All Forum Posts by: Andrew Smith

I am in the solar industry but will tell you that for flips, solar is not going to pencil out if you are flipping within 12 months unless you are mandated to put solar on, for example in California (depending on how significant the remodel).

If you are flipping to hold and/or it's your primary residence, in TX certainly the numbers will almost always be in your favour.

Vivint is no more as it was subject of an asset purchase. I'd say your leverage increased as a result.

Keep in mind that with zero down financing on a loan rather than a lease, you own the system which means Fannie Mae allow you to appraise the full value of a system. Leased systems are specifically excluded from appraisal by Fannie Mae. 

Thanks @Steve K. I'd be happy to run numbers @Dare Adebonojo and see if it makes sense. Sometimes it does on flips and sometimes not, it almost always does on buy and hold.

I posted this on another thread about solar on rentals. As you said there are pros and cons. ROI is very good in FL compared to other States  - especially as tenants are paying for the system effectively:

"It depends. Is this a SFR or multi-unit? Are the tenants paying the utility directly? Do you live in the property too? There are pros and cons for a rental property with regard to solar. First, other people will be paying for an asset to the building that raises the value of the property. In some areas this is not the case but certainly does in CA (and FL).

There is a little complexity in how the tenants pay. You can add to the rent and offer "free" electricity or you can bill them for their usage from the system at up to the same rate as the utility. You have to track that usage, and their is admin involved in that so that would be a negative for most landlords.

The "free" power with increased rent has 2 caveats. First you'd have to add a lease addendum for existing tenants to outline the increased rent in exchange for power. The addendum would also either need to ensure the tenants still took responsibility for any excess power used either by paying the utility for that directly or by paying you if you bill for that.

Bottom line it's attractive to have others pay for an asset that improves home value. Tax credits exist now - they will disappear especially as solar is now mandated in CA. The mandatory solar applies to significant remodels, so at some point you will have no choice but go solar - in the future there will be fewer if any incentives to do so. The down sides are that it will require some admin one way or another - either by lease addendum and/or beginning to bill the tenants directly.

As far as the 50% rule - well that would mean zero homeowners would go solar! The only neighborhoods with those stats right now would be brand new developments, especially in CA where solar is mandatory. FL has around 1% adoption of solar right now, largely because the state wasn't effectively open for solar business until mid-2017. Whether a neigbor has or doesn't have solar doesn't mean your home will ROI with solar. All usages and available roof space vary, as does property orientation.

The simplest way is to add a fixed amount to the rent while making sure that the tenants are still on the utility in case they use excessive amounts of power. You can show them that "X kWh" is included in the rent but be clear that they are liable for any overage with the utility.

More accurately you can monitor their usage and charge them a rate per kWh as a "utility" yourself. You can legally charge up to the rates offered by the utility in your area.

Hi Hoang, just to clarify if you mean the Federal Tax Credit for solar, as it stands right now, it is 26% of the system value if installed in 2020 and 22% if installed in 2021. 

Appraisals are always of course subjective. We use studies by Berkeley Labs, Zillow and the NAR as well as DofE and HUD. The average increase is shown at around $4/watt for system size, so a 10kW system adding $40k. We use $3/watt for our numbers. The key consideration though is the Fannie Mae requirements. They allow 100% of the value of an owned/financed system but zero for leased systems or PPAs.

So a couple of things on that are that it depends on how you use power. PG&E will definitely have you on a TOU plan. If you switch usage to daytime for things like appliances then that is one huge way to mitigate. Another option is to have a battery set to "TOU Dump". That means you are selling power to PG&E at peak and then buying at a lesser rate. Batteries doing that average $1 to $1.50/day in credit on an average system.

Also - and I'm sure this is not your case - but because of poor education by solar companies, a surprising number of homeowners believe they have "free power" because they have gone solar and use way more than they were before and then get an unexpected "true up". A good solar company factors in TOU also. In other words the system is built to mitigate the differentials in net metering. In other words even without a battery, the system is over-producing enough low rates to offset purchases at high rates. I personally have dozens of customers in PG&E that have true net zero bills or close to it and in some cases negative bills.

SGIP means that you can - if the home qualifies - get up to $9300 rebate per battery. That means a battery for net no cost that can TOU dump and of course be a backup. All losses through the inverter are calculated for in sizing a system.

Annual maintenance of washing panels is $0. Don't believe the window washing companies!! One rain cleans the panels, they should never have "special soap" on them and you can turn a hose on them yourself in the morning or at night.

I posted this on another thread about solar on rentals. As you said there are pros and cons. ROI is not as good in TX as other States because of low underlying utility rates but still does return - especially as tenants are paying for the system effectively:

"It depends. Is this a SFR or multi-unit? Are the tenants paying the utility directly? Do you live in the property too? There are pros and cons for a rental property with regard to solar. First, other people will be paying for an asset to the building that raises the value of the property. In some areas this is not the case but certainly does in CA (and TX).

There is a little complexity in how the tenants pay. You can add to the rent and offer "free" electricity or you can bill them for their usage from the system at up to the same rate as the utility. You have to track that usage, and their is admin involved in that so that would be a negative for most landlords.

The "free" power with increased rent has 2 caveats. First you'd have to add a lease addendum for existing tenants to outline the increased rent in exchange for power. The addendum would also either need to ensure the tenants still took responsibility for any excess power used either by paying the utility for that directly or by paying you if you bill for that.

Bottom line it's attractive to have others pay for an asset that improves home value. Tax credits exist now - they will disappear especially as solar is now mandated in CA. The mandatory solar applies to significant remodels, so at some point you will have no choice but go solar - in the future there will be fewer if any incentives to do so. The down sides are that it will require some admin one way or another - either by lease addendum and/or beginning to bill the tenants directly.