Would you pay more for a house that had paid off Solar Panels?

Question

I have a rental in Phoenix, Arizona and I have Solar Panels on them. I put the bill in my tenant's Name, so that I am not responsible for the utility.

My question is, I bought them for $33k, Would you pay $33k more for the house if it were a buy and hold?

The idea is that you have a $27 electric bill most months, and maybe $110 in the summer. That is compared to $105 on average, with $275+ in the summers.

You would possibly be saving $2000 a year in electric, which could be put towards the next property.

This means that you will pay off the panels in 16 years if you bought them with 0% apr.

The other option I have if I were to sell this property is to take the panels off.

I'd like to see what people think about paying more for the panels to have 1/4 the electric bill.

Doug Underwood · Answer

As an appraiser and realtor I can say in the Phoenix Market you will not get back close to what you paid.  Look it like a pool, it may cost you $30-$50,000, however the value added in an area like Gilbert or parts of Phoenix might be half or less than half of that amount.  Solar is the same.  I have appraised homes that the owner spent $50,000 that the market supports a $12,000 increase in value.   People in Phoenix care more about a cheaper price and less about energy efficiency, at least in today's market.

Patrick McCandless · Answer

I agree with @Russell Fugitt. Rents won't be much higher on a home with panels, if at all, I don't think. I'll put it this way, I've worked directly with literally 4,000+ renters over the last 7 years or so and I have yet to hear one tell me they would prefer a house with solar panels.

Russell Fugitt · Answer

As a buy-and-hold investor I wouldn't be able to pay more for the solar panel property because it won't rent for any more than one without solar panels.  Tenants in Phoenix might be slightly different than other parts of the country since the electric bills are so high.  It is still hard to prove to a prospective tenant that the solar panel property is worth one or two hundred dollars more per month than a comparable property.  Maybe someone with more Phoenix experience will have a different opinion.

Account Closed · Answer

I'm an Energy Consultant on the side and if you have panels on the home you should be able to be 100% independent from your utility. If not you don't have a big enough

Russell Brazil · Answer

In my market panels bring down the price of the property, so I'd pay less for a house with panels.

Kurt Dieringer · Answer

I'm looking to add PV to my double in Ohio (yes, Ohio) and based on my research it should still work out fine. I don't plan to "raise the rent" as much as "add a fee" for use of the panels. Here, lots of apartments will do a similar rider charge for assumed water bills or trash pick-up. It will be win-win as the tenant will still pay less in overall electricity costs, and I get the panels paid for, increasing property value.Also, if you CAN find renters who care about clean energy, I would think all the more likely these will be AWESOME tenants. Alas, all these criteria probably wouldn't work in a C- or D-class neighborhood, but I don't think that's where Cody is at.

Godspeed!

Ciro Affronti · Answer

SFR is valued off of comps not off the income, so you can't assume the person buying the house is an investor. It also can't command higher rents because of it although hopefully solar becomes more popular and that changes one day soon. I've worked with house flippers on three separate occasions who tried to get more because their property had solar panels, but it never worked. Buyers just don't seem to want to pay a premium for solar yet in Phx.

Doug McVinua · Answer

@Cody Lambson

Solar Panels are not contributing significantly to resale value outside of a niche of individuals that really want solar.

I don't believe the investors I work with and or manage properties for would be willing to pay much of a premium at all and the panels would be a negative for many. The negative would come from potential maintenance issues, replacement costs etc.

Tenants might like them if a case could be made for lower electrical bills as you have found out.

Just my 2 cents!!

Cody Lambson · Answer

Thank you all for the input. The house is in a desirable neighborhood so I was able to find tenants rather quickly. Initially I Charged $150 over average rent for the area, for the panels. They payed it, but my property manager at the time did not under stand what I wanted in the contract, and I deployed before I was able to see the final draft. What the contract should have said was something along the lines of:

Rent will be $1250, ($150 above average). All bills coming from the electric company (APS) will be the responsibility of the tenants.

Mine did not include that second part and was a big hassle. I eventually got it figured out.

If you owe more than $10k in taxes each year. I would still suggest solar. If you do not owe taxes, stay far away until you do.

I was hit with a $10k bill (30%) of the cost of the panels in June (1 year after signing solar contract). This is because instead of owing the government that money, you get a tax credit, and then owe your solar company that money. All of which goes to pay off your solar panels. So after June, I only owed $20k to solar.

Just like my tenants are paying my house off for me, they are also paying off my panels. I am holding this property currently, and as long as I do for the next 5 to 10 years, I will profit off of the sale. Just not 100% of what the cost of the panels were.

When we resigned the contract, I took the $150 off of the rent, and put the solar bill directly in their name. If I owned the panels outright, I would have kept the higher rent.

Back to my original question of, if you as an investor would buy a property that already had panels for more? You would be able to skip all of the steps I went through and most likely buy the panels at a premium. But again I would be hesitant of doing anything other than buy-and-hold. Also I have not sold the house yet, so I will not know if I truly made the right decision until that day comes. I will keep you posted.

I would only suggest solar for investors that meet all of these requirements:

- Buy-and-hold property for at least 5 to10 years

- Owe more than $10k (or 30% of your panels) in taxes next year, and can afford to pay that amount in full when it is due

- The property is in a desirable neighborhood

- The property is in a geographical location that makes since to get solar

Everyone else, I would recommend against doing it. Unless you just care about the environment, which is good too.

Jeff Schneider · Answer

I've sold several homes with paid off systems and sometimes you won't even get a credit for the system on the appraisal. Like Doug said, when you do, it's only a credit for 1/4 the value or less. From my experiences, few buyers are excited about solar and they're usually the techy engineer types but that may be because most systems are leased.

Would you pay more for a house that had paid off Solar Panels?

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