As a homeowner or multifamily owner, you’ve probably heard a lot about the benefits of solar panels. They claim to save you money and reduce your carbon footprint by producing all the electricity your property needs from the sun. Many landlords wonder if they’re a good investment for rental properties. As environmentalism becomes more prevalent every year, many tenants are drawn to properties that boast green amenities. So, are solar panels actually worth it, or do the costs outweigh the benefits?
There are a variety of factors that influence the value of solar panels for your specific property. Let’s discuss all the financial considerations you should make when determining if solar panels are a smart investment for your rental property.
How Much Do Solar Panels Cost?
Before considering the benefits solar panels may have on your rental, you should figure out how much they’ll cost you in total. Unfortunately, there is no set price for solar panels. The cost can vary widely depending on the location and size of your property.
One of the biggest indicators of cost, of course, is going to be the size of the solar panel system. Larger systems will cost significantly more to install, but there are two sides of the same coin — a larger system is going to produce more energy and potentially save you more money in the long-term. A similar balance occurs when it comes to quality. High-efficiency solar panels are going to have a higher price tag but they can provide a larger energy output and may be more durable over time.
In addition to buying the solar panels themselves, you’ll need to pay installation costs, which can vary depending on the company. Solar panels also require occasional maintenance, such as cleaning, replacing broken parts, or repairs to preserve their longevity and efficiency. You can also opt for various extras and add-ons that can enhance the performance of the solar panel system. Solar battery storage and energy monitoring software can help you get more out of your system and maximize its efficiency, but their value depends on your property’s energy usage.
How Much Money Can Solar Panels Save?
The main incentive for solar panel installation is the potential savings on energy costs. Calculating the exact savings you can expect from solar panels is complex, as there are many variables that can impact how much energy your panels will produce and how much money that actually equates to. These factors can also change over time, so your initial estimate may not be accurate in 5 years.
The biggest indicator of solar panel profitability is their energy production. It’s difficult to predict how efficient your solar panels will be, and depends on environmental factors like location. You should consult a solar power engineer to determine how efficient solar panels might be on your specific property.
Your property’s energy consumption also plays a large role in your potential savings — the more energy your property consumes, the more you stand to save. Solar panels can make a huge difference for properties with multiple units or high energy usage. However, you could stand to make even more if your system generates more power than your property uses. In some areas, the utility company may buy back your extra energy in the form of Solar Renewable Energy Credits, or SRECs. Find out your utility company’s rates for solar energy to determine how this may affect your property’s net operating income.
There also may be additional financial incentives to install solar panels in your area, as the initial costs of installation are often intimidating to property owners. There is a federal solar tax credit offered to all solar panel owners that allows you to deduct the costs of solar installation from your federal taxes. Some states and cities offer additional tax credits, rebates, or grants to further reduce installation costs. You can also get property tax exemptions in some states, meaning the added property value generated from solar panels won’t increase your property taxes.