Solar panels for 3-unit rental property??

[Will Mejia]

I had 2 rental properties in Chicago. I sold 1 early this year and did not buy another property because I didn't want to. Hence I will probably pay a good chunk of change to uncle Sam when I file my 2024 taxes. I still have the other property left and I think I will keep it at least for several more years.

I have been doing necessary repairs and upgrades on the property that I still owe including some that I foresee I would've had to do in the near future. I'm hoping some of these EXPENSES will reduce my taxable income for 2024.

I know there are rebates and TAX CREDITS for investing in Solar Panels. I wanted to ask your opinion or if you have any stories about this you might want to share regarding if it'd be worth it or not.
My building has 2 electric meters. One is paid by the tenant whose apartment uses that meter. The other electric meter I pay for because it feeds 2 units (the first floor and basement).

1)Would this be a good investment with worthwhile tax benefits? If not, any obvious alternate investment that I could do on the property to raise it's value, get more rent, or save money that I may be missing?

2)Would this save me money in the long-haul? I pay $135 a month for the first floor and basement. This is "included" in the rent.


Thoughts?

[Nathan Gesner]

You are currently paying $135 a month. If a solar system cost you $20,000 to install, it would take 148 months (12 years) for you to break even ($20,000 / $135). That doesn't include any maintenance costs or other variables.

I regularly argue that solar energy is rarely worth the investment. It offers a low return on investment and takes a long time to get there.

Here’s a general breakdown of how you might estimate your return:

1. Installation Costs and Incentives

• Average Cost: Residential solar systems typically cost between $15,000 to $25,000 before incentives for a 6kW system (suitable for an average home).
• Incentives: Illinois offers substantial incentives, including:
  • Federal Tax Credit: A 30% federal tax credit applies to system costs.
  • Illinois Shines Program: Provides Solar Renewable Energy Credits (SRECs) that homeowners can sell for additional income.
  • Net Metering: You’ll receive credits for any excess energy your system produces, reducing your utility bill.

2. Energy Savings and Cash Flow

• Annual Savings: Chicago’s electricity rates average around $0.14 per kWh. A typical 6kW system could generate around 7,000-8,000 kWh annually, potentially saving you about $1,000–$1,200 per year on energy costs.
• Increased Property Value: Solar panels can increase your property value, potentially adding 4-5% to your property’s sale price.

3. Break-Even Point and Profit Timeline

• After Incentives: With incentives, your net cost could be reduced to around $10,000-$15,000.
• Break-Even Estimate: If you save $1,000–$1,200 per year, it would take approximately 8-12 years to reach the break-even point.
• Profit Point: Once you pass the break-even, you’ll start generating a net profit in the form of ongoing energy savings. Typical warranties last 20-25 years, allowing you to enjoy several years of savings.

In summary, a solar system in Chicago could start yielding a profit within 8-12 years after installation, depending on incentives and system efficiency. However, this timeline might accelerate with further increases in electricity rates or additional state incentives.