How to Green Your Green #2A

My guest Blogger is Eli Winkelman from Oregon and is the CEO and Co-founder of Helios.

As a landlord, you (hopefully) care about doing the right thing and making your buildings sustainable. You are running a business however, and sustainability must generate cash flow. What if you could do both? With solar opportunities today, you can! Solar can provide both sustainability and improved cash flow. There are challenges to getting solar, such as getting paid for the energy and finding good installers. I’ll talk about those issues more below, as well as choosing whether to buy or not. Let’s start with the reasons why you should get solar at all (or why maybe you shouldn’t).

WHY GET SOLAR AT ALL?

The main reason for a landlord to get solar would be the cash flow that will be generated. Thanks to Solar Leases and Power Purchase Agreements, landlords can get solar for nothing. This means they can start generating more cash flow from day one. Let’s break down the financials behind getting solar on your rental property. Let’s say you get the lease from the installer. The electricity the leased solar panels generate costs 15% less than from the utility. Now, you lease the panels to your tenants for the same as power from the grid would cost them. You are now getting paid 15% of your tenants electricity bills. Additionally, the amount tenants pay for electricity is unlikely to go down. In fact, if you are on the East Coast, it’s likely to go up. Solar can also improve the desirability of the building, especially to younger renters. This helps to attract better tenants, even when the market isn’t as hot as it is now. Solar sounds great, but there are some cons to getting solar, illustrated in this pros and cons list.

Pros

1. Reliable cash flow. In many parts of the U.S., you can get solar for $0 down, and start generating stable cash flow immediately.

2. Improve desirability of the building. Solar panels on the building can improve the desirability of the building. This is true for both buyers and renters. This is especially true among younger buyers and renters who value sustainability.

3. Improve the Tenant-Landlord relationship. If you decide to pass some of the savings on to your tenant, they will appreciate it. Even if they aren’t saving much, they appreciate the sustainability aspect. Additionally, including them in the process will make sure they are aware of every step in the process of adding solar to your rental.

4. It's good for the environment.

5. Once it's set up, it takes almost no work to keep it going. If you buy, it will be producing energy for at least 40 years. If you lease you will have the panels for around 20 years. Additionally, maintenance is included in the lease.

Cons

1. It can take significant work to set up. Landlords don't generally get solar on their buildings so there can be some challenges to overcome.

2. You will have to figure out how to get paid for the energy by tenants. There are many options for this, varying in complexity.

3. Solar Power is currently difficult to do on larger rented buildings, unless the tenants aren’t metered.

Should I buy or Not?

Most people recommend buying solar panels if possible. For landlords however, leasing might be a better option. With a lease, the installer puts the solar panels on your building at no cost to you; however the installer will require a monthly fee. Leases generally last about 20 years. Leasing will let you generate immediate cash flow, without tying up liquid assets. That’s money you could use for things you can’t lease, like a new rental building. As I mentioned earlier, with lease you don’t need to worry about maintenance. For a longer rundown of the options check out this (insert link) blog post.

How do I Choose an Installer?

Now that you know how you are going to finance the system, the next step is choosing an installer. When looking at installers, keep in mind how you plan to finance the system. If you aren’t buying, remember that not all installers have Lease or PPA options. I’d recommend getting quotes from multiple installers; each has different pricing options. Remember that larger installers (like SolarCity) may have a better install process. Yet they may charge more than a smaller, local installation company. Other questions you should ask when looking at installers are:

1.How did they get that quote (satellite, local survey, etc.)? A local survey will be more accurate.

2.Are they going to stick around? Bigger companies are more likely to stick around.

3.Is there a price elevator? Will the cost of the lease go up by 1-2% every year?

The Important Part - Getting Paid for the Energy

For solar to make any financial sense, you need a way to get paid for the energy. There are many different options, which I’ll summarize below.

1.Add it straight to the rent.

This is pretty straightforward. You add the cost of your solar lease (plus a little) to your tenant's lease. Make sure you explain why their rent went up. Despite the simplicity, this can cause problems when getting new tenants. It can make your unit look more expensive than it actually is.

2.Sell it to the utility through a feed in tariff.

This can be a good option, but you must have an extra meter billed to your name to set up. Check with your local utility company to see if you have a feed in tariff.

3.Set up a separate solar lease agreement for your tenants.

This combines adding it to the rent with making it a separate legal agreement. A custom solar lease is needed to achieve this.

4.Set up a separate Power Purchase Agreement.

This is like number 3, but the legal structure is more complex. Instead of leasing the panels at a fixed rate you are getting paid by volume (kWH) for the energy.

5.Use it only for community areas.

If your building has a community area, you can hook just the community area up to solar. Assuming you’re paying the cost of running that area, you’ll save money every month.

For more information on each of these, check this out.

Take the Easy Way Out - Getting solar on your building is starting to sound pretty complex. That’s the purpose of our startup, Helios. We help landlords make money with solar energy. We’ll help you find an installer and communicate with your tenants. Once you’ve gotten solar, you can generate a customized lease document (to get paid). Along with that you can set up online billing (for your tenants). You can sign up for our pilot here. Feel free to leave any questions in the comments, or email me at [email protected]