Solar panels are gaining popularity and have become the most common renewable source of energy. But do solar panels improve rental property value? If you’re a property owner we assume that the same thought might be going through your mind. In this blog, our property experts talked everything about solar panels on rental properties.
Do Solar Panels Increase Your Rental Property Value?
Yes, having solar panels increases the value of your rental property. Installing solar panels significantly decrease electricity bills and other utility expenses which undoubtedly attracts better tenants. Plus having solar panels enables a steady source of renewable energy. This energy-efficient feature increases the value of your rental rates.
It can be said that both property owners and tenants are benefited from solar panels; it’s a win-win situation for both parties.
How Much Do Solar Panels Increase Property Value?
According to research by the National Renewable Energy Laboratory, every dollar saved in energy bills adds $20 to the rental property’s value. However, the exact number varies from property to property and is affected by several factors including the size and location of the home, the number of solar panels installed, and more.
Recent studies show that each kilowatt (kW) of solar that is installed increases the property’s resale value by $5,911. This means that adding a 5kW system, for example, adds around $29,555 to the resale value of a single-family home.
Despite the increasing affordability and availability of solar panels, property owners need to carefully consider the cost and the types of solar panels that certainly improve their property’s value in the long term. Along with installing solar panels, there are other types of renovations that increase your property value and attract new tenants.
Types of Solar Panels
There are three types of solar panels that you can get on the market. The first type is monocrystalline panels, which are the oldest and most developed type of solar panels. The second type is polycrystalline solar panels, which are newer but are quickly becoming a popular choice because of their efficiency ranging from 18% to 22%. Both monocrystalline and polycrystalline panels perform similarly, but the latter is the most widely used today.
The third type of solar panel is a thin-film solar panel. These are the ones you can find on solar tiles or shingles. Although they’re less expensive, they are also around 11% to 13% less efficient, which means that they won’t be able to generate as much electricity.
Types of Solar Systems For Rental Property
#1 Grid-Connected Solar Systems
Grid-connected solar systems are the most popular type for two reasons: they’re less expensive and they require less maintenance. A grid-connected solar system lets you power the rental property with renewable energy when the sun is out. But when sunlight isn’t available, your property can get its supply of electricity from the grid.
#2 Off-Grid Systems
An off-grid system, on the other hand, stands alone. It isn’t connected to any grid because most properties that have off-grid systems are located in remote areas. Installing an off-grid system is typically more expensive, but it is cheaper than running a power line which can cost around $15,000 to $50,000 per mile. An off-grid system also requires other heavy-duty equipment such as meters, batteries, power-conditioning equipment, and more.
How Much Does it Cost to Install a Solar System?
Since the U.S. solar industry has grown tremendously over the last few years, the cost of solar system installations has dropped. According to EnergySage, the cost to install solar panels in 2021 is around $20,000 or $2.81/watt. This is significantly lower than the price of solar in 2009 which was $8.50/watt.
It is important to note that although prices may be decreasing, the cost of installing a solar system will depend on your location as well as the type of system that you select.
Do Solar Panels Require a Lot of Maintenance?
Just like any other piece of equipment in your rental property, solar panels do require maintenance, though this is limited to occasional cleaning. The price of maintaining solar panels runs from $150 to $330 and should be done only annually. Other than this, a solar system is a low-maintenance feature that many tenants will find attractive.
Do Solar Panels Come with Tax Incentives?
As long as your property has its own solar system, you can benefit from tax incentives such as the 26% solar tax credit or the Investment Tax Credit (ITC). It essentially allows homeowners to deduct 26% of the total cost of installing a solar system from their federal taxes. The ITC applies to residential, non-residential, and other types of investment properties.
Steps to Ensure Your Solar Panels are Worth the Investment
#1 Choose the Right Solar Panels
The first step is to choose the right solar panels for your rental property. Most homeowners often wonder what the difference is between the various types of solar panels. For instance, is the return on investment on cheap panels the same as premium ones?
While lower-end solar panels may be lower in terms of upfront costs, they are not designed to last, and you may find yourself replacing them frequently. Cutting-edge solar panels offer greater power output and better efficiency.
#2 Get a Warranty for Your Solar Panels
It is essential to get a warranty for your solar panels. Should issues occur, a warranty ensures that repairs to the solar systems are covered. Most solar panels come with two warranties. The first guarantees that the solar panels will function without failure for a set period. For instance, certain warranties cover workmanship, parts, labor, and more for up to 25 years.
The second type of warranty is a guarantee that the solar panels will consistently generate energy. For instance, some manufacturers offer warranties that promise 90% production over 25 years.
#3 Partner with a Reputable Installer
Once you’ve selected the right solar panels for your rental property, it’s time to hire an experienced installer that is familiar with the type of solar panel that you’ve chosen. If possible, hire an installer who is a recognized brand partner, as this ensures that they received specific training for that particular model.
Professional solar panel installers typically offer additional benefits such as warranties or discounting pricing for repairs. If you don’t know where to find a trustworthy installer, you should consider hiring well-known property management services. They have a list of preferred vendors, plus they can help you get the best services at the lowest price.
Should You Install Solar Panels on Your Rental Property?
Solar panels offer clear benefits for tenants who want to spend as little on their utility bills. But despite its advantages, whether or not installing solar panels on your rental property depends on several conditions including the location of the home. For example, properties that are in areas that receive plenty of sun are ideal candidates for installing solar panels. However, if your rental property is in a cooler, gloomier area, there’s no reason to invest in solar panels.
Is Your Property Ideal for Solar?
Luxury Property Care can help you determine if your property is ideal for solar. Before making this huge investment, let our property managers conduct a free assessment of your rental unit. We will prepare a detailed summary of the expenses involved as well as the projected rental property value.