How Much Equity Does Solar Add

What Is The Average Payback Period For Residential Solar Panels In 2021

The solar payback period refers to the amount of time it takes for the electric bill savings from your solar panels to equal the amount you paid for the system. The average payback period for a residential solar system in 2021 is about seven years.

A payback period of seven years equates to a return on investment of approximately 14%. However, this varies greatly by state and even by regions within states.

Calculate the solar panel payback period for your home based on your location, electric use and current local solar system prices

Once you have generated an accurate payback period, you can compare this to the returns you see on other types of investments:

• Long-term government bonds currently have returns between 0.1% and 2%
• Zillow estimates that home prices increase between 3% and 5% annually
• The stock market has risen around 9.5% historically

As you can see, residential solar panels stack up favorably against all of these other investment options and this is even before we consider the increase in a homes value caused by the solar panel installation.

How To Measure The Home Equity Of A Solar Energy System

A 2015 study by the National Renewable Energy Laboratory places a price premium of $3.11 a watt for solar power systems added to residential properties. For those with a typical 8kW system, this means the added resale value to your home is around $24,880.

If you have a 3kW solar array the added value would be 3,000 watts x $3.11 =$9,330. A 5kW solar array would be 5,000 watts x $3.11 = $15,550. An 8kW array would be 8,000 watts x $3.11 = $24,880. And so on when you add solar panels for your home.

A homeowner’s payback rate on solar power systems in Ohio from electricity savings and earned SRECs is typically around 10 years. If you decide to sell your home, you will generally be able to fully recoup your investment just from the value added to your house, above and beyond the electricity bill savings you will receive.

What about depreciation? Well, the general rule is taking a cost approach which would value a solar electric system as a 25-year going concern. For every year you have the system, it would be depreciated at around 4% per year. So if you have the system for 10 years you would depreciate it 40%. Here is an example of an 8kW system valued brand-new at $24,880. :

10 years x 4% depreciation: 40%

Estimated value of the system: $24,880 x 40% depreciation = $9,952 depreciated amount

$24,880 New Price – $9,952 depreciated amount = $14,928 value of the system after 10 years.

One Of The Most Important Aspects Of Owning Your Own House Is Building Equity So Whether Or Not Adding Solar Panels To Your House Will Help Or Hurt The Resale Value Is A Common Question

For many people who are thinking of adding solar panels to their house, knowing whether they will add or reduce the value of your house is a really important question. While it makes sense that any type of improvement to your home, including solar panels, should increase its value, there are a few caveats to be aware of when it comes to solar.

First of all, when it comes to the question of whether or not solar will increase your home value, the answer in most cases is yes. Studies show that when looking at houses with equal comparables, solar panels will add $4 per watt in value to the home. This means that a 6 kw solar system could add $24,000 in property value. However, there are a couple other factors to consider: whether you own the system yourself, and what the public awareness of solar is in your area. In this article, weâll discuss this in depth.

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Do Solar Panels Make Sense For Your Home

As you weigh the pros and cons of solar energy, it makes sense to consider the overall impact on your property value. Youll also want to take into account factors including:

• How much you spend on utility bills each month: If you live in an area that has high average electricity rates, youll get a better return on your solar energy investment.
• How much sunlight your home gets throughout the year: Some homes are better positioned for solar panel installation than others. If your home is situated at an optimal angle for harnessing the suns energy, it makes more sense to go solar.
• Financial incentives available to you: All American homeowners are eligible for the federal solar tax credit, but many states and municipalities have added rebates, low-interest loans and other financial incentives for their own residents as well.

For many homeowners, the question of whether to buy solar panels comes down to cost. If you want to see how much solar panel installation would cost for your home, you can get a free, no-obligation quote from a top solar company in your area by filling out the form below.

If you want to know for sure how solar panels will affect your home value, you can click below to connect with an EcoWatch-vetted installer and get a free estimate.

Pros And Cons Of Selling A Home With Solar Panels

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Solar Panels Are Adding Value To Homes

Solar panel owners are seeing an increase in their property values over comparative homes in their neighborhood. The main reason for this increase in market value is that homes with solar panels offer a definite financial benefit to future owners.

Potential buyers are encouraged to purchase homes with an installed solar energy system because of:

• The ability to replace your electric bill with a much cheaper and cleaner option
• The reduction of our carbon footprint

Public Opinion On Solar Panels

Youve probably heard the long-standing debate over whether panels actually look nice on a property and you might even have your own opinion on the matter.

To get a better understanding of how people feel about solar panels appearance, weve carried out a survey, asking 112 people how attractive they think solar panels look on a home.

Interestingly, there was a clear correlation in our survey between the age of the respondents and how attractive they found solar panels.

To get a better idea of this relationship, check out the results in the chart below. Respondents were given the option to rate the attractiveness of solar panels on a scale of 1-5 with one being the least attractive, and five being the most which we have grouped together into three categories below.

As you can see, theres a dramatic difference between the oldest and the youngest age groups.

Half of respondents aged 13-40 think solar panels are attractive, which drops to just 11% amongst 57-72 year olds. As for 73-88 year olds? Zero respondents in this bracket find solar panels attractive.

Whats more, a massive 85.7% of respondents in the oldest category rated solar panels as unattractive, rather than just acceptable, compared to just 12.5% of respondents aged 13-24.

Despite the mixed responses, 86.8% of respondents said they would buy a house if it had solar panels on the roof.

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Is My Roof Suitable For Installing Solar Panels

There are a number of factors that determine how suitable your roof is for solar panels, including:

• The size of your roof
• The direction your roof faces
• The pitch of your roof
• How much of your roof is shaded

When trying to determine if solar panels are worth it for you, consider the size, direction, pitch, and the amount of shading your roof has. Large, unshaded, southern-facing roofs are the most ideal for solar production.

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How Can I Value My Solar System

Increasingly, homeowners and realtors have been pondering how to value a solar system when selling a property. Thus, the SEIA created a guide on valuing residential solar systems. They present three different methods.

• The income approach involves calculating the value based on the estimated income the system will generate for the new owners throughout the remaining lifespan of the equipment.
• The cost approach estimates the value based on the cost of reproducing the same solar system currently installed, but it doesnt consider equipment depreciation.
• The comparable sales approach method examines similar properties with and without solar energy systems . This requires finding at least two pairs of homes, both with and without solar.

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How Much Does Solar Add In Value

The average solar home in Phoenix only receives $1500 in extra value because sellers fail to take the right steps for max solar value.

Ask most real estate agents in the Phoenix area and these real estate agents will say, Solar does not add value, Solar decreases the value and makes your home hard to sell, or even If you are lucky, expect a $1,000 or so in extra value but no more. Yet with solar home sales in Phoenix topping 5% and more of the total home sales each month, savvy home owners are taking prudent steps to make sure they get maximum value for their solar homes.

Having been in the real estate industry for the last 25 years and focused on selling solar homes for over 11 years now, the simple answer is yes, solar can raise your home value IF you follow a few simple steps to make sure you get the most value out of your home when you sell it. With millions of dollars worth of solar transactions over that period, no two transactions are alike and no two homes are the same. I have found the one common denominator in all of these transactions is me, coming in with a lot of solar real estate experience, training on marketing and valuing solar homes, and insight on how to properly guide my solar home sellers to get the most value for their property.

How Much Do They Cost

The cost of your installation will depend on the how much wattage youâre hoping to generate, and therefore the size of the system. Fortunately, installation prices have dropped significantly over the last few years. Once upon a time, it could cost you $10,000 to install a 1kw system, but now a 3kw system – a good size for the average home – can cost you between $3,400 – $5,600, while a slightly larger 5kw system can cost between $4,900 – $8,000.

While this may seem like a lot, consider how long they last, and how much youâll likely save on electricity bills after theyâre installed.

Find out if you could pay less each month with Lendi. Get a comparison in minutes.

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Impact Of Solar Panels On Your Home

Installing solar panels on your homes roof will improve your home in numerous ways, particularly in two major ways. When you install solar panels on your roof, your:

• House will sell for more
• The house will sell faster
• How easy it is to transfer the solar panel system to the new owner

House Will Sell for More

Lawrence Berkeley National Laboratory is a Department of Energy Office of Science lab. This research facility is managed by the University of Cal. It is highly accredited, with more 13 Noble Prizes associated with the Berkeley Lab.

Berkeley Lab, conducted a study to analyze the impact that solar would have on home sales. They analyzed 22,000 homes sales in 8 states. Four thousand of which included solar PV systems, from 2002 to 2013. Based on their research, in 2015 they released their findings. In a study called, Selling Into the Sun: Price Premium Analysis of a Multi-state Dataset Of Solar Homes. The analysis determines that each found that each watt of solar increased a homes value in California by an average of $4 and an average of $3 per watt elsewhere. For most single-family homes, they typically average a solar PV system size of around 5kW. Therefore, the average home outside of California will increase by $15,000 . And $20,000 in California .

Their House Will Sell Faster

The National Renewable Energy Laboratory , conducted a study based on a national sample across 87 utilities in 16 states. Their analysis found that:

Impacts to These Metrics

System Size

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Solar Panels Are Unlikely To Be A Deciding Factor

Solar panels are unlikely to be a deciding factor in peoples purchase of the property at this stage in the game.

Very few home buyers know enough about solar, know about how much money they are going to save, how it works with the whole grid system and when you are selling panel back to the grid and all of that sort of stuff.

So there dont know enough about it to be able to quantify it and add value to it. So solar isnt going to add more than it is actually costing you.

Just like your pool, do solar for personal reasons not necessarily for financial reasons in terms of capital gain or in terms of selling your property but obviously for personal reasons there is added benefit that they are green so you feel better and you sleep better at night but you are also saving money on your electricity bills.

If you are looking to put a solar on your house then assess it from a personal stand point and financial stand point and the terms of how it works for you rather than looking and saying Oh if I set solar it is going to increase my equity by x dollars.

If you need more information then go ahead and speak to your local real estate agent who knows the market, who sells properties day and day out because they will know whether or not it is likely to increase the value or not .

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Reap The Rewards Of Green Energy

Solar panels are a great decision for many homeowners. They increase the value of a home and provide clean, renewable, and affordable energy. If youâre considering installing solar panels on your property, now is the time to do it. The cost of installation has come down in recent years, and more incentives are becoming available all the time. For homeowners primarily thinking of resale value, research the local market and talk to your real estate agent to get an idea of the local demand for solar panels and other home improvements.

Dave Kotler

Size Of The Installation

The number of solar panels your roof can accommodate positively correlates with your homes post-installation property value. The production capacity of your solar panels needs to be proportional to the size of your house.

So how do solar panels affect property values? A Berkeley Lab study estimates that the resale value of your home will increase by about $5,911 for each kilowatt of solar.

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What Kind Of Home Improvements Are Tax

Certain capital improvements and energy-efficient upgrades may be tax-deductible, though the specifics of what qualifies can change over time. If the improvement adds substantial value to a home and extends its useful life, its generally considered a capital improvement and can reduce or eliminate your tax obligation when you sell the home. Other upgrades, like energy-efficient improvements or enhancements for medical reasons, may be deductible from your taxes at the end of the year.

Use Our Home Solar Calculator To Help You Estimate Home Value Increases

To quickly and accurately calculate how much solar you do need, we recommend using our solar calculator. That information, combined with the formulas above can also help you quickly estimate your expected property value increase with solar.

In the section below, we provide an example of how to create a ballpark estimate of the value of your home with solar panels installed using our calculator and the above formulas.

Our calculator takes the following factors into account in order to give you an accurate estimate of your installation costs and solar savings:

• Your available roof space
• Your utility company electricity rates
• Available solar incentives

In our example, we use Zillow as well, to help you get a gauge on your initial real estate value without solar.

When you enter your address into a search engine like Google, youll quickly find a Zillow link to your property. On that page is a listed Zestimate value, or the amount your home would probably sell to a new owner for based on sale data from similar types of homes.

Find out how much a rooftop solar system will cost you

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Understanding How Solar Panels Impact Your Homes Value

Often, when people think of the savings they can enjoy with solar power, they only consider the cheaper monthly energy bill. Homeowners sometimes forget to account for the fact that owned solar panels can also dramatically increase their property value and subsequent equity. They add equity to a home and, in turn, offset some of the initial cost of purchase.

When crunching the numbers to decide if its worth the investment, solar panels added value is a crucial aspect to consider. If you fail to calculate their impact on your propertys resale value, youre not accurately measuring how much they can bring to your home.