Are Solar Panels Worth It For A Rental Property? (Solved)

Installing solar panels brings many benefits to all types of properties including real estate used for rental income. Are solar panels a worthwhile investment for rental properties however?

Landlords are increasingly choosing solar panels to gain the many benefits that come with this new technology. But the installation costs can be anywhere between $10,000 to $25,000, so they need to be fully investigated before going ahead.

The initial investment of installing solar panels poses a real question for investors, however, community solar is an option that doesn’t require a large upfront investment. Plus, there are financing options and other ways to cover the upfront investment.

Are solar panels worth it for a rental property?

Yes, they can be. Installing solar panels certainly attracts better tenants and saves on utility expenses in the long run. Investing in solar panels can ultimately improve the bottom line for the property owner.

Having solar panels provides property owners and tenants some definite benefits, especially if the property is located in a prime location where there is a lot of sun exposure and hot summer months require a lot of energy consumption to keep the home cool.

7 Benefits of Installing Solar Panels On Your Rental Property

Let’s take a look at some clear benefits of having solar panels on your rental property:

1. Tax Credit

If you have a solar system on your investment property, you will likely qualify for the ITC along with other annual federal and state tax benefits. Depending on your state, you may also receive numerous incentives.

2. Claiming Depreciation

When you have a solar system on your rental property, you may claim 10% depreciation in value each year. A high-quality solar system can last more than 25 years if installed and maintained properly.

Throughout that whole time, you can claim depreciation, which allows you to recover the initial investment made on the solar system.

3. Increase in Property Value

Another great advantage of having solar panels is the increase in property value. You may charge more rent and find better tenants by having an energy-efficient feature. Your tenants benefit as well as they see a dramatic decrease in their electric bills.

Being able to charge higher rent allows you to recover financially from the expense of the purchase and installation of the solar system. If you sell the property down the road, the solar system will increase the sales price and might make it more attractive to buyers.

4. Energy Efficiency

It is a great feeling to be independent of public utilities. Not only is the supply more reliable and better for the planet, but it amounts to great savings each year. This is especially true in states where you receive a lot of sun exposure.

5. Credits and Rebates

Although there aren’t federal rebates for energy-efficient installations, there are several local and state government and utility company programs that offer credits and other financial incentives.

Even some solar manufacturers provide you with special discounts that make your investment in solar a minimal one. It is certainly worth researching the programs available before you purchase your solar system.

Solar companies also offer specific installations for rental and commercial properties that suit your financial objectives as an investor.

6. Community Solar

Instead of installing solar panels on your roof, you may enroll the property in a local solar farm. It allows you to support clean and local energy while saving lots of money on the electric bill.

It is much easier than installing panels on your own and it doesn’t require the hefty initial investment of approximately $10,000 to $25,000. Your tenants will save every month on their electric bill and your property will be much more attractive on the market.

7. Helping the Planet

Besides the financial benefits, using solar panels decreases our dependence on fossil fuels for energy. Using solar energy significantly decreases your carbon footprint and will help the environment stay in good shape for future generations.

Installing solar panels is becoming more popular and some tenants are even requesting that property owners provide this option.

How Does Solar Energy Work on Rental Properties?

If you are wondering if you can put solar panels on a rental property, the answer is definitely yes. Both the tenants and property owners have to reach a mutual agreement regarding the charges and benefits from the solar system.

The expense of electric bills changes when a solar system is used. The rebates are paid back to the person who appears on the utility bill.

Here are a few scenarios that may occur:

  1. The tenant appears on the electricity bill and pays normally as well as receives the rebates.
  2. The property owner appears on the electricity bill, pays it, and receives the rebates. Then, charges electricity to the tenant and uses that money to offset the initial investment of the installation costs.
  3. The property owner appears on the electricity bill, pays it, receives the rebates, passes on a percentage of the savings to the tenants. Although there is no legal obligation to pass on the savings to the tenants, this could attract quality tenants that want to save money by using clean energy.

Who benefits from solar panels?

Both the landlord and tenants have the potential to benefit from a solar system. It all comes down to the agreement that is put in place on the lease. Having solar energy provides the property with the ability to generate savings that will directly impact the bottom line.

Is Your Rental Property Suitable For Solar Panels?

As a property owner, you must consider the type of property you choose. Most properties are suitable, but not all make it possible for a successful solar system installation.

To gain the most benefit from having the system, the solar panels should be installed on a roof that faces south at approximately a 30-degree angle.

Roofs that face east or west at different angles will still generate sufficient energy. If you are dealing with a flat roof, you will have to mount brackets to create the most effective angle.

For properties that face north or have shade from structures or trees that surround them, it may be difficult to generate solar energy. You also have to check with the local council to make sure that you are able to install a solar system in that area.

If the property is a listed building or is within a conservation area, you may have some obstacles installing solar panels. Before purchasing the rental property, it is wise to consider all of these factors to determine if a solar system will be an option.

For Tenants: How Do I Get My Landlord to Install Solar Panels?

If you rent, installing solar panels might be a bit more complicated. You can speak to your landlord about installing solar panels and discuss factors such as:

  • Solar tax credits that benefit the property owner.
  • Property and sales tax exemptions that may apply to your state.
  • Landlords may receive metering credits for energy surplus generation.
  • Financing options for the installation.

Since converting to solar energy is a fairly new topic, it is important that you assess your landlord’s knowledge. Sometimes the biggest obstacle is not knowing the options that are available.

After doing research in your area, you can give your landlord a good idea of what it takes to install solar panels on the property. Once the facts are laid out, it is much easier to have a real discussion about a new energy-efficient system.

My Final Thoughts on are Solar Panels Worth it for a Rental Property?

Now that you have a better idea of the benefits and considerations of having solar panels on your rental property, hopefully, you can determine if this option is right for you.

The first step if you are interested in a solar system is to find trusted suppliers that can provide fair quotes.

There are many local and state programs that can help you offset the initial costs of having a rental property with solar panels. A solar system is well worth the investment, especially if it is located in a sunny region.

There are many creative ways to cover the initial investment of installing a solar system. In the long run, it will certainly translate into a significant amount of savings. It is environmentally responsible and a great step towards a more energy-efficient property.

I would love to hear your thoughts and experiences on whether Solar Panels are good for rental properties. Please leave your comments in the comments section below.

Thank you and have a great day 🙂

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