Does Going Solar Increase My Property Value
Solar energy accounted for 43% of new electricity-generating capacity last year in the United States, according to the Solar Energy Industries Association . As more and more homeowners install solar panels on their roofs, they weigh the pros and cons. Whereas electricity savings are relatively simple to calculate, some of the other benefits are somewhat more complex.
One important consideration is how solar panels will impact the property value. Gaining some understanding of the benefits of a solar energy system on a homes resale value can make going solar more appealing.
A Win For Landlords And A Win For Renters
Renters have also indicated that they are willing to pay more for rentals with solar installed little surprise when you consider the direct savings on their energy bills. Therefore, landlords looking to increase the value of their investment property can benefit greatly from installing solar panels. Not only can they charge more in rent, but the appeal of solar for renters means your property is more likely to be rented out all the time. All landlords will recognise the value in that.
Some states currently offer rebates specifically for landlords. For example, Victorias Solar for Rentals program offers eligible rental providers a rebate of up to $1,400 for the installation of solar panels on their property. Eligible landlords can also apply for an interest-free loan of up to $1,400 to further reduce the upfront cost of the solar panel system.
How Do I Prepare To Sell A Solar Home
It is crucial to make sure your solar system is in good working order. If you have solar monitoring, review the data to make sure the solar system is performing well. Having the invoice for your solar system available helps appraisers, realtors, and potential buyers understand the value of the installation. If the solar system is still under warranty, have this information available as well. Most solar panel manufacturers offer a power performance warranty for at least 20 years. Likewise, having electricity bills on hand helps demonstrate the financial savings of owning a solar energy system.
Feature image by Vivint Solar on Unsplash
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Homeowners Who Made The Solar Switch
Lisa and Jerry Chretien, a couple from Cape May County, New Jersey, decided to lease solar rooftop panels from Sunrun a year ago. High utility bills and the desire to live cleaner and greener lives inspired them to make the decision. Since going solar in June 2018, the Chretien’s electric bills have decreased, especially in the summertime.
“As soon as we would open the pool and turn on the air conditioners in May our electric bills would run close to $800, sometimes more,” said Lisa Chretien. “Saving money, especially with kids in college, has been a big help and a big saving. And there are a lot of incentives, tax wise you get a break. It has just been a plus all the way around.”
For Kerrie Lane, owner and operator of a cleaning service and resident of South Jersey, the experience was similar. After moving into her new home, she received her first electric bill: a staggering $1,100. Kerrie knew she needed to do something to make her electric bills affordable.
“I’m 60 years old, so I’m getting up there. I do a physical job for a living but I can’t do it forever. … So having my bills being manageable was very important to me,” Lane said. “My first electric bill in this house was $1,100. I knew I needed to correct this situation and make it manageable and Sunrun gave me the consistency that I was looking for. “
Contributory Value Of Solar Panels
A solar panel system also has the benefit of augmenting the energy savings of any other efficiency upgrades you have made. This means:
- What you pay for heating and cooling goes further when upgraded home insulation keeps hot and cold air inside the house where it belongs
- The efficiency of LED lighting is enhanced when solar panels catch the rays to light your home
- ENERGY STAR-certified appliances are even more efficient when they are powered by renewable solar
The cumulative benefits of solar panels combined with other solutions cannot be overstated. Not only will these and other upgrades cut your monthly energy bill, but they will be an undeniable draw when you decide to put your house on the market.
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Examples In New Jersey
In New Jersey, homes with solar energy installed are valued at 9.9% more than comparable homes. That is an increase of $32,281 for the median-valued home.
The first home we will look at is located at 8 Arthur Ct in Jackson, New Jersey. This home has 2 bedrooms, 2 bathrooms, and sits on a 6,534 square foot lot. This charming home is currently on the market for $316,000 and includes many features, such as solar panels. This house was also on the market for $168k in 1997.
A similar home, located just 13 minutes away, at 19 Lace Bark Ln in Jackson, New Jersey also has 2 bedrooms and 2 bathrooms, just like the home on Arthur Ct. While this similar home also has many great features, it does not include solar panels. It is on the market for $96,350.
We can see that there is quite a big difference in the prices of these two homes, even though they are in the same city and have the same number of bedrooms and bathrooms. A major difference in these two homes is that one has solar panels installed, and the other does not.
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.
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Studies Linking Solar Panels To Home Value Increases
The Appraisal Journal cited researchers Ruth Johnson and David Kaserman who report, Home value increases of about $20 for every dollar saved on annual energy costs.
So, in the case of the $200 monthly savings example above, you could expect the value of that solar home to be worth $48,000more than it was previously .
For a second example,a study by the Lawrence Berkeley National Laboratory yields a formula of a $5,000 resale value increase for every kilowatt of solar installed. To get that same $48,000 home value increase from the Appraisers Journal with this calculation, youd need a 9.6kW system .
With average installation costs around $3,500 per kW upfront, you could have this size system installed for $33,600. That difference in value gained relative to your investment potentially nets you an arbitrage opportunity of $1,500 per kW of installed solar.
That doesnt even include the federal investment tax credit, which allows you to recover 26% of the cost of your home solar installation. Additionally, in some states, your property value increase is even exempt from additional property taxes.
If youre looking to sell your home faster and at a premium, it might be worth having solar installed first! You can expect a quick return on investment for this type of clean energy home improvement.
While that estimate is simple, theres a lot of unaccounted for variables. For example, it doesnt take into account the size of the solar energy system.
Curb Appeal Warranties And Other Concerns About Solar Panel Value
Many homeowners are interested in solar power, but have held out because of concerns about curb appeal. However, new innovations in solar panels are rapidly making them more visually appealing. Todays solar panels are smaller, sleeker and offer increased flexibility of configuration. And depending on your roofs pitch, todays panels can appear barely-there. Another option, depending on the area of the country in which you live, are roofs with solar shingles. These solar shingles can blend into the architecture of a home and that of surrounding homes. If you have any concerns about solar panels and curb appeal, let your solar contractor know. They will likely be able to find an option that meshes well with your preferred aesthetic.
Homeowners also fear that they will be on their own if something goes wrong with their solar panel system. However, as with any major home renovation, you can allay those fears by ensuring your solar panels have proper manufacturer and installer warranties included. These warranties should give you peace of mind. And unlike other parts of your home, a solar panel system has no moving parts that will wear out over time, and they typically require little maintenance or repair.
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Factors That Influence The Value
While these simple calculations can give you a ballpark, there are a number of factors that influence the value-add of solar panels. Some of the most prominent include:
- Geographic location: Different communities experience different electrical costs . Additionally, geography can influence the amount of sun exposure you get, as well as the social benefits of installing solar power.
- Local solar installation prices: Another geographic factor is the cost of getting a new system in your area. If a buyer would save money by purchasing a home with a system already installed, it will make your home that much more valuable.
- System output: As you can see from the chart above, a larger system with more energy generation will provide more added value.
- System age: If you have an older solar system, you’ll need to account for depreciation. Older systems won’t add that much value to your home when you sell it, as there’s a higher chance the buyer will need to do repairs or replace parts sooner.
- System replacement value: Along the same lines as system age, how expensive or difficult parts of your system would be to replace affects the added value of the system overall.
Why Invest In Residential Solar Power Systems
Based on the research, installing solar power systems is one of the safest investments you can make. While it is estimated that solar power can increase the value of your home by 3 to 4 percent, solar incentive programs support an even greater financial return. Based on recent trends, the real estate industry is working towards a more accurate and sophisticated method for determining the market value of these systems, which may lead to even greater returns.
According to Cost of Solar, over the 25 to 30-year lifetime of a solar power system, you can enjoy significant electricity bill savings. Even if you’re not interested in selling your home, based on the electricity savings alone, your system will pay for itself. However, if you do decide to sell, you will receive a premium, further increasing your return on investment.
If you have the right-sized system, your investment could pay a 200+ percent return and best of all, those returns begin on day one, regardless of how small or large your installation is. While there are varying systems and the best option for you can be discussed with a GreenLogic expert, your property value can increase as you scale up.
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In addition to getting you a higher asking price when you sell, installing solar panels can help you sell your home 20 percent faster than properties without solar installations.
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The Size Of The Installation
The number of solar panels your roof can accommodate directly relates to the property value increase post-installation. Property value increase is directly related to the quality and quantity of the solar panels installed. 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 you can expect the resale value of your home to increase by about $5,911 for each 1 kilowatt of solar installed.
Will A Bigger Solar Panel Installation Increase The Value Of Your Home
The best part of installing a solar panel as a seller is that you control that home solar energy therefore, the amount of money you add to the property will depend on you. However, research shows that the wattage produced by a solar panel system does not raise your house value proportionally. This means that installing a large solar panel system in the room of your home will not equate to a higher or better resale value. Therefore, you should consider installing a solar panel system that will sufficiently meet the owners energy needs by doing so, you will be able to recoup the installation price.
Do solar-ready houses sell faster compared to those without?
Solar-ready houses tend to sell faster however, this will vary significantly from one region of the country to another. Research carried out in six different states by Lawrence Berkeley National Laboratory shows that homes equipped with solar panel systems take eight more days to sell however, new research tends to show the opposite. A house equipped with a solar panel system will sell 20% faster than those without.
Nowadays, we are witnessing a rapid expansion in the use of solar panels across the United States. This results from an increased appraiser and homebuyer understanding of how reliable a solar panel can be. Furthermore, they have understood the long-term benefits of using solar panel systems thus, it has accelerated sales and raised sellers revenue to use solar panel systems in homes.
· California
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Examples In South Carolina
In South Carolina, homes with solar energy installed are valued at 3.5% more than comparable homes. That is an increase of $5,866 for the median-valued home.
The last home we will discuss in this article is located at 7 Calhoun Dr. in Sumter, South Carolina. This house has 4 bedrooms, 2 bathrooms, 2475 square feet, and sits on a 21780 square foot lot. It was last sold in 2018 for $161k. The sellers of this house are giving the new buyer an option to keep the solar panels and take over the contract, or they can remove the panels. I am not sure why anyone would want to remove the solar panels from their home. Not only do they cut down the cost of your electricity bills, but they increase the homes value! It is currently on the market for $192,000.
A comparable home, located on the same street at 47 Calhoun Dr. in Sumter, South Carolina is similar in many ways. This house also has 4 bedrooms, 2 bathrooms, 2431 square feet, and is on a 20000 square foot lot. While this house is quite similar in size, the price difference is surprising it was just recently sold for $162,500.
Even though these houses are on the same street, in the same city, and are almost the exact same size, they are not valued at nearly the same amount. The biggest difference? Solar panels! The 7 Calhoun Dr. house includes solar panels, and it is valued at almost $30k more than the house at 47 Calhoun Dr.
Leased Vs Owned Systems
Finally, the premium only applies to homes with host-owned PV systems. If you agreed to a solar lease or PPA with the developer who installed the system, you likely wont see muchif anyof the higher sale price returned to you as profits. In these cases, buyers will request the previous owner pays off their lease or PPA agreement, which offsets the additional value built into the final sale price of the home.
The extra cash from the sale only goes into your pocket if you have purchased your PV system outright. Thats one of the reasons we strongly recommend buying your system instead of leasing it.
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Solar Investment Tax Credits
Every local and state government, as well as the federal government, has a refund and/or rebate incentive for you to install a solar panel system on your property. These are solar-centric tax credits and its essentially free money.
In 2019, you could get a 30% refund and/or rebate against your solar panel installation costs. Unfortunately, those solar-centric tax incentives have fallen to 22% for this year. And they wont exist by 2022, so 2021 is the final year for you to take advantage of these incentives.
Refer to your local, state, and federal government websites for solar energy for more information on ITCs.
From Aggressive Incentives To Curbing Greenhouse Gases There Are So Many Advantages To Installing Solar Panels Onto Your Home
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We’re happy some trends have died out. Planking. Excessively distressed jeans. Hair crimping. Hey, hindsight is 20/20. One trend that we’re glad to say is here to stay? Renewable energy, most notably, solar power. Jump on this eco-friendly bandwagon and reap the many rewards that solar panels have to offer!
While there are numerous reasons why homeowners are replacing their power system with a renewable energy source, here we’re going to focus on four big advantages that come from installing solar panels onto your roof.
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