What do I need to know about solar?

Question

Hey BP,

I have a 5plex in Tucson AZ that I have been converting to furnished rentals for travel nurses. All of the utilities are in my name. My plan is to buy solar and put it on the roof. What do I need to know before I do? Any gotchas or things that people aren’t normally aware of? Any things to watch out for? Any help would be appreciated.

Thanks!

Kyle

Carlos Valencia · Answer

Hey Kyle,

I used to sell solar and some things I learned was that you have to be very careful with who you contract for your solar project. There as so many solar installers out there similar to any industry. Finding the right installer for your project is key. Few things to consider if you choose to go solar for your 5plex paying cash will be the most cost effective option. If you know you will need a new roof in the next 5 years I would recommend getting a new roof and then installing solar. The great thing about solar panels on your roof is that it will help protect your new roof as the panels are on top of your roof. Therefore if you get a new roof make sure you get a solar warranty that covers everything on your roof for 30 years as most only cover 25yrs. The only challenge when installing it on a rental property is that its hard to predict how much energy your tenants will use. In order to take advantage of solar on your roof is to make sure it generates enough energy where you wont have to pay the utility company excess usage that is not covered by your solar panels. You dont want to end up paying two bills which would be your solar panels plus any excess energy used to the utility company. To best protect yourself from having to pay the utility company for any excess usage make sure to get a big system to cover at least 120% of your energy usage so it gives you 20% buffer to help avoid having to pay the utility company. Usually the only other fee you still have to pay the utility company is the connection fee. Lastly check to see if your utility company will pay you back for any excess energy you produce that is not used. Those credits can help you offset on months when your tenants might use more than what your panels produced. I'm sorry one more thing to look out for is when working with a solar company make sure they get permits first before installation because without permits the utility company wont let your system to be turned on. There many solar companies promise fast install without permits. Permits can sometimes take as little as 2 weeks to as far as 6 months and you dont want to be stuck paying for something you cannot use until its been permitted. Many things to consider when going solar also make sure to get at least 3 quotes. If you need a solar quote I can connect you with a former colleague that can assist you further with that. Hope this helps with making your decision of going solar.

@Albert Bui @Matthew Kwan

Account Closed · Answer

Just some thoughts

1. Solar doesn't work at night

2. Efficient batteries aren't yet available to store enegry (so it's use it or lose it)

3. Your roof orientation affects if panels would be useful( they don't work facing north)

4. Some power companies offer incentives for solar

5. You have to clear the panels regularly since they accumulate dust which affects the usefulness

6. Neighbors might complain about the look

7. It usually makes it tougher to sell the property

8. Firemen don't like them, it impedes the ability to fight a house fire

Chad McMahan · Answer

It may be a problem in some other states receiving less sunshine. In AZ it really cuts the APS/power bill.

That being said, I definitely second the awareness of needing replacement of the solar when replacing the roof. Also, in some cases, roofs cannot be properly maintained unless the panels are removed- which is a bigger problem, as proper maintenance significantly reduces roof life.

Amy Konopka · Answer

If you pay for it outright and you own it, it will have absolutely no impact on your ability to sell the property.

I would absolutely put solar on, bonus depreciation  (80% this year) and tax credits, ….oh and free electricity?! I have solar on my primary and am putting it on my rental (it’s a recovery residence so I pay all utilities) especially in Arizona!  My advice though is stick with the larger companies.  More expensive but they’ll be around when there’s a problem.  You’re out of luck when something goes bad and the company closed shop.

Eliott Elias · Answer

Just one thing, don't do it. It will inhibit your ability to sell the property.

Joe Villeneuve · Answer

Lots of experience with solar in my "day job".  PM me.  There's an awful lot you need to know about solar before you retrofit it onto a house.  There are so many options, the list and explanation would give me writers cramp.

Leo R. · Answer

@Kyle Swengel I don't have any personal experience with Solar, but--as others have mentioned--one consideration is the age/condition of the roof.

It would be no fun to install solar, only to have to rip it all down in a few years because the roof needs to be replaced...plus, if you had to do that, where does the power come from while you're replacing the roof?

So, I'd probably want to only put up solar if A) the roof is very new and has plenty of years left, or B) the roof is very old--in which case, I'd look into replacing the roof before adding the solar.

...but, perhaps removing the solar for a roof replacement isn't a big deal--if there are any solar experts on here, I'd be interested to know how much of a hassle, and how much cost it is is to remove and re-install solar to replace the roof....

Jeff Copeland · Answer

We've had solar on our primary for several years here in Florida, and generally love it.

Some things to be aware of:

1. There are different business models. You can buy the panels outright with cash, you can finance them, or you can lease them. Figure out what works best for you.

2. There are also different models in terms of metering. Some utilities offer "net metering" - which means if you are fortunate enough generate more energy that you use, you essentially sell it back to the grid and reduce your utility costs accordingly. In other cases, your generating capacity might just power your home, and if you make extra, it just goes unused rather than going back to the grid.

3. Invest in solar for the reduced utility costs (and in some cases, the tax credit). Don't expect them to add value on resale or appraisal. The market just doesn't seem to support this yet. In most cases, this means it needs to be a long term hold where you pay the utility costs in order for it to make sense.

4. The panels do have to come off if/when you re-roof. Many installers will include one time removal & reinstallation (later on) in their initial bid. This is something to check on (and them hope they are still around in 10 years when you need to call them on it!).

Randall Alan · Answer

@Kyle Swengel

I get that the utilities are in your name, but just factor in the utilities expenses into rent and avoid the complexities of solar would be my personal opinion.

So when you need a new roof, you are going to have to take all the panels off and put them back on. That sounds cheap, right?  Replacing batteries on your system, and whatever other maintenance the system may require - extra expense.

I would consider hold time as well… is it worth the up front cost if you decide to sell the property in 5 years or the next up market turn?  I seriously doubt it increases housing value on the market (which is just going to look at $/sqft) — and to another investor could go for or against you on desirability.   For me it would be one more complication of the property - even though it has the potential to save you money.

At the end of the day you really aren’t paying the utilities at the property - your tenants are through their rent payments - regardless of whose name they are in.  I think you need to shift your frame of reference there.  I would never consider solar for a rental.

Obviously it sounds like you include utilities in your rental rate.  One approach might be to say to your prospective tenants that “rent is $XXX per month, and utilities are a flat rate of $xxx per month.”  In other words, just because you pay them because you have a single electric meter doesn’t mean you can’t bill your tenants a fair rate for electricity if they are long term (monthly) tenants.  You can ask your utility for the average usage and they will provide that. Although paying the bill you probably already know it.

I just don’t see the need to go through all the expense / commotion of solar when it’s a pass through expense.

Randy

What do I need to know about solar?

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