are solar panels a good investment?

Question

I'm considering installing solar panels on my personal home. According to the seller the panels immediately increase home equity to the cost of the panels and the monthly payment is equal to savings on electricity bills.  Not to mention the tax credit of 25%. I was curious has anyone here installed solar panels and are they as good as investment as advertised?

Andrew Smith · Answer

Hey Scott,Just like insulation codes, double glazing, environmental protection codes are "forced" they are for a bigger purpose. California has some of the highest goals for zero carbon footprint in the world so making solar mandatory is a way to accomplish those (though I think there are better ways).Houses would all be a heck of a lot cheaper if there were no code requirements for anything but not sure we'd love the outcomes.In spite of it being mandatory it is still highly attractive financially in most cases in California.

Charlie MacPherson · Answer

@Jacob D Cockerell It largely depends on the local incentives.

Here in MA, we not only got significant rebates on our 48 panel (13.44 KWp) system, but also have a 10 year, fixed price contract that pays us about $180/month for Solar Renewable Energy Credits (SRECs).  That fixed price is based on the size of the inverter, not on the actual output.

It made sense for us because we have electric baseboard heat, which is only slightly less expensive than burning actual dollar bills for heat.

We have a net meter, which spins backward for most of the year, meaning that we build up a negative balance all spring, summer and fall.  Since the 2017-2018 winter season, I think we've spent less than $600 for electricity in the ensuing 12 months.

Since our system went live in July 2017, we've produced 18.76 MWh.

As to valuation of the property, that's another story entirely.

We recently did a refinance to take some equity out to work on the property.  I left the appraiser a very detailed description of the system and made the point that because the panels are mounted to the roof of one of our barns, they are realty, not personalty.  Not only are they a tangible asset, but they also produce income.

The appraiser allowed precisely $0.00 in valuation.  Luckily for us, we didn't need it as we have more equity than we needed.

One appraiser understood my point but said "show me a study that says buyers will pay more for a home with solar".  In other words, I wouldn't count on any additional valuation from an appraiser.

And, by the way, we purchased our system.  When it comes to leased systems, they're at best a wash and at worst a liability when it comes time to sell.

Andrew Smith · Answer

The tax credit is 30% through the end of this year and will diminish from then.The savings and value add depend on a lot of factors including where the property is located, your usage of power, size of system desired, etc. As @Jason D said, ownership - cash or financed - enables the value add, but leases do not.If you'd like the numbers run for your property, it's what I do.Cheers, Andy

Jason D. · Answer

@Jacob D Cockerell I plan on installing solar on my home. I can almost guarantee that it is NOT a 1:1 increase in value, but will add some value to the property. How much depends on the market you live in

A lot of factors are involved in knowing if it's a good purchase or not.

This is assuming that you are purchasing, and not leasing the panels. Having leased panels will likely lower the value of your home

Jacob D Adamczak · Answer

tax credit should be 30% and the immediate home equity is if its a loan or cash payment, not a lease.

Scott Mac · Answer

Hi Jacob,

It seems to me that (IF) Solar Panels were such a big bonus, that the State of California (a sunshine state) would not have to pass a law FORCING people to install them on new construction.

It seems to me that (IF) they were such a big plus, that the ALL new builders would self install them without being FORCED to do so. Like they do with Toilets and Front Doors, etc...

No one has to pass a law requiring (FORCING) everyone to invest in real estate (because the value is there, and people know it).

Without number crunching it out, those are just my thoughts on this.

Good Luck with your decision!

Andrew Smith · Answer

@Charlie MacPherson

That's great info and super to see the SRECs in action! MA is indeed leading the way along with CA.

Fannie Mae explicitly allow the full value of a system to be appraised if owned (or financed) and explicitly disallow the value of a system to be appraised if leased. The other main difference is how the systems are secured. Owned or financed are typically UCC1 on the equipment only whereas leases will add a lien to the home.

Jacob D Cockerell · Answer

@Charlie MacPherson thank you for the info, the appraisal and equity part was my main scepticism. in my case the panels would be directly on my roof so might make a little difference but I'm not going to count it as equity. I'll probably even talk to my realtor about it too.

Jacob D Cockerell · Answer

thank you both for the advice. I'm definitely planning to buy, not lease and the numbers do seem to work out.

are solar panels a good investment?

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