Would installing solar panels on rentals be a wise investment?

Question

Question to the apartment owners, management companies, single family portfolio investors and the like.

Would installing solar panels on your income producing assets make sense if there was no upfront installation cost and you could "bill" the customer for electricity that the sun produces for each property?

Russell Brazil · Answer

Solar panels are highly regionalized as to their effect. Some locations they raise your property value, some places they make no difference, and some places they will decrease your properties value.

Consult with someone local with solar panel experience.

Nathan Gesner · Answer

I've discussed this ad nauseam in the forums for over a decade. I encounter many people with strong opinions about the benefits of solar, but none of them can produce hard evidence to support their enthusiasm. Just like with electric cars, nobody wants to talk about the true costs, the poor people (aka: slaves) digging up the materials, the damage caused by the manufacturing process, that solar only survives because our government steals money from its citizens to prop up the entire industry, involvement of Communist China, etc.

If you want to use this technology to feel better about your carbon footprint, go for it. Don't expect it to increase your cash flow, keep tenants longer, or help your home appreciate.

Paw Nouri · Answer

there’s a funny debate on this. we put it on one of our rentals in SoCal and it’s netter us in a positive way and made us more attractive to prospective tenants.

that being said, IF it were truly lucrative I think we’d see more corporate apartments like Greystar and Redwood installing solar panels.

If you do install, make sure you figure out what tax credits you qualify for etc and make sure your output is covered by the panels for day AND night. theres no sun at night.. so make sure when they design they dont hide that. the salespeople are shady with that aspect and it’s annoying.

Colleen F. · Answer

@Costin I.  We did get a battery system from tesla because we are in the northeast and have an all electric house. We loose power more often than most so aside from the credits it does help us in storm situations.  With a 0% loan for the batteries payback is a still 10 years but  we will see how it looks after a year.

Paw Nouri · Answer

also for the love of God, do not get a tesla system lol they are legitimately the worst. they have terrible customer service and their product is not good. look reviews and comparisons up.

we did LG panels and enphase iq8+ microinverters with enphase batteries

LG panels are superior, their microinverters are not. Enphase has the best microinverters on the market.

do your research and you’ll be fine man

John Underwood · Answer

@Chris Murdien

No.

Not unless you are paying the electric bill.

Bradley Buxton · Answer

@Chris Murdien

Look into the Tesla battery packs and do a cost analysis.  They charge during hours when power is cheaper and then you can use the pack during peak times. The technology is improving rapidly. It will also depend on your tenants and your area. Here in Reno, NV Tesla has a factory building battery packs and the new semi-trucks and some tenants value the technology of battery packs, EV chargers, smart home features, etc., and would pay a premium to have such amenities.  The goal I would think is to increase your rental income and solar might do that but there are alternative investments in your property that might get you higher returns.

Costin I. · Answer

@Colleen F. If you don't have true net metering agreements available to you in your location, you'll likely be on the losing end of the deal with a system "designed" to cover 100% of your annual consumption.

Why? Because while the system might produce the same kWh amount you are consuming on an annual basis, when you are producing it is not going to match when you are consuming it. The excess production gets placed on the grid, benefiting your utility (basically you become a free energy producer for them). You'll get a very low rate for what you produce (excess you put in the grid), while you'll be charged a much higher rate for what you consume (get from the grid, likely at night).

There are other "payback" schemes that offer higher rates, but they are limited (basically efficient only for very small systems), or have charges that offset the higher rate. And presented in very complicated way, hard to bring them to an apple to apple comparisson.

One way to mitigate the lack of a net metering agreement is with a battery system (see Tesla Powerwall) - a very expensive way to become a truly self-sufficient energy producer (basically you become your own power plant), which rarely makes financial sense unless in a region with frequent power loss or in an off-grid scenario.

Colleen F. · Answer

@Costin I.   Your second point about utilities selling high and buying low is one that annoys me.  We have solar on our home and it was a point they weren't really clear about.  The differential on price for buying and selling for us is high.  System will pay off in 10 years for us but we have a good exposure and a lot of panel.

Costin I. · Answer

@Chris Murdien - I looked into this matter extensively, both for my residence and rentals, here are my 2¢:

1. There are no tax credits for solar installations on non-owner-occupied properties. Right there you lose some 30% of the financial incentive to do this on rental properties.

2. The efficiency of a solar installation is dependent on many factors - location (or average daily sun hours), house orientation (15deg SSE ideally), roof inclination, shade obstructions (on the roof and/or around the house), consumption, components used, inverter or microinverters, hail resistance, warranty, utility payback vs net metering. Each one of them can make a huge difference and the installer will not tell you much of all the hidden gotcha's (his interest is to convince you to install as many panels he can slap on the roof as possible, regardless of the ROI). Hint: look for a solar architect, who acts as an adviser and works for you and audits the installer project proposal.

Many states/utilities are no longer allowing net metering (kWh for kWh) and use instead all kinds of payback schemes (e.g. if you over-produce, they will gladly take your kWh for 3 cents and graciously allow you to take it back at night for 22cents - end result being, if your system is not properly sized, you will be producing energy for the utility and never recover the costs of the installation). The installer will not tell you about this, but will try to cover 100% of your consumption - the problem is, that your consumption and production do not happen at the same time.

3. The payback period on a system installed on a residence, with(!) tax credits, and with no(!) financing is 10-20 years, depending on a series of factors (see #2). If you finance it, it's much longer - IMO, you lose another 25% of the financial ROI, with the only ones making money being the installer and the lender.

4. And if you are looking into this just for the sake of saving the planet, 1. remember the solar industry is heavily subsidized, creating distortions in other areas, and 2. most of the solar brands manufacturing are not green at all, leaving behind a bunch of toxic byproducts + if you factor in the materials and energy consumed in the production of panels, they will never recover that during their useful lifetime.

In short, it makes economic sense on your residence, in very specific and controlled conditions.

Would installing solar panels on rentals be a wise investment?

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