All Forum Posts by: Andrew Smith

@Laura Yoerger There would be no way to tell how they are using electricity. If they signed a lease saying they would pay the utility then that's what they are doing. They would not care where or how the power was being generated. The only way would be for them to pay $x/month for the solar system plus any excess from the utility or charge them $y rent including ultility (with a caveat for reasonable use), or become your own utility and bill them monthly for power.

@Laura Yoerger

There would be no way to tell how much they saved. 

The usual methods of having tenants pay would be to have higher rent with "free" electricity with a reasonable use clause in the agreement so excesses could be billed to the tenant. Either that or you set up as the utility company and bill for usage (this is usually on multiple unit structures).

As far as the tenant in your case, they are using electricity and being billed by the utility for that use. What you're really asking is if you can bill them for your cost of the solar system that is reducing their use. The answer would be no unless by agreement or compensated for in higher rent.

Hi @Laura Yoerger

What credits are on the bill? If you mean the usage reduction, that's for whomever pays that bill. If you are the owner of the system you'll be paying for the system unless you have an agreement with the tenants to pay for the system and any excess usage from the utility.

The 30% Federal tax credits will not be paid to you as these are rental properties. You will be able to depreciate the system on a 5 year schedule though which is a really good deal but only if you own/finance the system. That will apply to the roof required to be repaired/replaced to accommodate the system.

Fannie Mae allows for a full appraisal of the value of the system in appraising the property IF the system is owned/financed. Fannie Mae explicitly disallows appraisal of a solar system if leased or a PPA.

For cashflow then a lease may be a better bet. For equity then ownership is the way to go especially as others are paying for the system if presented correctly and you can appraise the full value when selling the property. The 5 year depreciation is attractive.

As others said the lease would have to be assumed by a willing buyer at time of selling - not always easy as there's no appraisable value.

Sadly the solar tiles are a non-starter. Their cost is astronomical compared to rooftop systems. Most of the tiles will not generate power and they have thousands of connections for failure points. Solar tiles are for the 0.1% economically who want to be the cool kids on the block.

Just to clarify the tax credits.

This year (2019) the tax credits are scheduled to decline annually not expire. They will decline from 30% to 26% at the end of 2019.

The Federal tax credits are for primary residences and do not apply to rental properties/second homes. However, you can depreciate the cost of a system on a 5 year depreciation which is definitely a big deal.

The numbers vary from property to property for a number of factors, so run the numbers specific to each property. There are some "global" trends but literally each home has different numbers.

Leasing solar does not allow you to appraise that system as part of the property value. Ownership does and Fannie Mae explicitly allow appraisal of systems IF owned (cash or financed).

You are investing in the property with other's money if the tenants are paying for the system instead of their paying a utility. Depreciation is a big advantage if tax conditions make that so.

Is the solar system a lease/PPA or is it a financed system?

If lease/PPA then you can haggle with the provider to reduce the buyout. If not an option then the buyer can assume the lease/PPA.

Unfortunately this is why for the most part leases/PPAs are not a good option compared to cash/financed ownership. If you want to connect I'd be happy to take a look and see if there's a better option.

Hi @Peter Z. That's for sure something I can help with. I'll send you a connection. We can roll the roofing into the solar project which has very significant advantages too with tax credit applying too.

 The advantages of ownership - even zero down financed ownership - are that you first get to appraise the full system value. Fannie Mae allows for that appraisal with ownership but not with a PPA/Lease. Second, with ownership there is no lien on the property, but the solar system is secured by UCC1 equipment filing until paid for. Leased/PPA systems will come with a property lien.

As it is a rental, you' likely not qualify for the 30% Federal tax credit, but would get a 5 year depreciation which can work really well especially as others are paying for the system.

 Hi Peter,

The Federal Tax Credit is for primary residences. It would depend then if your "primary residence" is your rental property. If it is set up as a rental then you do get a 5 year depreciation rather than the 30% tax credit, so considering others are paying for the system then it could well be a really good deal for you too.

We've experienced very dirty politics in FL. There's obviously zero reason that the Sunshine State shouldn't be leading the world in solar and it's taken massive effort by politicians, oil companies and other vested interests to suppress it. Amendment 1 was shot down by the people in Nov 2016 which basically enabled solar in Florida as a whole. Without that, solar would pretty much be non-existent in FL.

We've seen an explosion in business in FL since then so there's no problem with the underlying demand. In spite of Amendment 1 being shot down along with other pro fossil-fuel measures there are pockets that still fight hard to retain their ways and unfortunately JEA is one of those currently but will surely have to follow the rest of FL if the people speak up.