The Benefits of Installing Solar on Your Investment Property


In recent years, more and more homeowners have invested in solar panels as a way to reduce energy costs and their carbon footprint. However, while more private homeowners are installing solar panels, it’s still rare to see solar panels on the roof of a home used as a rental property. This is primarily because many investment property owners don’t see any incentive for installing solar systems on their rental properties. After all, it’s the tenants, not the landlords, who pay electricity bills. Landlords don’t see the installation of solar panels as being beneficial obviously to them.

While this is a common misconception investment property owners have, there are many benefits landlords can receive by investing in solar panels for their income properties including:

1. Reducing Your Carbon Footprint

One of the biggest reasons landlords choose to add solar panels to their rental properties is that it can help to reduce our carbon footprint. As we begin to see real repercussions as a result of climate change, many of us wonder what we can do to help the environment. Electricity production often requires fossil fuel consumption, which adds greenhouse gases to the atmosphere. 

By making sure your rental properties have access to green power options such as solar, you’re helping to reduce your impact on the environment. Even though you won’t directly benefit from the electricity savings the solar panels provide, you can feel good knowing that you have done your part for the environment. However, there are secondary financial benefits you can receive by adding solar panels to your income property. 

2. Attract and Retain Responsible Tenants

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 leasees as well. And of course, the prospect of lower monthly electricity bills will help to set your property apart from the competition. Additionally, current 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.

3. Increases Property Value

While it may take a few years to recoup the cost of installing solar panels on your rental properties, you can still benefit in the short-term by the increase you’ll see in your home’s value. 

Just as they are attractive to tenants, homes with solar panels are extremely attractive to prospective buyers as well. This can make your home more marketable and position you to realize a higher price if you sell.

4. Enjoy Tax Incentives and Cash Rebates for Going Solar

There are many incentives for installing solar on your investment property. First, the federal government offers a 26% investment tax credit that you can subtract immediately after you’ve filed your tax declaration. 

The great thing is that you get to enjoy this benefit whether you’ve bought your PV (photovoltaic) system using a loan or in cash. For instance, if the total installation costs for your solar system amount to $15,000, the federal tax credit can save you up to $3,900 on your taxes.

If you’re eligible, a state investment tax credit can also greatly reduce how much you spend on your investment property solar installations. Check into whether this benefit is offered in your state; guidelines and restrictions vary widely.

There are also solar rebates, which, unlike the tax credits, help save you money on upfront costs. For instance, the New York State Rebates Program refunds you about $1,750 for every kilowatt-hour installed or up to 40 percent of your total solar installation costs.

In addition, you also get to save huge on upfront costs and enjoy long-term ROI as solar power is exempt from property tax and sales tax.

5. Depreciation Expense

A high-quality solar system comes with a warranty period of up to 20 to 25 years. That said, installing solar on your investment property allows you to 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 would help you offset tax payable on the extra rent income you charge for installing solar on your property. You’re also left with an extra ten years of savings, which you can pocket.

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, but the positive financial incentives should be considered as well. 

As solar technology continues to become more efficient, we can expect installation costs to continue dropping while our savings grow even higher.

Find out if Solar is Right for You