Are Solar Panels An Investment In MPLS?

14 Replies

Hi folks,

Just a question I've been looking into a bit and wondering if any other Minneapolis investors have considered. I understand that the price/efficiency of solar panels is trending on an exponential curve, but the amount of government subsidies also follows the same trend (dropping in total subsidy amounts), so I think from a timing perspective it's a good buy - not sure about how fast the payoff period would be for somewhere in Minneapolis though.

Has anybody here decided to purchase solar panels for a property and been satisfied with the returns?

Hi @Patrick Erichsen , if you have a specific property I can run the numbers on it so you would have actual data on it to see if it makes sense in MPLS.

Right now the Federal incentives are excellent, and I can dig in to the local level incentives. Panels will increase in cost if the tariffs are imposed on foreign-made panels so that is something to consider for anyone looking at solar.

Hey @Andrew Smith , thanks for the reply! I don't have any specific property in mind at the moment, but I'll keep your contact info on hand once I do! 

The bit about tariffs is another interesting component that I wasn't aware of as well. I think with the current administration, that's certainly within the realm of possibility.

I did quite a bit of digging into this several years ago.  I actually thought about starting a company to sell and install solar roofs but back then it seemed like the payback was around 20 years ignoring maintenance costs which would be a tough sell.  That considered energy incentives and tax credits.  I am sure the price of panels has come down a bit but until I see more of these installed on houses in areas with more sunlight I am holding off.  I can't imagine much energy being generated with our low sunlight in the winter and when the panels are covered in snow :)

I have talked to a couple of people who have systems installed on their house and they seem to believe it is a 7 year pay back but I think they are just selling themselves on their decision.

From an investment standpoint this could lead to cost savings but it will lead to additional capital needed so I expect this to decrease overall ROI on a property.

@Andrew Smith does your company install panels in MN?

My buddy owns two commercial buildings  8000 sq/ft+ and both are powered by solar panels. They even have monitors inside that show the power produced. They are predicted to pay themselves off in 4 years.

Jordan Moorhead, Real Estate Agent in MN (#40542303)

It definitely would seem more feasible on a commercial building with a flat roof, less trees, etc.  I have a couple of clients who have them on commercial roofs but the owners did it because they were more interested in being known as a green company.

@Andrew Smith I went to your solar website this morning for information but I don't necessarily want to get on a sales call when I am more or less digging for information.  Considering the lower panel costs, could you look up feasibility on a single family house in Mpls?  Say area code 55401?

@Patrick Erichsen @Andrew Smith @John Woodrich @Jordan Moorhead

Hey Guys, one very important point.  If doing solar it may be important to purchase them rather than lease them.  I"m certainly no authority on this but some of the leases and contracts, particularly from SolarCity place liens and deed restrictions that can make financing the property very difficult.  This can affect selling or refinancing. I would not say that it's not worth looking into, but be very careful to read and understand the contract.

Granted this is from 2015, but a quick google search will produce tons of similar stories  https://www.washingtonpost.com/news/where-we-live/...

Cheers,

~Tim

Tim Swierczek, Lender in WI (#103522) and MN (#103522)
(651) 772-9000

Hi @John Woodrich - Our coverage in MN is limited to portions of the State. The call is more about information gathering than selling. It's difficult to give accurate numbers without doing that. Example a 2000 sqft with a retired couple would be completely different to a 2000 sqft with 6 kids and a Tesla.

What I can say is that a very "general" rule would be an existing bill of at least $120-$140/ month typically show an ROI out of the gate. The zero down solar programs are relatively new, but make sense for a ton of homes - but not always for sure! In the example I gave, the rates currently paid are very important. Does the home with kids use all their power at peak rate for example?

Our "top tier" markets are CA, MD, VA, DC, FL, TX and others because the value proposition of solar is so high. In most areas in those States it pretty much makes zero sense to not explore solar if the bill is $120+. Other areas like northern WA not so much because hydro makes the underlying cost of power much lower.

In calculating ROI, don't leave out the reduced bill. I have seen frustrations with Realtors in escrows with solar because the buyer has not understood cost of home ownership. They might see a contracted payment of $200/month for a solar system for example but they are neglecting to factor in the elimination of $250 to the utility. Plainly as the system is paid off, that value also increases significantly notwithstanding the average 8%/yr hike in power bills. (Edison here last year hiked 38%)!

Hi @Tim Swierczek , absolutely! It really does depend on circumstances though. Again as a "rule" the best ROI is cash purchase for a solar system. Next would be the low APR zero down financing. This assumes that the solar buyer has a tax liability that will benefit from the 30% tax credit (plus other localised incentives).

In the cases where a customer has no tax liability, the solar company can benefit from the tax credit and lease the system. The benefit to the homeowner is a reduced monthly bill at a fixed rate for their power. A good example of this is solar for churches. The leases are typically a great option because churches have no tax liability and can reduce their monthly expenses.

I personally would not want to lease. Leases are not so much a problem in escrow with educated realtors/buyers. The savings with time still make financial sense. Solar City's leases in the past were not the greatest for sure, but even those guaranteed a home buyer would automatically qualify for the existing lease and/or the buyer/seller could pay off the lease and bake the cost into the sales price.

@Andrew Smith thanks for the information. In any instance this may be hard to estimate relatively accurately with a rental property as their may be times of vacancy and changes in tenants over the payback period. For most properties in MN the tenant pays the utilities especially electric because it is easy to meter. From that standpoint the only ROI would be related to the ability to increase the rent cost (because of lowered utilities) and value added to the property (if any). I suppose you could take the risk of grossing up rent and covering electric but the tenant would have no reason to be efficient.

@John Woodrich You can be "the utility" and charge for the power. Keep the rent the same and bill them for power directly (cost of system + any utility power required). The way I am exploring for the rentals I will buy would be the "free power" route though. Maybe different in MN for sure depending on how homes are heated, but here in CA allowing the tenants to use A/C at their discretion would be a major plus when already included in an (increased) rent. The utility typically stops sending monthly bills when solar is added, but send reconciliation statements monthly with then an annual payment to be made or received. In this case you'd see if the tenants were doing things like growing herbal products or other ways of excessive use and put a clause in the agreement that states they will be responsible for the utility reconciliation.

@Patrick Erichsen My broker (also an investor) runs a separate business installing solar in Minneapolis. He has panels on nearly all his commercial buildings and acts like the “utility” for the commercial tenants. He also owns MF residential properties, but as @John Woodrich said a flat roof and no trees is key for your best ROI. Although that doesn't mean it can't work on residential properties. Minnesota recently discontinued their state-wide solar incentive program (Made in MN), but within the metro Xcel's Solar Rewards incentive program will reopen for applications in 2018. Google's Project Sunroof is a great tool to quickly see if it makes sense to further explore installing solar on any property.

@Andrew Smith great info and advice! 

Alyssa Strom, Real Estate Agent in MN (#40506416)
218-349-4574

In Sunny California, unless it is owned the panels do not worth more or less. The company leased to you took the tax credit.  An appraiser may add a few $K as amenities here in CA.  From electricity bill standpoint 15 cents per KW it makes sense to have solar for electric car, home servers, electric heating etc. One gets some money back from utility company. A former coworker had a very advanced solar development company in MPLS that just went under.   Unless government is willing to give generous credit it will remain to be a novelty alternative energy.

On international scale, German government credit tax law expired followed by many company bankruptcies. At International solar show since last year most visitors are from middle east, China.  American solar technology companies are hanging there with layoffs here and there. Emerging technology?  Haha.

I have solar panels on my personal residence.  The pay back was for 15-20 years depending on electrical rates.  No upfront cost since I own a small business and work from home. The installers I went with found a great bank to work with and is a great company to work with the programs they offered.  I only pay my electric normal bill each month. Govt. pays for 20% of your bill but for businesses I believe it was 5%. This was all given through your taxes. These quotes are from 2015.  I also thought the govt. assistance was extended till 2019.  I love the panels and make more electricity than needed thus we get paid by our power company.  Living in MN with snow isn't as bad as you think.  Snow actually reflects the sun and we did fantastic in Feb. last year.  We have a ground mount system and have removed snow to help production.  I have dabbled with the idea of adding to my rentals in the future.  The ones I have now have too much tree coverage.  Also there is a lottery system to even get them into city limits. 

Our place has been shown to legislature as an example on how well solar can fit into a community.  I would highly recommend solar to anyone.  Panels are guaranteed for 25 years.  The installers say manufactures state they will cover 1/2 of the life of items which means the panels will most likely last 50 years.  I figure I am going to get at least 10 years of free electric or more out of doing this. Make sure you get tier 1 panels if you do get solar. The panels I got came from Canada and were tier 1.  

Solar has come a long way.  We looked at doing this back in 2007 and there was no way we were ever going to make our money back.  Just 8 years later we are making money off the panels.  We don't have batteries as they are a lot of work and cost a lot of money.  We just feed back into the grid thus we get paid for over producing some months which makes up for the months of not much production.  But we still are ahead of what we actually use for the year so we are making money.  Panels do loose life over time, so this probably won't be forever, but I will take it while I can.

I would do your research on different companies and see what they can offer you.  The company I used does do work in the twin cities. Novel Energy solutions.  If you do use them please mention my name.  I do get a referral fee.

Sincerely

Jessica Grewe

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