The Benefits of Solar Panels on Your Rental Property

There are plenty of reasons why installing solar panels for your investment property is a smart choice. Let’s take a look at just a few reasons.

Increase Property Value

While it may take a few years to recoup the cost of installing solar panels on investment properties, both the perceived and actual value of the property increases right away. As more commercial and residential tenants seek out clean sources of energy to power their homes and businesses, property owners who’ve built solar into their infrastructure can expect more profitable rents and sustained higher occupancy.

Attract Tenants with Lower Utility Costs

Adding solar panels to your rental property can help increase its desirability to prospective renters. Just as it appeals to homeowners, helping to reduce our carbon footprint is attractive to tenants as well. Not only will the prospect of lower monthly electricity bills help set your property apart from the competition, tenants will be more likely to stay due to the benefits your solar panels provide them. This can help to boost your earnings by reducing the costs associated with vacancies and high renter turnover.

Depreciation Expense

A high-quality solar system comes with a warranty period of up to 20 to 25 years, during which you can claim a 10% decline in your solar system’s value each year through the depreciation value method. For example, if you invested $6,000 in a new solar system, you could claim $600 in the first year, $540 during the second year, and so on. In just ten years, the deductions would equate to over $4,000. This helps offset tax payable on the extra rent income you’re able to charge for installing solar on your property. You’re also left with an extra ten years of savings, which are pure profit.

Become LEED Certified

LEED Certification is the gold star standard that demonstrates your commitment to sustainable building and energy practices.

Solar Panel Financing

Federal tax credits are available for investment properties that go solar before January 1, 2023. You can take advantage of a federal tax credit equal to 30% of what you paid for solar for the next 10 years.

We advise investment property owners to consult with a tax professional to ensure that these incentives may be recaptured. NYSERDA (New York State’s Research and Development Authority) under the umbrella of NY-Sun have designed a system of incentives to subsidize the cost of installation, making the prospect of going solar more attractive to landlords.

Project incentives will vary by region and current incentive rate. Incentive rates decrease as projects capacity increases. As current capacity stands, projects under the 750 kW cap may fall under the Small Commercial and Non-residential structure subject to $0.35/watt installed. For commercial industrial projects over 200 kW, there is either a Performance Based Incentive (PBI) Monetary or Volumetric crediting method.

Currently, Commercial & Industrial (C&I) incentive stands at $0.12/watt up to 7.5MW. Qualifying solar energy equipment is eligible for a cost recovery period of five years.

“Depreciation” is the loss of value that occurs over time when the object purchased is used for a specific use. As a business owner, you are eligible to deduct this “loss in value” from your taxable income when used for your investment property. If you are running a profitable venture, and you can show that the solar power you are generating is for investment property use (as opposed to personal use), then it may have a strong impact on reducing your bottom line.

For more information, check out our Solar Panel Cost page.

Solar Panels for Renters

If you rent or lease a building, you’ll need written permission from your landlord in order to move forward with any type of solar project. If you’re not able to get permission from the landlord, there may be a Community Solar array in your area that would allow you to opt into solar energy for your electricity.

Need help discussing solar with your landlord? Here’s a spec sheet to send them with answers to landlords’ most common questions.

Is Solar Right For Your Investment Property?

Solar costs continue to decrease, so converting rental properties to solar energy is becoming a viable option for investment property owners. Not only are there environmental advantages, there are also positive financial incentives that make solar a smart choice to power your investment. And as solar technology becomes even more efficient, we can expect installation costs to continue dropping while our savings grow even higher.

Solar Panels for Rental Property FAQs