Solar for MFR - Does it make sense?

[Ravi K.]

Folks! I am exploring installation of roof top solar panels to 

a) reduce the utility bills (Owner paid utility situation), 

b) to replace an old roof part of this deal so it can be depreciated quickly!

Of course, it's going to cost a lot and need to financed this transaction, but I did the math and it seems my monthly net cash out is almost zero (I.e, Utility bill savings are offsetting the cost of installing the panels and financing charges!). 

With the above I would be able to achieve following...

1. Able to put $100K roof, free of cost (as it's part of the solar deal and financed).

2. With accelerated depreciation (Note that roof also get's depreciation, other wise you can not do this!) I can get more than half of this investment $$'s on year1 (60% of the investment on year1 with depreciation, rest in remaining 5-6 years) combined with potential tax benefits (30% Federal tax benefit on Solar).

3. ROI is approximately 6 to 7 years, so any utility savings after that is a gain...I really don't care after 6++ years as I may not keep the apt, so it might be a value add when selling [also NOI would be better after smaller utility bill]. Key benefit might be able to maximize total return on whole investment (apt + solar), with out this solar option the returns are going to be based on just the investment returns on original apartment building.

Here are my questions...

1. Does this really make sense or I am being too optimistic?

2. Any one deployed solar on bigger apartment complexes (50 units or more)? If yes, what are your experiences and thoughts around doing some thing like this.

3. Are there any gotchas? and/or what to watch out?

All / any relevant analysis and/or experiences are welcome. Especially, love to hear the analysis of people with finance background (ex. CPA's etc).

Thanks in advance.

-Ravi.

[JD Martin]

I love solar but I believe you are being too optimistic. Returns almost never recapture costs, though in some cases they can at least break even. There are also other considerations - roof loading, wind shear, switching & wiring decay - that can eat into your profit pretty heavily.

That said, you have two major things in your favor: density of usage and a favorable climate. So if anyone can make it work, you are a prime candidate. I just think you shouldn't go into it thinking you are going to save (or make) money, because at best it just shifts costs.