Would you pay more for a house that had paid off Solar Panels?
Real Estate Professional · Phoenix, AZ · Member since 2016 · 6 posts · 2 votes
Would you pay more for a house that had paid off Solar Panels?
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Investor · Goodyear, AZ · Member since 2015 · 29 posts · 7 votes
9yAs 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.
13 Replies
- Rental Property Investor · Sacramento, CA · Member since 2016 · 267 posts · 214 votes9y
@Cody Lambson Hi Cody, that's a good question. I come from the commercial side of real estate, which is all based off of profitability. Assuming all else equal, I would imagine an investor would take kindly to solar panels, and pay more for your house. Anytime you have a component to your investment that will put more money into your buyer's pocket, the value will increase. Your challenge is creating a compelling breakdown of expenses and benefits. An investor might gloss over the panels and become indifferent if they can't quantify the benefits.
That being said, the real question is whether or not they would pay enough to make it pencil out to sell them with the property. I would call the company you bought the panels through. They might have sales aids that show how much it increases the value of your home. Just make sure you get legitimate values so the buyer will take it as fact.
Lastly, make sure that you write it into your contract, regardless of what you decide. I'm not positive since I've not dealt with this specifically, but the law might see it as real property (which defaults to stay with the home through a sale) since the panels are affixed to the home.
I hope this helps!
Kenny Reimer
- Investor · Goodyear, AZ · Member since 2015 · 29 posts · 7 votes9y
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.
- Residential Real Estate Broker · Paso Robles, CA · Member since 2015 · 196 posts · 58 votes9y
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.
- Phoenix, AZ · Member since 2016 · 11 posts · 6 votes9y
@Cody Lambson Hey Cody, I would say it really depends on the buyer but I doubt you would get anywhere close to the full price of what you paid. Everything else being equal, your house being 33K more than a comparable would cost a extra $167.00 a month to purchase (30yrs 4.5%). So, to me it would not make financial sense. Now, if your house is in a very desirable location your could possibly get the full amount and more ...I have seen crazier stuff happen in AZ.
- Northern, CA · Member since 2014 · 674 posts · 444 votes9y
getting more rent aside, a house with Solar is worth more than one with out and has been proven so by sales data. Houses with Solar sell faster and sell for a premium equal to the cost of the solar system.
I have an 8kw system on my house and have not paid utilities since it was installed 5+ years ago, It will have paid itself off in the next 12 months. The system cost 27k, 19k to me after federal rebate. My system has given me a ROI of 15-20%, so let's look at the numbers. If I had to take out an extra 19k loan at 5% but that 19k is going to have an ROI of 15-20%, that is called rate arbitrage and it's free money. I don't think many in real estate have learned to look at it this way, you are getting paid to buy the more expensive solar house! I also ask people where else they can get RISK FREE 15-20% return with their money, I'm still waiting for an answer.
Now obviously this doesn't work if you can't get the higher rent, but I plan to turn my current house into a rental down the road and I do plan to get the extra rent. It may take some education OR a specialized lease where Rent is XX amount and then I charge them an additional amount for electricity yet the utility is in their name. This way it separates it out in their head and makes sense, you have to keep it very simple for most people.
- AZ · Member since 2015 · 12 posts · 4 votes9y
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.
- Residential Real Estate Agent · Phoenix, AZ · Member since 2016 · 155 posts · 117 votes9y
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.
- Real Estate Professional · Phoenix, AZ · Member since 2016 · 6 posts · 2 votes9y
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.
- 9yDoug McVinuaPro MemberProperty Manager · Queen Creek, AZ · Member since 2016 · 608 posts · 426 votes
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!!
- Investor · Scottsdale, AZ · Member since 2014 · 52 posts · 23 votes9y
Originally posted by @Cody Lambson:
Would you pay more for a house that had paid off Solar Panels?
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.
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.
- Investor · Columbus, OH · Member since 2016 · 30 posts · 59 votes9y
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!
- Sheffield Lake, OH · Member since 2016 · 17 posts · 1 vote9y
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
- Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes9y
In my market panels bring down the price of the property, so I'd pay less for a house with panels.
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