California- Income from property electric consumption via solar

[Aron Persing]

The short. Potential income stream from tenant electricity. Install solar for say .15 kwh. Sell to tenant for market. So cal edision low tier is .26kwh. .09 kwh profit. So if a rental uses 10,000 kwh. Thats a $900 income. Per unit. My math says $500-1000 a year per unit. Have a 4 plex. Could be $2000 a year. Have 10 single family homes. Could be $10,000 a year. What if the the power companies continue to increase rates at 9% a year as they have for the last decade? Seems like it could have some serious income in the future.

The long. For the past decade ive been in the real estate industry, property management, tenant placement, fliping, apartment repositions, real estate software etc. Callithome.com is a site I built. Anyway i recently got into the solar industry. A friend of mine wanted me to join him selling solar and broke down the ins and outs of how it works. From a basic level solar allows people a choice of how much they want to spend on electricity. Similar to picking phone service or tv etc some are cheaper than others. Given I own some rental properties I instantly thought of installing solar on them.

This sent me down a path of discovering pros and cons of solar on investment properties. The biggest con is, solar transfers the properties eletric liability to the property owner. Regardless it you collect a payment for a tenant for electric or not, the solar company will want their money. Ok, so if i accept this liability i would want to make money for this potential risk. The biggest pro is the potential income stream from electric. There is no question about it. You CAN install solar and produce electric for less than the power companies across cali. So solar on a primary residence, in my opinion is a no brainer. So my questions was can I in fact generate income from solar. I started to find a few solar companies installing solar on larger multifamily then billing each tenant for electric directly. (Tenants are going to pay for electric regardless of solar). So the basic concept seems to have merit. When I went to others in my company with this idea. They basically said, yes just charge your tenant a flat rate for eletric. Or just include electric on your rent. BUT the law says that a tenant has the right to know how much they are paying per kwh. AND a property owner can not charge a tenant more than what the power company would charge. So if you charge a tenant 100 for flat rate but their bill would have been 70 from the power company. The tenant could actually bring the law to your door and cause problems. Not real sure what that looks like, but they could.

So it seems like the challenge is the billing of electric to the tenant. So the tenant know how much they are paying. I have found a few software companies that these multifamily operators are using to bill their tenants and spoke with them. The technology is available, but since these software companies make money by the unit. Setting things up for a few houses is not their current focus. Setting up a 100 unit property brings 100 units worth of income.

Assuming I can simplify the billing process. Am I crazy to think i can create income from electric?

Some basics

Ways to install solar

There are 2 ways to install solar. Purchase or a power purchase agreement.

Purchase.

Pro. Can have a cheaper installed price per KwH. You own the system. As low as 1.9% interest rates on loans.

Con. placing your name to extra debt. On the hook if something breaks during its life. Could be a few thousand per repair.

Ppa (power purchase agreement)

Pro. Bumper to bumper warranty. Install company maintains equipment for its life. Some have output guarentee. No debt to your name

Cons. You never own. Can have higher install costs per kwh

General pros

Potential income from tenants eletric. Potential to give tenant discount on power. And leave a profit. Say you show them a 10% savings in power. Potential for this income to grow over the life of the system. As the power companies increase rates. The rate that you can charge tenant increases. Power companies rates have. been increasing at 9% a year in so cal.

General cons.

Not being able to sell all your power produces reduces returns. Potential to have more debt to your name and property. Taking on liability as the solar is billed to property owner not the tenant. If tenant doesn't pay. Solar payment is still due.

Examples.

Single family home with good roof and eletric. Uses. 10,000 kwh. Installed price per kwh .15. Bill tenant .26. .09 per kwh or 900 per year. What if in 5 years increases stay on pace and low tier is .36 from power company. Thats a .21 per kwh income. Or $2100 a year!!

Single family that needs a new roof and/or electrical upgrade (new panel). Between cost of roof/eletric and solar install this increases install price per kwh to .20. Still leaving a .06 per kwh income. Or 600 a year. AND you got a "free" roof/electric panel. ( you could also use this scenario if you'd rather install a solar carport or a solar patio cover to enhance desireability of home)

Potential con scenario.

Single family that produces 10,000 but only sell 8000 as tenant is energy conscious. Install cost per kwh. .15. Or 1500 year. Tenant only buys 8000 but at .26. Or 2080. "Only 580 yearly income. Still income. But not maximized.

Single family that produces 10,000 but only sell 8000 as tenant is energy conscious. Install cost per kwh. Is now .2 since the property required enhancements. Or 2000 year. Tenant only buys 8000 but at .26. Or 2080. "Only 80 yearly income. Still income. But marginal.

4 plex.

Each unit consumes 5000kwh. Or 20,000 kwh total. Install cost at .14 (chaper since its larger single size. Sell to tenant at .26. Thats $2000 a year profit. $500 per unit.

I hope this paints the general pictures. Lots of small details I have played out in my head and could expand upon if need be. Has anyone else had this thought? Am i missing something? Anyone want me to get you exact numbers on your property?