We live in a desert… Phoenix, one of the largest Metro Areas at the same time. That means in today’s world, Solar is a huge topic. However, when it comes to Real Estate, what are we seeing? Well, I plan to answer that in this blog.
First of all, a little disclaimer… I am no solar expert and not ever solar “system” is like the next. They’re all a little different… capacity, output, technology, leased vs owned, etc. That’s one of the biggest challenges I personally see: there’s not much uniformity and not much time or resources out there readily available to learn quickly on the fly during a real estate transaction.
Solar is still a fairly new technology in the real estate space and one that is evolving so quickly that a new system two years ago could already be outdated today. Think about the evolution of cell phones, televisions, computers, etc… a similar parallel here. I anticipate that as we move forward and additional companies enter the realm, costs will be pushed down. That being said, it could prove beneficial to remain patient and perform your due diligence prior to signing a lease or contract.
Let’s first talk about leased solar systems… there are numerous options including Solar City, Sunpower and many others. The leases seem to range in length from 10-30+ years. Payments sometimes remain the same throughout and other times escalate at a small percentage annually. That can lead to a big difference 25-years down the road. Not to mention, the guarantees or projections for these systems show output decreasing over time, which is not the greatest combination with increased cost.
We all seem to believe that electricity/utility costs will continue to increase over time… we just don’t know exactly how much. That can make a solar investment somewhat speculative. Owned Solar Systems can be better, but usually to really see a huge savings, unless large tax credits are available, then you need to buy it outright and live in the home for a really long time to see significant return on that initial investment. We see owned systems cost $20-40,000 depending upon the size of the home and energy being produced. **there are some smaller (partial) home systems available, even through Costco…
Not only is there the initial system cost, but maintenance can play a factor down the road and any roof repairs/replacement may require cost to remove and re-install the solar system.
You’ve probably also heard of Solar Roofs: Solar Shingles, Solar Tiles, Tesla Solar Roof… this is another growing technology. Right now, the cost is roughly $42 per square foot. That can add up real fast and not really be in the budget for most homeowners. Time will tell how efficient those products turn out to be.
DO YOUR HOMEWORK. When going to sell your home with solar on it, there are some things to know. For now, some lenders do and some lenders do not count the solar lease payment against qualifying debt-to-income ratio. That can impact how many buyers qualify for the property. On an owned system, when it comes to appraisal, you’re not going to receive a healthy return for initial expense. We often see $5-8,000 given when someone spends $30,000 on a system. If you financed an “owned” system and want a new buyer to assume any remaining balance… good luck with that.
We are always here to answer any other questions you may have and when it comes to solar… one thing is inevitable: change!