Solar panels on rental property?

Portland, OR · Member since 2016 · 29 posts · 10 votes

Hey, new here. I don't own a rental property myself, my dad used too, but that was more from necessity. Hopefully one day I will, but I'm fifteen now, and more worried about paying for college. However, I'm part of a startup and we're looking at helping landlords get solar on their buildings and pay for it through a separate lease or PPA with the tenant. I was wondering if any of you had ever had experiences with solar power on a rented property? Did you do it? Why or why not? What was the experience like?

I appreciate any feedback you can give me.

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Eddie T.

Rental Property Investor · NY · Member since 2013 · 844 posts · 350 votes

10y

@Eli Winkelman What about a roof that has years left. Who is going to pay for removing all the panels to install a new roof and then installing them again?

How many years of savings will it take to recoup the cost of installation?

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Dion DePaoliPro Member
Real Estate Broker · Northwest Indiana, IN · Member since 2011 · 2k+ posts · 2k+ votes
10y
Bump.
0 Reply
Richard Bradshaw
Investor · St Petersburg, FL · Member since 2015 · 127 posts · 39 votes
10y
Well, personally I wouldn't see any value in investing in solar panels for a rental property because tenants tend to pay for the electric.
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Eli Winkelman
OP
Portland, OR · Member since 2016 · 29 posts · 10 votes
10y
That would be where our system is helpful, we would give you the legal forms to let you either lease the panels to your tenant (legal basically everywhere) or set up a short term power purchase agreement (legal in most states without being considered a utility), then the tenants would be paying for electricity, but they would be paying you for it, not the utility.
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Nate Wightman
Investor · Denver, CO · Member since 2016 · 213 posts · 57 votes
10y
Bravo Eli, Wow.. 15 and all in..
well if you do not need to pay for electric then the rent can be higher because you have added value to the rental.... you rent a place for 1000 expecting $75 for electric and you do not have to pay for electric so you could afford to pay $1075/month ... so they still pay it but it is in the rent ...
you could also call solarcity and ask them for the rep. in your area... get his cards and sell solar for them and get +- $200 for every house you refer to solarcity http://www.solarcity.com/ every business you start and fail makes you one closer to success. Proud of you... laugh lots.
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Eli Winkelman
OP
Portland, OR · Member since 2016 · 29 posts · 10 votes
10y
Yes, that is where are revenue source is from, selling the customers to solar installers (hopefully in a competitive marketplace so that landlords get the best price). Also, we might eventually provide system monitoring and billing tools to the landlords, which would be pretty essential, and would only costs a small percentage of what they are billing, but other than that everything would be free for the landlords.
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Eli Winkelman
OP
Portland, OR · Member since 2016 · 29 posts · 10 votes
10y
Some tenants won't see that they will be not paying a electricity bill, and dismiss the property as having too high rent, or won't cap their electricity usage if the landlord is paying for it. If anyone's interested, I can send you a link once we have our prototype up.
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Eddie T.
Rental Property Investor · NY · Member since 2013 · 844 posts · 350 votes
10y
@Eli Winkelman What about a roof that has years left. Who is going to pay for removing all the panels to install a new roof and then installing them again?
How many years of savings will it take to recoup the cost of installation?
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Eli Winkelman
OP
Portland, OR · Member since 2016 · 29 posts · 10 votes
10y
The roof thing is something that is figured out on a case by case basis, but generally you want to install solar panels right after you replace the roof (or replace the roof right before you put on solar panels), or within a couple of years because the installation labor cost is a large part of the overall cost for solar panels (the materials can cost less than $.50/watt).
The payback time will vary greatly depending on the location, the building, etc. However I can see that you live in the state of New York, and New York is one of the best places for solar with a average payback time of 7 years, or a IRR of 19.8% (https://solarpowerrocks.com/new-york/), of course, this doesn't take into account the decrease if you were to give your tenants a 20% or so electricity savings, which is totally up to you.
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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
10y
In my market solar panels bring down the value of a property anywhere from 3 to 6 percent. So it is not something I would seek out.
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Eli Winkelman
OP
Portland, OR · Member since 2016 · 29 posts · 10 votes
10y
Okay, thanks for telling me. I've heard it's the other way around, that it brings the value up at least the value of the solar panels, but I'm sure that's not true everywhere. It is possible you're thinking of houses with a PPA or Lease, not with the panels owned outright? A PPA or Lease will definitely make it harder to sell/lose value almost anywhere, owning will lower the value in some areas, recoup 100% or more in others (California). It depends heavily on the location.
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Craig Crawford
Retired · Canyon Lake, CA · Member since 2015 · 2 posts · 1 vote
10y
Hey Eli, Nice to meet you. As a renter in California, I value the solar panels on my rental. Over the last year it has saved me an average of $253/mo. After the first year lease, I agreed to a rent increase in large part because I knew the electrical cost of most homes around me would be that much more. I definitely see the value in what you are trying to offer investors. I think with your attitude will get you far...best of luck.
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Nate Wightman
Investor · Denver, CO · Member since 2016 · 213 posts · 57 votes
10y
solar city will remove and reinstall for +-$500 if something destroys roof depending on the size I suppose. My opinion is it will only lower value to some who don't like solar.. any one who likes solar will pay or pay premium to have it... so may go either way and it is getting more and more popular.
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Eli Winkelman
OP
Portland, OR · Member since 2016 · 29 posts · 10 votes
10y
Originally posted by @Craig Crawford:

Hey Eli,
Nice to meet you. As a renter in California, I value the solar panels on my rental. Over the last year it has saved me an average of $253/mo. After the first year lease, I agreed to a rent increase in large part because I knew the electrical cost of most homes around me would be that much more.
I definitely see the value in what you are trying to offer investors. I think with your attitude will get you far...best of luck.
Thank You. That's great that you've got solar panels on your building, out of curiosity, if you moved, do you think you would mention it to your new landlord?
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Eli Winkelman
OP
Portland, OR · Member since 2016 · 29 posts · 10 votes
10y
Originally posted by @Nate Wightman:

My opinion is it will only lower value to some who don't like solar.. any one who likes solar will pay or pay premium to have it... so may go either way and it is getting more and more popular.
Yeah, that's generally how it works out. If there are a lot more people who want solar trying to buy a home than there are homes with solar being sold, it will sell for a premium. Also, depending on when you're planning on selling the home (and if it's a rental property it might be a while), the solar panels might be ready to be replaced, or a totally normal thing when you sell.
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Albert Bui
Lender · Bellevue WA & Orange County, CA · Member since 2013 · 2k+ posts · 1k+ votes
10y
Originally posted by @Richard Bradshaw:

Well, personally I wouldn't see any value in investing in solar panels for a rental property because tenants tend to pay for the electric.
True but if you're net effective cost to rent is lower you can market this has a competitive advantage perhaps with a long term benefit. For instance if your property is a Net zero power use property you it could lower the residents effective cost.
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Eli Winkelman
OP
Portland, OR · Member since 2016 · 29 posts · 10 votes
10y
Originally posted by @Albert Bui:

Originally posted by @Richard Bradshaw:
Well, personally I wouldn't see any value in investing in solar panels for a rental property because tenants tend to pay for the electric.
True but if you're net effective cost to rent is lower you can market this has a competitive advantage perhaps with a long term benefit. For instance if your property is a Net zero power use property you it could lower the residents effective cost.
You can do that. You could also set up a separate lease agreement for the solar panels, save the tenants a bit of money on electricity, and it's easier to advertise then trying to explain that they get such and such amount of free energy, which will still raise the rent, and turn people away before they see that some electricity is included.
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Albert Bui
Lender · Bellevue WA & Orange County, CA · Member since 2013 · 2k+ posts · 1k+ votes
10y
My concern is what kind of damage the solar panels will do to the composition shingle roof, are you familar with this Eli?
Is there an advantage to leasing the system versus buying and financing it ?
The solar could also absorb the power bill for all CAM power use like the laundry facilities, CAM lights, CAM day/night lights, and other CAM electrical use.
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Eli Winkelman
OP
Portland, OR · Member since 2016 · 29 posts · 10 votes
10y
I'm not very familiar with the actual specific technical problems that can occur with installations. As far as I know, at this point, there isn't a very large risk of damage happening, and if it does the installer will have insurance to cover it.
As far as leasing or a power purchase agreement versus buying it outright (or were you talking about a loan?) is that buying it outright will have a much higher return. Leasing it won't have any return because you aren't making an investment. If you don't have the capitol, leasing or doing a PPA is a good option, but if you do, then buying is far superior as far as the investment goes. For maintenance, I wouldn't worry about it too much, an installer that knows what they're doing should offer a couple years of support, and warranty for the panels and inverter. Generally though, this won't be needed, most of the maintenance you need to do just involved spraying off the panels every couple of weeks, there are no moving parts. If you have to choose between a loan or a lease/ppa, generally a lease/ppa is a better deal, but not always, I'd recommend looking at both, figure out how much you'd save with each (pay attention to the tax credits and Renewable energy credits, as these can affect ROI), factor in the support you'll get with a lease/ppa, and that you'll own the panels when the loan is payed back, this will change the amount of money you'll save.
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Nate Wightman
Investor · Denver, CO · Member since 2016 · 213 posts · 57 votes
10y
Not sure but it seems possible that the solar panels will shade the roof and make the
house cooler in the summer by reducing the attic temps. Saving more money for the tenants.
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Eli Winkelman
OP
Portland, OR · Member since 2016 · 29 posts · 10 votes
10y
Originally posted by @Nate Wightman:

Not sure but it seems possible that the solar panels will shade the roof and make the
house cooler in the summer by reducing the attic temps. Saving more money for the tenants.
This actually does happen, but it will also make the house a bit colder during the winter. Solar panels can help decrease the urban heating effect (http://journal.frontiersin.org/article/10.3389/fenvs.2014.00014/abstract)
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Steve R.
part-time investor/landlord · Calgary, Alberta · Member since 2015 · 66 posts · 27 votes
10y
if the panels have to be sprayed every couple of weeks, I would not imagine we can ask or even let our tenants to go on the roof twice a month (liability issues and not all tenants will want to) and me as a landlord I do not see me going over properties twice a month climbing roofs
so there is maintenance involved?
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Eli Winkelman
OP
Portland, OR · Member since 2016 · 29 posts · 10 votes
10y
The amount you need to wash off the panels depends a lot on the location, if you live somewhere dry and dusty, they'll need to be washed off pretty regularly, but if it rains and snows where you are that will get off the dirt, except in those really dry and dusty climates, it's not generally that big of an issue.
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Steve R.
part-time investor/landlord · Calgary, Alberta · Member since 2015 · 66 posts · 27 votes
10y
if you tell tenants that they have to climb the roof it is a big issue
if your tenant climbs the roof to clean the panels and falls off or damages the roof or the panels it is a big issue
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Account Closed
Rental Property Investor · Portland, OR · Member since 2015 · 338 posts · 332 votes
10y
Solar panels that belong to the house outright--ie the homeowner purchased them (vs lease or PPA)--do indeed increase home values, @Russell Brazil. Realtors don't like solar, however, because transferring a PPA or lease takes an extra day or two during the contract negotiations, thus postponing the realtors' commission checks.
When receiving information, @Eli Winkelman, always consider the source and their particular motivations.
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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
10y
Originally posted by @Account Closed:

Solar panels that belong to the house outright--ie the homeowner purchased them (vs lease or PPA)--do indeed increase home values, @Russell Brazil. Realtors don't like solar, however, because transferring a PPA or lease takes an extra day or two during the contract negotiations, thus postponing the realtors' commission checks.
When receiving information, @Eli Winkelman, always consider the source and their particular motivations.
@Dani Z is right about one thing, consider the source and their motivations, however she has certainly misjudged the source and motivations. In this case we have two sources, one who is making a statement about the market place in which he is an expert, and someone else making a blanket statement about all markets across the country which they could not possibly have knowledge of. While it may be the case that they bring up the value in Portland, which I have no idea, they certainly do not in my market, and the statement has nothing to do with the fact that I am a realtor. If they brought up property values in my market place, I would put one on every single one of my properties.
The idea that a Realtor would be concerned with a commission check being delayed a couple delays is utterly absurd. I check my commissions on a quarterly basis, and due to that, find some of my commissions delayed months, so I certainly wouldnt be concerned with it being delayed a few days.
I could also care less if a client is buying or selling a property with panels. Now I dont have any stats, and I dont know that they even exist, on what percentage of panels are leased verse owned in my market place, but I think I can make a pretty good guess that with 10 of the 20 richest counties in the nation, that most of them are owned outright here and not leased, and they still drop the price of the property.
I am usually pretty cordial on here, and I disagree with many people here often, many of whom are close friends of mine who I do business with. We simply agree to disagree. But when my motivations are questions, and for such an absurd reason, well then I need to point out the absurdity of such logic.
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