Would you install Solar? Any tips?

45 Replies

Originally posted by @Zachary Beach :

@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.

Thank you! I'm very interested in STRs but it looks like they're making them illegal everywhere, particularly CA. How do you deal with that? Or do you mean 30+ days?

 

@Rafael Ro

Vacation markets. I own and manage STR's in big bear CA half the houses are vacation rentals here almost. Over 6,000 within a few miles of the lake. All my properties perform above the 90 percentile on airDNA every month for there classification.

Just like gas prices, rates for renting your electricity tends to go up as time progresses with inflation. Buying solar eliminates your current energy bill and puts you on a fixed solar rate that does not change. Sometimes the panels can produce more than you use, giving you a negative energy bill. Just like owning property, at least at one point you will own your electricity instead of renting it. Some states have a tax incentive, like us in California, we get a 22% back in the system. I don’t use too much electricity in my household so my system cost 7.9k with the incentive. Find out with free solar consultations as many installers will be more than happy to give you one. It will make sense for some households and some households it would not.

@Rafael Ro this will depend on the area but there are some solar companies where you are basically giving the the roof space to put up solar panels and then you buy power from them so they become your electric company. You lock in at a rate lower than the local power rates to save money, but the company is the one selling excess power back to the utility. These contracts typically have clauses in them to remove and out the panels back if you need to do roof work.

This way you still have a normal utility bill that you can pass on to renters, the bill is cheaper, there is no up front cost, you are protected in case of repairs, and you are helping transition to a more renewable grid. In NorCal Vivint solar was offering this. I think Tesla will do the same thing. Something to look into.

Originally posted by @Matthew Gjertsen :

@Rafael Ro this will depend on the area but there are some solar companies where you are basically giving the the roof space to put up solar panels and then you buy power from them so they become your electric company. You lock in at a rate lower than the local power rates to save money, but the company is the one selling excess power back to the utility. These contracts typically have clauses in them to remove and out the panels back if you need to do roof work.

This way you still have a normal utility bill that you can pass on to renters, the bill is cheaper, there is no up front cost, you are protected in case of repairs, and you are helping transition to a more renewable grid. In NorCal Vivint solar was offering this. I think Tesla will do the same thing. Something to look into.

One thing to consider: you don't own or control the panels or the electricity they produce. My brother got suckered into this in California. They installed the panels on his house at little/no cost to him. The electricity produced is sent to the grid. He buys his electric at a reduced rate. Sounds good, right? Unfortunately, he is still subject to restrictions and/or blackouts when the grid runs low. He got hit with quite a few rolling blackouts this year, including one where it was 110 degrees outside and he had no power for about nine hours. The solar panels kept producing energy, but it went to the grid and was sold to someone else while he sat roasting.

 

I have solar panels on my personal home.  It is net metering, in New Orleans, and they get sun all day long.  They generate a lot of power, but I have never had a "zero" electricity bill.  I save about 50-60% on my electricity bill each month.

I don't use them on any rentals.  If I was even able to charge any extra rent, I don't think it would be very much.

As a caveat, our energy provider (Entergy) charges some of the highest per KwH rates in the country here.  Perhaps if the rates weren't so outrageous, my electrical bills would be closer to zero.  

I'm in the Southern CA mountains (Big Bear) and, because of over 300 days of sunshine per year, a lot of homeowners here have been installing solar. In addition to the tax credit, our county has something called the HERO program where the county loans you the money to install solar, and then you pay it back through your property taxes.

Originally posted by @Nathan G. :
Originally posted by @Matthew Gjertsen:

@Rafael Ro this will depend on the area but there are some solar companies where you are basically giving the the roof space to put up solar panels and then you buy power from them so they become your electric company. You lock in at a rate lower than the local power rates to save money, but the company is the one selling excess power back to the utility. These contracts typically have clauses in them to remove and out the panels back if you need to do roof work.

This way you still have a normal utility bill that you can pass on to renters, the bill is cheaper, there is no up front cost, you are protected in case of repairs, and you are helping transition to a more renewable grid. In NorCal Vivint solar was offering this. I think Tesla will do the same thing. Something to look into.

One thing to consider: you don't own or control the panels or the electricity they produce. My brother got suckered into this in California. They installed the panels on his house at little/no cost to him. The electricity produced is sent to the grid. He buys his electric at a reduced rate. Sounds good, right? Unfortunately, he is still subject to restrictions and/or blackouts when the grid runs low. He got hit with quite a few rolling blackouts this year, including one where it was 110 degrees outside and he had no power for about nine hours. The solar panels kept producing energy, but it went to the grid and was sold to someone else while he sat roasting

Yes, absolutely! If you don't install some form of energy storage you will still be subject to blackouts. You just have to figure out which "problem" you are trying to solve. It is too bad that wasn't made clear to your brother. When we put solar on our house, they were very clear that if we wanted grid independence, we would also need batteries. We originally just installed solar because the permitting was going to take so long for the batteries. We are now adding batteries to get the added protection. If people do this, they also need to realize that different systems are handled differently when it comes to tax incentives. I am no expert because they are different in different areas and changing all the time, just make sure to ask and get very clear answers regarding what qualifies for any government support.

Originally posted by @Myriam Mourani :

I'm in the Southern CA mountains (Big Bear) and, because of over 300 days of sunshine per year, a lot of homeowners here have been installing solar. In addition to the tax credit, our county has something called the HERO program where the county loans you the money to install solar, and then you pay it back through your property taxes.

Thank you for sharing that.

I hadn't heard of the HERO program, so I did a quick search and found THIS ARTICLE. If I understand correctly, the system will cost quite a bit more than if you had purchased it outright and there are a few other negatives listed. 

Again, I just encourage people to do the research themselves and make an educated decision.

@All - a few thoughts, insulation or more efficient equipment in my experience has always been a much better roi than solar. Using less electric is better than producing it with the sun or wind.

Also something I don’t see mentioned much is these things “scum” over similar to head lights on cars. This reduces the output above and beyond other factors such as clouds or the angle not being able to following sun.

The easiest thing to do is see if the electric can be purchased cheaper somewhere else.

I bought a new build on a Caribbean island, it was planned with solar water heating and solar panels on the roof. 

No battery, the electric solar panels go through an inverter so the whole system is still dependent on the grid.

The price was about 10.000 for both. Any excess is fed back in the grid and is taken off the electricity bill.

I don't think it was a selling point for the tenant per se but it is a nice extra. Electricity bill comes in as usual and is paid by the tenant so no extra hassle there.

I would do it again, it is a great feeling doing the right thing and all. Financially it is just about even, no loss or gain. I am able to ask a good rent (but that is also because it is a new build).

@Rafael Ro Have you considered keeping the electric bill in your name and charging the tenant for electricity based on their use? You could give the tenant a 5% discount over the utility company price and then the tenant would essentially be paying for your solar panels over that 10yr payback period. Anything past the payback period is extra profit so essentially 15 or more years depending on the life of the roof. Like others stated it is best to install on brand new roofs. 

Originally posted by @Nathan G. :
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.

Nathan... ugh I feel like we've been through this so many times before already, but I guess I have to reply to this. First of all thanks for replying with a more fair and balanced comment than your original blanket statement "solar is not worth it". I don't think many people will agree that you are only 87.2% negative against solar with a statement like that, or that I'm 100% positive by saying sometimes it pencils out financially and other times it doesn't. I hope we can at least agree that in some cases it is worth it and in others not so much. 

Just for the record, net metering has been around since 1979 and started to become widely adopted throughout the 80's and 90's. You're correct in that it is still not available everywhere, but in most heavily populated areas it is. Grid electricity is not available everywhere either for that matter, and those are the places where off grid solar/batteries come into the conversation. Batteries are usually not involved otherwise, except with people who are just learning about how solar works. Saying grid-connected solar doesn't make sense because the batteries need to be replaced is like saying cars don't make sense because the horseshoes need to be replaced. I know, cars don't use horseshoes. Just like cars don't use horseshoes, solar systems don't usually use batteries. But while we're on the topic (which usually isn't even part of the calculus of whether or not solar "makes sense", but I'm humoring you here), your story about your brother losing power... he could have bought a different inverter if he wanted backup power. My SMA SunnyBoy Secure Power Supply gives me one circuit that can put out up to 1500 watts of daytime power, as long as the sun is out, without a single battery. If I need more power than that, I fire up my trusty Honda generator. Like most people, I didn't buy solar for backup power. I bought it to save money. Although solar is a way to provide backup/stand alone power for some people (a very small fraction of people living off the grid), grid-connected PV is not usually about providing backup power (although it can be if someone chooses). 

 Regarding subsidies: once again every form of energy is heavily subsidized and solar is no different in that regard. Coal, natural gas, nuclear, etc. all receive government money. A LOT of government money. So it's not like the rest of the energy industry is a free market and solar is the only energy source getting assistance. They all do. I see you continually trying to politicize solar in every thread that it comes up in, and frankly it's annoying. Do you tell everyone eating a hamburger that beef is subsidized too? Unless you volunteer to pay the full unsubsidized price of gas at the pump, or send your electric utility extra money every month because you feel bad about the fact that they're propped up by the government, then quit with the "solar is subsidized and therefor it's bad" comments. EVERY FORM OF ENERGY IS HEAVILY SUBSIDIZED. Not just solar. Every time you turn the lights on, you're benefitting from energy subsidies. In fact solar and wind are the two forms of energy on track to not require subsidies in the near future, while every other form of energy requires increased subsidization over time.

Some people like to see a certain payback period, other people realize that creating a return on investment where only a monthly payout existed before is a good thing. The factors that determine whether or not solar is a good investment for an individual are electricity usage, roof space/location/azimuth/shading/framing/electrical main panel/physical system design and pricing, local utility rebates and net metering agreement, and ability to claim the federal tax credit (thanks for that George Bush, and thanks Trump for renewing it). That's it. A local installer can give them a quote and they can decide for themselves if it makes sense in their situation. Let's leave politics out of it. Sometimes the math works, other times it doesn't, just like most things. The fact that the solar industry has been literally doubling in size annually over the past several decades, during both red and blue administrations, is an indicator that the math works in more situations than not. 

I researched putting panels on my home about 6 years back when I had to buy a new roof. At that time, I figured it would take me about 20 years to break even with an expected 30 year lifespan. Prices have gone down considerably on the panels since then and the output/efficiency has gone up. It seems like it has become a better investment every day, but location is a big factor. With tax breaks and a decent interest rate to finance the system; they would most likely come out ahead.

@Rafael Ro  You need to see what it would cost. Ask the house builder what he would charge to add solar. See about solar tiles (like Tesla or a competitor), rather than solar panels. Then you have to see what the power company will pay you for energy you don't use and what State or Federal Incentives might exist.

Good luck!

Originally posted by @Joe Kelly:

I will be slowly adding solar panels to ALL of my houses exactly like this. I can easily recover my costs in about 5 years and then every month I will earn half or more of whatever the tenant's power bill would be on top of rent. This is a far, far higher ROI than you can ever get on actually renting houses!

Joe, it's great to hear you're getting such a strong return! Can you share some numbers with us?

1. What did the system cost you, out of pocket?

2. What is the cost of an average electric bill each month for your area?

3. What is the cost of an average electric bill after installing solar?

Either I suck at communicating or people misunderstand my posts. I'm not against solar. I know people can have success with it. However, I think the success stories are outside the norm and - in some cases - greatly exaggerated. 

If an investor read your post, they may get the impression they can slap solar on their house and earn $200 a month from the extra electricity produced. While that may be true for you, I don't think it's true for the majority of investors in America. I'm trying to encourage people to look at their own situation and crunch the numbers for themselves. It doesn't mean I hate solar or that solar can't possibly be a good investment. It's my opinion that solar is a bad investment in most cases for most investors. I see a lot of people getting upset with my claims, but I don't see a lot of people producing evidence of strong returns.

 

0.22 per kwhr, ouch, power to choose currently shows the rates in my area at 0.092 to 0.136 with at least 12 months fixed. 
 Thinking I’m paying about 0.10, with a 3 yr fixed rate. 
This is a simple math problem for me if $7000 nets me $80 per month versus $2000 for a coin op washer and dryer that nets $50 a month. So 3x the washer and dryer cost $6000 and nets $150 per month. Easy peasy. 
Of course if you already have the washer and dryer or what ever pays better than the solar, then why not. Or if this has some emotion value to you, then again why not.

@Rafael Ro

Well I rented my house out and I believe solar was an attraction to the Tennant. We did price high to see what the market would bring and I don’t think they came for the solar but it attracted these great tenants. Great income and 800+ credit score!!!!

So my take is that people will not pay an extra fee but build it in the price and see if there are takers.