
This article isn't a detailed guide or a definitive answer to the question of whether every real estate investor should install solar panels on their rental properties. Instead, it provides basic information to help to consider the factors before deciding to go solar. Think of it as a starting point for further research. For this discussion, we'll focus on long-term rentals, specifically detached single-family residences. For professional advice, always consult a local solar company.
Every hour, approximately 100,000 solar panels are installed worldwide. (Think Solar Group) |
What are solar panels?
In simple terms, solar panels are devices that convert sunlight into electricity. Here's how they work:
- Solar cells absorb sunlight. Panels are made up of solar cells that capture sunlight.
- Photovoltaic effect. When sunlight hits these cells, it generates an electric current through a process called the photovoltaic effect.
- Powering the home. This electricity can be used immediately to power a property or stored in a battery for later use.
It’s as simple as: sunlight in, and electricity out!
Installing solar panels contributes to a cleaner, more sustainable future. However, for real estate investors, another compelling reason to consider solar systems is their ability to reduce electricity bills and potentially increase property value.
Solar panels for rental properties
Solar panels provide real estate investors with flexibility in how they market and price their rental properties.
For instance, in areas where climate awareness is high, properties with solar panels can attract eco-conscious tenants seeking environmentally friendly homes.
Similarly, in regions where rising energy costs are a well-known concern, investors can market their properties as "electricity included" or even "no electric bills" by slightly increasing rent. This approach could appeal to tenants looking for cost predictability and who no longer have to worry about rising electric bills and can now consider renting a house, for example, with a pool – something they might have been hesitant about before.
However, any decision to invest in solar panels or adjust rental pricing should be backed by careful calculations. Key factors to analyze include:
- Cost of solar panels.
- Monthly electricity bills without solar panels.
- Average solar offset.
- Government incentives: Tax benefits and subsidies often play a significant role.
- Solar panel system maintenance costs.
These considerations will help determine whether installing a solar system is a financially sound decision.
Do solar panels really add value?
The common belief is that owned solar panels increase property value. For example, a 2024 study by SolarReviews found that homes with solar panels sold for 6.8% more than those without.
But the reality isn’t always that straightforward. In sunny regions like parts of California, solar panels are effective and highly valued, which can drive up property prices. However, in other parts of the world — such as cloudy regions where solar panels are not commonly used — they may not add value. This is because buyers may not see the need for them, lack awareness about their benefits, and may be unwilling to pay extra. Only in cases where the property is unique — due to its location, for example — and buyers are competing for it, might a buyer agree to pay extra for the solar panels to secure the deal. On the other hand, if the property is typical and competing with similar listings, there’s a chance that the investment in solar panels might not pay off.
That said, even if solar panels don’t add value to a property, they are not a sunk cost. Panels can often be uninstalled and sold separately or even reinstalled on another property. To better understand local market dynamics, consult a real estate agent or an appraiser familiar with your region.
Before installing solar panels, it’s crucial to comply with local laws and coordinate actions with the local utility company (in many regions, solar companies handle this). If solar panels are installed illegally or without proper coordination (yes, such cases do happen), they will definitely not add value, as most buyers are unlikely to appreciate the enthusiasm of the previous owner.
Common questions about solar panels
1. Do I still pay for electricity if you have solar panels?
Yes, in most cases. Even with solar panels, property owners likely remain connected to the utility grid to cover periods when solar generation is insufficient (e.g., at night). While bills will be significantly lower, property owners may still be responsible for paying fixed fees and charges.
2. Do solar panels work on cloudy days?
Yes, but they are less efficient. Solar panels will still generate electricity, just not as effectively as on sunny days.
3. What happens if solar panels generate more energy than the property consumes?
If the property owner has a solar battery, the excess energy can be stored and used later. Alternatively, in some regions, it’s possible to sell the surplus energy back to the grid.
Solar panels: Conclusion
Alternative energy is undoubtedly a great thing. But the reality is that it needs to provide tangible benefits and be convenient — simple as that. Without these factors, it will only appeal to green enthusiasts and will never achieve widespread popularity.
For real estate investors, the decision to go solar is often a smart move — but only after thorough research and calculations. High chances are that solar panels will prove to be a valuable investment, but if not, keep exploring your options.
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