that it's near the mountains so it'd get really cold. I guess not. 

Im doing some more digging and questioning my numbers. During the summer it's very expensive but I think the other months are not so bad. Plus, there is a company called IID that offers substantially cheaper electricity and we're sectioned for it. So the new plan is wait a couple of months after we move in and see how things are looking. That way we'll get some real numbers. 

Question -- why would you be concerned about the LTR on this house? It's a nice house, so I would imagine we can get some nice renters to stay there forever. I'd like to keep it. What do you think?


@Rafael Ro

I say keep it in your portfolio and rent it out when you are ready.

I am in a similar situation near Oceanside. My rational is that the depreciation would be totally worth holding on to this property and see if I can increase rent in the next five years to create some really healthy cash flow.

I feel blessed to be in this situation so I may as well see how my strategy works out.

I am going to have a conversation with my new property manager soon about the effects of solar on rental income or the type of tenant it can bring in. I will let you know what he says and how I execute.

I’m glad you asked the question tho, it is an interesting concept.

I have this wild idea to put solar on one of my other properties if this pans out. I wonder if there is a way to send the energy produced straight to the electric company and keep the profit (if it is worth it)

@Nathan G. Nathan! What the heck man? Your posts on property management are the best, and you're obviously a smart man. Your posts on solar, however, with all due respect, are still mostly nonsense even after we've discussed this several times already. What batteries? What maintenance? Since the late 80's when net-metering was developed, 99.9% of solar systems have used the grid as a battery and don't have batteries themselves. They use net metering, no batteries. Only off grid systems require batteries and modern AGM's last 10 years or more, not 5-7. As far as maintenance, modern solar systems don't require any maintenance at all (no moving parts, nothing to oil or maintain). Some people clean them because they want to, but rain takes care of that for those who can't be bothered. That's it for maintenance and repair! Plus they all come with 20-30 year bumper to bumper warranties. Regarding the environmental impacts that "nobody talks about". They actually do talk about it. It's been studied and quantified by the biggest pocket-protector types out there for many decades. This is called the environmental return on investment or EROI which looks at sourcing raw materials, manufacturing, transportation, installation and recycling of materials after their 40-50 year useful life. Most panels have an EROI of under one year these days and the worst are 3-4 years. So pretty good, and compared to most other energy sources, extremely good. You're not too far off on system price at $15k, the range is about $8k-$18k for a residential system these days, minus the tax credit and any local rebates (yes like all forms of energy solar receives government money, but not nearly as much as fossil fuels and nuclear, etc. do). The payback period really depends and can range from 3-20 years, depending on local rebates, pricing, and net metering policies. But considering there's no return at all from continuing to pay an electric bill every month, a long return is still better than no return. The OP should get 3-4 quotes from local installers (I recommend owning over leasing, and going with a local installer over the big national companies). Most quotes include a financial analysis and he can decide for himself if the math works out for him or not. Sometimes it does, sometimes it doesn't. It did for me on two of my rentals that I used to live in, but not my small multi-families that don't have good roofs for it. On one of my systems, it was paid off in less than a year and the utility writes me a check for $20 every month, even with a hot tub, whereas without solar my bill would be $200/month. So that's obviously a win. It really depends on the specific property, a lot of times it makes sense and sometimes it doesn't, so anyone looking into it should get a quote from an installer like @Andrew Smith

Originally posted by @Steve K. K.:

@Nathan G. Nathan! What the heck man? Your posts on property management are the best, and you’re obviously a smart man. Your posts on solar, however, with all due respect, are still mostly nonsense even after we’ve discussed this several times already. What batteries? What maintenance? Since the late 80’s when net-metering was developed, 99.9% of solar systems have used the grid as a battery and don’t have batteries themselves. They use net metering, no batteries. Only off grid systems require batteries and modern AGM’s last 10 years or more, not 5-7. As far as maintenance, modern solar systems don’t require any maintenance at all (no moving parts, nothing to oil or maintain). Some people clean them because they want to, but rain takes care of that for those who can’t be bothered. That’s it for maintenance and repair! Plus they all come with 20-30 year bumper to bumper warranties. Regarding the environmental impacts that “nobody talks about”. They actually do talk about it. It’s been studied and quantified by the biggest pocket-protector types out there for many decades. This is called the environmental return on investment or EROI which looks at sourcing raw materials, manufacturing, transportation, installation and recycling of materials after their 40-50 year useful life. Most panels have an EROI of under one year these days and the worst are 3-4 years. So pretty good, and compared to most other energy sources, extremely good. You’re not too far off on system price at $15k, the range is about $8k-$18k for a residential system these days, minus the tax credit and any local rebates (yes like all forms of energy solar receives government money, but not nearly as much as fossil fuels and nuclear, etc. do). The payback period really depends and can range from 3-20 years, depending on local rebates, pricing, and net metering policies. But considering there’s no return at all from continuing to pay an electric bill every month, a long return is still better than no return. The OP should get 3-4 quotes from local installers (I recommend owning over leasing, and going with a local installer over the big national companies). Most quotes include a financial analysis and he can decide for himself if the math works out for him or not. Sometimes it does, sometimes it doesn’t. It did for me on two of my rentals that I used to live in, but not my small multi-families that don’t have good roofs for it. On one of my systems, it was paid off in less than a year and the utility writes me a check for $20 every month, even with a hot tub, whereas without solar my bill would be $200/month. So that’s obviously a win. It really depends on the specific property, a lot of times it makes sense and sometimes it doesn’t, so anyone looking into it should get a quote from an installer like @Andrew Smith

Thank you - much appreciated and your post is right on the money as always. 

@Steve K.

That was a perfect statement. Thank you! I thought i was out of my mind

I would add that if i want to rent, looking at a house that has solar panel, against another that doesnt, i would pay a better rent as my electrical bill would be more civilized ( or zero). Obviously the difference in rental is a function of the average monthly electrical bill.

In his case, considering its true that average electrical bill is 400/mo, i would expect rent to be at least 200/ mo more if solar covers entirely the bill (50%- pure guess)

One think he should be careful is to write the contract specifying what happens with the netting in the energy. If theres excess of production over usage who gets the check. For his cash flow he should make it clear he gets it.

Anyway, good luck. Let us know what did you decide and give us the numbers!!

Originally posted by @Steve K. :

@Nathan G. Nathan! What the heck man? 

Net metering is available in most states, but I don't believe it's been available since the 80s and it's still not available in all areas. Many people will need to use batteries to handle their needs at night or on cloudy days. Telsa developed the Powerwall in 2015 so they clearly felt there was a market for solar batteries.

I'm glad to hear your system paid off in a couple years but the average is closer to 10 years and that's after tax-payers subsidize solar at every level. The system costs $20,000 but you're only paying $13,000 because politicians are paying the rest with other people's money. It's completely legal and I don't blame you for taking advantage of it, but let's be honest about the true cost. If solar was really a sound investment, it wouldn't need to be so heavily subsidized which is part of my argument against it as a viable power source.

Here's just one pro-solar summary:

The average annual electricity consumption for a U.S. residential utility customer is 10,972 kilowatt-hours (kWh) per year, or an average of 914 kWh per month.
Multiply that by the national average electricity rate as of June 2020 ($0.13 per kWh) and you'll find that the typical American family has electricity bills totaling $1,450 a year.
This means that if enough solar panels were to be installed to cover the average electricity usage across the country, average solar panel system savings for any home in America in 2020 would be about $1,450 per year.

At a cost of $14,500 to install, it would take you ten years to break even.

Some argue that solar results in a higher sales price. That's true if you own the system outright, kind of. Let's say you buy a $250,000 home and install a $15,000 solar system. Five years later, the home sells for 3% more than a comparable home without solar. Sounds like a win, right? WRONG! $15,000 is 6% of the home value at the time of installation. If the home sells for 3% more than a home without solar, that means the solar has actually lost 50% of its value and has done nothing to increase the overall value of the home. You could use that same $15,000 to install another bathroom and get a better return than just 3%.

The bottom line: the answer depends on about 117 different factors, many of which are personal to the investor and their location. People need to read your 100% pro-solar posts and then read my 87.2% negative posts, apply their own situation, and really crunch the numbers. For someone like you, solar may pay off in spades. For others, it can be a money drain. 

A good example is California's "Solar Power Purchase Agreement" where they essentially install solar for "free". All the electricity produced is sent to the power grid and then they sell it back at a deeply discounted rate. Sounds good, right? But when the grid suffers a shortage and they have rolling blackouts, you still lose power like everyone else. My brother was sitting in 110-degree temps with no power or A/C while everything produced by his system was sent to the grid.

I'm not preventing anyone from purchasing solar. I'm just laying out the factual negatives. Do the research, consider all sides, crunch the numbers, and decide what works best for you.

Originally posted by @Alexandre Marques dos Santos :


I would add that if i want to rent, looking at a house that has solar panel, against another that doesnt, i would pay a better rent as my electrical bill would be more civilized ( or zero). Obviously the difference in rental is a function of the average monthly electrical bill.

In his case, considering its true that average electrical bill is 400/mo, i would expect rent to be at least 200/ mo more if solar covers entirely the bill (50%- pure guess)

The national average for electric use is around $120 per month. Let's assume his average is $200 a month. He could raise the rent $175 per month and save the tenant $25. It would take eight years for that solar system to pay for itself, all things being equal. 

That's an unlikely scenario. It would probably take 10+ years for the system to pay for itself and for the Landlord to receive any financial benefit. Maybe he's one of the lucky ones that can get it to pay for itself in two years and then he's raking in cash. Unlikely. Most investors would not suggest you invest in an upgrade with a break-even point of 8-10 years, but everyone has to make their own decisions.

 

I have repeated asked appraisers for their opinion about solar.  There is no universal answer, some think you get a little bump, others say you get nothing for it.  

It would be difficult to raise the rent for the solar.  Tenants are not going to wrap their heads around it.  The play may be to just do net metering back to the power co and not supply the house.  Not sure if that is even possible.  The other area that has interested me is that some municipalities have kickers.  Jacksonville does not, so I have not looked into it any further.

@Rafael Ro

To answer your question as LTR it would probably be fine but my guess is that the rent to price ratio would be very bad. So it would be an  appreciate play. California is very  tenant friendly so that's a bit of a concern. If you have great financing you could make a killing just make sure you can hold it. All my California investment properties are STR so I get appreciation but also huge cash flow.