Solar or new AC for energy savings???

Question

Hi there, I recently purchased my first home, a 5 bed 4 bath which I plan to househack using short term rentals like AirBnb, furnished finder, etc. I've moved in now for 3 weeks and getting things prepared but one aspect of owning a large home (4600 total livable space) is that my energy costs are high. There are two AC units on the home, one very old and working, but noisy and one that is old, but smaller and in better shape per my inspector. I was planning to get Solar before the end of this year as the tax incentives and credits available in Illinois are tremendous, but even with those credits the system I can put on my roof only covers around 65% of my total needs for the year. Once I pay off the loan the savings will be a couple hundred per month, but would investing in a new AC unit actually be more bang for the buck? Obviously less of a hassle, but I do lose out on being "eco-friendly" on AirBnb and the extra equity solar panels would provide. Has anyone had a similar decision to make? What are your takes on Solar panels in general to offset utility costs/add value to home/raise rates on rentals?

Craig Janet · Answer

I'm an HVAC contractor and investor, I can tell you that you will never recoup the money you spend on a new unit. Keep your old units going as long as possible. It's very unlikely that both units will go out at the same time. Keep a portable unit handy so when they do go out your not at the mercy of contractors on 95 degree day.

Jaron Walling · Answer

This especially with the HVAC industry undergoing a transition in AC coolant types. They are moving away from R-410A and moving towards R-454. Our HVAC guy said they can't even buy the older stuff now. It's sold out everywhere. The pay back period for solar makes no sense for the investment. Keep what you have working for as long as possible (roof included), then upgrade the full HVAC when the time is right. Let the tenants pay for it.

George Skidis · Answer

As a former claims adjuster nobody ever called me to their home to tell me how great things were. When it comes to roofing their were several causes of interior leaks. First and foremost anything that puts a screw or a whole in a perfectly good roof will eventually leak. My favorite example is installing a skylight. They look great, but will eventually leak or get foggy maybe both. Flashing around chimneys, vent pipes or any other penetration in the roof needs regular maintenance, or they leak.

So you want to put 225+ screw holes in the roof of your home. Why. Do you have a detached garage? Could you build a pergola to sit under in the summer sun?

In my opinion solar is being oversold based on the ROI. By the time you get it paid for you will need to start replacing panels. What happens when you need a new roof that is not covered by insurance?

Have you had an energy audit? The best first  course of action is to see where you are bleeding energy. Is there enough insulation in the attic? How old are the windows, are they thermal windows? How about your water heater? Is it a 20 year old low efficiency 50 gallon tank that runs 24/7? Have you looked into a tankless water heater? We installed one in the wife's beauty shop in 2010. After the install we noticed the utility bill dropped $60 a month. It is still working today. Also have a tankless in my personal residence. It seems like endless hot water would be a blessing when you have 4 or more roomers in your home.

Step 1 perform an energy audit and see where it takes you.

If you are house hacking, that means you are not planning on staying in the house. Do you really want to drop $20 to $30 thousand dollars of your own money to gift it to someone else. The house will only sell for what it is appraised for.

Good Luck and Good Investing

Peter W. · Answer

I haven’t run numbers recently because I moved to upstate New York. About 10 years ago in Florida the payback period was something like 10-15 years and that’s assuming nothing breaks. Which is to say, the ROI on solar panels is typically pretty small—especially in the Midwest where there isn’t much sun. I am not sure whether you are closer to Colorado or Cleveland in terms of cloud cover. My buddy works in the industry (currently maintenance, but he did sales and install previously) and he would not consider solar where we are in upstate New York.

If you go lease options you can pay zero down, it typical makes it difficult to sell the house.  Those contracts have lots of fine print which are not in your favor. Doesn’t mean it can’t work out, but be careful to understand what you are signing. The salesman will not be your friend here, his goal is to do whatever it takes to get you to sign.

The department of energy has some excellent calculators which will calculate exactly how much energy your solar panels will create so you don’t have to guess.

The department of energy also has a list of the SEER ratio for almost all available AC units so you can calculate how much energy you will save there as well.

Rick Albert · Answer

What is the age of the roof? It is only worth adding on solar panels if the roof is new. Otherwise it costs thousands of dollars to remove the panels and then put them back.

When I've ran the numbers, the payback period is a while. The incentives must be really good to make it worth it.

As Caleb said, solar panels have been the bane of existence in the resale world. The only option is to sell them paid off, and even then, at least in So Cal where we get plenty of sun, I have never had a buyer pay a premium for it.

From an investment perspective, I would focus on the AC. If that goes out, then you are SOL with the guests, including potential for bad reviews. I don't do as much in the Airbnb space but I would run the numbers of how much more money you can make by being "eco-friendly."

In support of solar panels, you are paying for utilities, so anything that makes sense to increase your ROI should be considered. I just think there is an order to it (first AC units, then new roof, then solar).

Kate Sanchez · Answer

@Ben Rosenblum  Great question! Solar adds long-term value & marketing appeal for STRs, but an efficient AC impacts comfort & monthly bills immediately. Many hosts do both - start with the system giving you best ROI based on lifespan & usage.

Ying Tang · Answer

I toured a house in California once and the owner told me that they have Tesla solar panels, and Tesla inspected and fixed their roof before installing the solar panels. For me personally, I'd love to buy houses with existing solar panels but will not install new ones.

Alan F. · Answer

Yup, maybe if folks just actually changed filters, cleaned coils, kept air handler clean & didn't block of registers equipment would last longer

David Bovyn · Answer

I agree with the above, only do it with a NEW roof. Also, only do it if you can get it mostly free. I've seen a lot of incentive programs and deals, but if you have to invest your own cash, it will take quite a while to pay off, and by that point you may need to replace panels or the roof!

Terrence Terrell · Answer

Thanks for posing this question, Ben! I'll also reach out to some of my past investor clients that may have some input for you here.

Solar or new AC for energy savings???

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