I have been working in the solar industry for years. We have done single family homes, rental properties, commercial properties, and big common area meters for Apartments and HOAs.
When it comes to income producing property the economics are quite simple. What we really care about is our Net Operating Income (NOI) and/or Cash flow. There are 2 ways to increase our NOI either raise income or lower expenses. If you are currently paying the electric bill for your property that is a line item expense that can and will be reduced with solar therefore increasing NOI and cash flow.
First of all there are 2 good ways to acquire solar you can purchase it for cash outright and recoup your investment over the next 5-12 years depending on your market or you can get a ZERO MONEY DOWN loan for the equipment and have a payment that's lower than what you're paying the utility now. To maximize your return and keep your money in your pocket for other investments, I always suggest the latter.
To put it in real estate terms I equate it to renting or buying power just like you rent or buy a property. Right now, you “rent” your power from your utility you make a payment every month of say $200 and just throw all the cash out the window. With switching to solar now instead of needing a down payment like you do on a home you buy your system with $0 down and own it. Every month you make a payment of say $150 to the bank paying down the system and the extra $50 stays in your pocket!
Here's an example of an Airbnb we just did in Florida with the no money down method:
Upfront cost: $0
Current Avg. Variable electric bill: $245
New FIXED electric payment: $175
Monthly savings: $ 70
Annual increase to NOI: $840
Return on investment: Infinity
Payback Period: None
I love this because It is like the BRRR investing strategy where you do not have any money in the deal and you just get cash flow.
Now here is what it would have looked like if we did that deal for cash:
Upfront cost: $25,750
Tax credit: -$ 6,695
Net cost: =$18,025
Current avg variable electric bill: $245
New electric Bill with solar payment: $12
Monthly savings: $233
Annual increase to NOI: $2,796
Return on investment: 15.5%
Payback Period: 6.5 years
I know this post has gotten long but there is a lot of misinformation floating around the internet I wanted to try and clear up. A couple of final notes and factors to consider:
1. If your area is a good area for solar. Personally I’ve done systems all over the country and it’s just a fact that some are much better than others.
2. If your utility provider is solar friendly
3. None of these numbers include rate hikes by the utility company which have been anywhere from 3%-11% per year over the last 10 years depending on your area. At a minimum the rate of inflation in the US for the last 10 years has been about 2%!
4. What rate you are currently paying for electricity
5. What incentives your state has
6. All systems that we (I cannot speak for all other providers) install come with a 25-year warranty on the inverters and panels so as far as maintenance you will be covered for 25 years.
7. Someone above mentioned degradation, yes, the panels do have a slight degradation factor of around 0.5% per year making them still work above 85% efficiency even after the 25-year warranty
Final Note: If you have any other questions or think I missed touching on something please let me know! I love talking about this stuff and have seen firsthand how amazing of an investment this can be, so it gets me excited!
