Real Estate Agent · Beverly, MA · Member since 2013 · 353 posts · 93 votes
Has anyone looked into installing solar power into investment properties? Is it possible to sell excess power to utility company and generate additional income?
Investor · Sunnyvale, CA · Member since 2013 · 62 posts · 19 votes
12y
One other thing, I was doing some research and there are systems (mainly available in Germany) which include battery backups such that you could install the system and remove yourself completely from the grid. However, due to the increased need for production to cover nighttime the systems need about twice the production capacity and end up costing about twice as much as a system which is tied into the grid as a "backup" to the solar. Someday this might work but for now it doesn't appear to make sense for most people.
Apparently the city will take another week or so and APS may take up to another three weeks. Fun stuff. I'll post more when we're generating power.
It's sometimes little wonder the public perception in N.A. is that solar is a cute, expensive, feel-good project. I read a report recently that pegged the order to install to operational window in Germany as being typically less than a month.
Investor / Chief Acquisitions Officer · Billings, MT · Member since 2011 · 91 posts · 24 votes
12y
If you are paying for the utilities on a property that is an expense to you the owner.
Adding solar to cover the utilities reduces your expenses and increases your net income. Increases in the profitability of a property increases it's value.
Investor · Sunnyvale, CA · Member since 2013 · 62 posts · 19 votes
12y
Peter: I include utilities in my rent so going solar will help a couple things. First, it will reduce my electric bills. Second, it will increase the value of the house. Lastly, in effect, solar turns a variable cost (electricity) into a fixed cost which I'm paying up front.
For those of you interested in going solar in Arizona, I found this article which you might consider. I used Solar City and just sent them a rather nasty email regarding their support of APS in trying to change the NetMetering rules. So, far they have been reasonably easy to work with but if they are working against my interests at the same time as they are selling me a system based on certain financial assumptions (which they appear to want changed) I think that's a little sleazy and very annoying.
Investor · Sunnyvale, CA · Member since 2013 · 62 posts · 19 votes
12y
So, I misread the article and thought that it was referring to Solar City. It's First Solar who is supporting APS. Sorry for the mistake. :) Regardless, I still think solar is a good idea and will post how it turns out for me.
Rental Property Investor · Madison, WI · Member since 2013 · 629 posts · 339 votes
12y
We installed solar panels on our rental in Dec 2011. Our local utility requires that we pay the electric utility, so now the rent includes electric, but not gas. We increased the rent $50 per month to cover electric based on past usage, but guess what, this (cold!) winter it's clear our tenants got an electric space heater. So the electric bill shot up (over doubled for the past 2 months). We're crafting a letter to them this week...
Investor · Sunnyvale, CA · Member since 2013 · 62 posts · 19 votes
12y
Last month we got a first full month bill with the bi-directional meter installed. Because we're generating power during the daytime, I switched to a billing plan where they charge $0.20 per kWh from Noon-7pm on weekdays and $0.06 per kWh any other time. Because of this we are averaging about $0.07 per kWh which is a reduction from ~$0.12 on the level-billing plan. In addition, the whole electric bill was $41 for the month and only $9 of that was actual electricity. The rest was fees and taxes. We banked just shy of 200 kWh of peak time power for future use. I'm sure that will be consumed this coming Summer. Last year's bills peaked at around $450 so I'm hoping for a dramatic drop. We'll see... I'm accelerating the payoff of the loan I took out to install the panels. The monthly payment is ~$200 and I should have the 20 year lease paid off 7-8 years, maybe sooner if I can afford it. So far I'm happy with them and they look pretty nice.
Flipper/Rehabber · Abilene, TX · Member since 2014 · 25 posts · 2 votes
12y
I'm somewhat new to real estate investing and brand new to this site but this post caught my attention because I know much more about commercial Solar and Wind Power than I do buying and selling property. I have had several conversations corresponding with how commercial relates to residential.
Solar is great but in comparison, I'm wondering if you have considered a small wind turbine..? The reason is because they are typically much more efficient and I know that it is actually Texas law(not sure about other states) that the energy you don't use has to be purchased.
FYI, the people I have talked to in Texas that own one of these paid around $10-$12K. Worth noting that they mentioned that there has been a few times that they have not produced enough and have had to pay a small electric bill. However, I'd be willing to be they don't use conservatively.
Buffalo, NY · Member since 2014 · 371 posts · 146 votes
12y
Look into PPAs (Power Purchase Agreements). This is eliminate the need for an initial cash layout. My 9-5 is in the the energy industry. I'm assuming your tenants pay their own utilities and the excess you are referring to is over and above the common area usage. You will also need to make sure your utility allows for "bi-directional meters." Most do nowadays. The company doing the PPA will be able to help you determine feasibility in your area.
Investor · Sunnyvale, CA · Member since 2013 · 62 posts · 19 votes
12y
All,
Just as an update, it's been a few more months with the solar panels and I am very pleased. The results for the past few months have been similar to the info I posted previously. The latest power bill (April) was $42 and we banked another 120kWh of peak power. For the past few months I haven't paid for a single, peak-priced kW of energy and have over 700 kWh's of peak power banked which I'm assuming I'll use over the hottest summer months. This means that I'm paying $0.061 per kWh which is less than half of the rate I was paying before installing the panels. As the days are getting longer the amount of power I've generated has grown to around 44-47 kWh/day. I'm assuming it will hit around 50 kWh/day during the long days of Summer. We'll see how things go over Summer but so far Solar City's estimates have been spot on and I'm thrilled with their performance.
Real Estate Investor · Boston, MA · Member since 2008 · 102 posts · 10 votes
12y
I'm thinking of buying a unit in a condo complex of which some units are rented and some are owner-occupied. If I can convince the other owners to install solar panels and pay for it from the condominium association funds, do anyone know if I can claim a federal tax credit on my portion of the installation (eg 25% if I bought 1 unit to be owner-occupied in a 4-unit complex)?
Is the payback equally divided among the units so that in the future, the other owners can stop charging utilities to their tenants and increase the rent payment?
Investor · Sunnyvale, CA · Member since 2013 · 62 posts · 19 votes
12y
That sounds complicated. Rental properties are specifically excluded from the tax credit so it's not clear how this purchase would be classified for everyone and since you're using association funds it's not clear who gets the tax credit if there is one allowed. What I ended up doing was leasing them from Solar City (or whoever you decide to work with). They take the credit (because businesses are allowed) and discount the 20-year lease cost by that amount. The rental properties can write off their portion of the lease costs over the period of the lease. I don't think that you'd get to write off your portion since it's owner-occupied but your payment would be reduced by the tax credit. I'm not an accountant or lawyer so you definitely should check with one/both before you go down this road. Good luck.
Rental Property Investor · Madison, WI · Member since 2013 · 629 posts · 339 votes
12y
I think to do it that way, you'd need four separate systems installed. How is the complex metered? If there's one main meter and then four sub-panels, you could do it with one system. If individual meters, you probably would have to hook each one up to your solar system.
You should ask this question to a solar installer. They would know what your options are.
West Chester, OH · Member since 2015 · 2 posts · 1 vote
11y
Correct me if I am wrong, but I believe there are TWO different tax credit programs at play here:
-Residential Renewable Energy Tax Credit (26 USC 25D) Form 5695, Line 1
-Federal business energy tax credit (26 USC 48): IRS Form 3468, Line 7
Yes, rental properties are not allowed a solar PV tax credit under the residential program, but the business tax credit program should still apply. You have to file the proper business tax forms (3800, etc) of course. Also, I believe that there are some additional issues with the business tax credit if you sell the rental property within 5 years -- with residential you don't have those.
Investor · Sonoma, CA · Member since 2013 · 11 posts · 0 votes
11y
@ Timo Radzik
I have been trying to figure out if I would qualify for the investment tax credit on a rental property...IRS Form 3468. Seems confusing since they exclude buildings used for lodging?
Chattanooga, TN · Member since 2015 · 28 posts · 2 votes
11y
thanks @Glen Sonnenberg for posting your experience. I'm investigating methods for including electricity with rent and and looking for best practices for adding solar power and other Eco green values adds.
I have been trying to figure out if I would qualify for the investment tax credit on a rental property...IRS Form 3468. Seems confusing since they exclude buildings used for lodging?
(Caveat: I am not a tax professional, so best to check with one)
IRS Form 3468 says you can't claim credit if "Used for lodging or in the furnishing of lodging (see section 50(b)(2) for exceptions)". So, two factors to consider:
1) Is a rental residence considered "lodging" per IRS? Not sure. I would assume there is a difference (signing lease, length of time) but I skipped and went to...
2) what are the exceptions in 50(b)(2)?
So, going to the relevant US Code (https://www.law.cornell.edu/uscode/text/26/50)
and looking at Section 50(b)(2) says:
<<<Quote Starts>>>
(2) Property used for lodging
No credit shall be determined under this subpart with respect to any property which is used predominantly to furnish lodging or in connection with the furnishing of lodging. The preceding sentence shall not apply to—
(A)nonlodging commercial facilities which are available to persons not using the lodging facilities on the same basis as they are available to persons using the lodging facilities.
(B)property used by a hotel or motel in connection with the trade or business of furnishing lodging where the predominant portion of the accommodations is used by transients;
(C)a certified historic structure to the extent of that portion of the basis which is attributable to qualified rehabilitation expenditures; and
(D)any energy property
<<<Quote Ends>>>
By my reading, 50(b)(2)(D) applies, as solar panels are energy property, I believe. (Page 6 of the instructions for Form 3468 discusses "energy property"). I think the purpose of the "Lodging Restriction" on Form 3468 is because Form 3468 can include various investment credits for rehabilitation of buildings as well. They want to restrict the tax credit for lodging facility rehab, I guess. But not lodging facility energy property.
I would appreciate any comments on this from anyone with additional info, better knowledge of tax codes, etc. These are just my opinions from reading the forms and codes.
About the maintenance on the solar panels, there is none. I live in the desert, and I literally never have to clean my solar panels, it rains a couple times a year and that is plenty cleaning to keep them running efficiently. As for any real maintenance, completely covered by my solar company. And the solar panels can absolutely make the home even more cash flow positive, on a 20 year loan costing 72$ a month, charging the tenant a consistent 100$ a month, they're paying for the asset that raises your homes value and covers the electricity on top of covering your mortgage. Win, win, and win. Now if you went with the 10 year loan, that wouldn't be cash flow positive on the panels until it's paid off, but you can definitely structure it to pay you in the mean time.
I just realized you can't get the federal tax credit on income properties, so unless you lived there until tax season that would hurt the profitability of the solar panels on a rental.
Investor · Sunnyvale, CA · Member since 2013 · 62 posts · 19 votes
10y
Actually you can get the tax credit but you have to sign up for a lease. Solar City hooked me up and they get the credit but they pass it through in their lease price. For my rental in Phoenix it was about $15k over 20 years which you can prepay or finance at what was about 8% with no prepayment allowed. You can deduct 1/20th each year of the lease. They claim at the end of the lease the panels will have essentially no value so they can then "sell" them to you for some minimum cost. It's been thrre years now and I'm very pleased.