Would you install solar on an investment property?

Hey guys,

I'm looking into starting my own company installing solar systems and I'm trying to find way to get my name out and appeal to the investors market in a sense to install solar on their IPs.

Now there are a lot of factors to take into consideration when it come to solar, but for simplicity let say you went for a 5KW system (Both the normal size these days as well as the biggest you would want, any bigger and your electricity provider won't pay you for the electricity you put into the grid)
For simplicity, lets say this sized system would cost you, the investor, 4K (not always the case).

From what I see the average power bill costs $600 - $800 each 2 month billing cycle. It would not be difficult for the tenants to save this entire amount each billing cycle (My bills are $20 every 2 months). So lets say they're saving this total amount each week.
Now as the investor you would obviously want to charge extra to pay for the system. Lets keep it at a small amount of $20 extra a week on top of what you're already paying. In a year of your property being rented out for 50 weeks of said year, you would earn an extra $1000 a year (taking 4 years to pay the system off, then its all profit for you).
Obviously you property would stand out more too because of the fact that there would be less power bills for the tenant, so it's a win-win situation.

After reading this, would you be interested in getting solar on your IP? If not, how come? What would you want to see to make you buy a solar system?

Furthermore - To the real estate agents and property managers out there, what would motivate you to recommend me as a solar installer? I was thinking of offering a $50 finder fee for every client put onto me who successfully bought a solar system.

 

Wouldnt install it on an investment property because you dont get any benefit out of it.

If the property already had it, it can be good. Its a marketable feature though - tenants see the property as more affordable so more likely to apply for it vs similar properties.

 

The benefit would be charging extra rent of around $20 a week. Plus having you property more appealing because the tenants wouldn't have to pay power bills (Like you said more affordable than other properties) saving the tenants at least $200 a month.

 

It isnt 20 a week nor 200 a month. That's just the numbers from your glossy brochures, doesn't mean either are in the right ballpark.

 

Admittedly the amount of rent you would get back isn't my expertise, seeing as I'm not a property manager. as yourself being a property manager, what would you think to be a more likely figure?

As for the the amount of solar savings, that's on the low side of the scale. I've been installing solar for years and clients always feel confident to tell me how much their pre-installed systems
(I would be there for maintenance reasons) would save them. I've seen cases of system saving clients $1000 a month (Living up north in the pilbara where you use a lot of electricity to run airc-cons). A perth figure would be closer to $300-$400 a month. Obviously more factors come into this, but the $200 a month was my own personal example of what I'm saving (I'm single and live on my own, A family/share house would save more than me)

 

My electricity bill in a rented 3 bed townhouse has varied between $300 - $370 per 3 month billing cycle.

I'm coming from the perspective of a tenant not a landlord, but I suspect pricing your property at $20 above similar properties could be a hard sell even if you could be 100% confident the numbers do stack up. I can do things about my electricity bill by modifying usage or shopping around to different suppliers. Locking in a fixed price for the life of the lease in the hope that it works out in my favour is a bit risky.

 

Sorry I should have gone further into depth. The average family household is of the higher figures. Obviously not all.
Like I said mine are pretty low

 

Wouldn't solar help in a crappy market? Even if you can't add much to the rent it might help with reducing your vacancy rate?

 

No worries. Glad to know we're spending below average

We don't really try to be careful with electricity although my kids don't shower as often as I'd like! 2 adults and 2 kids, 3 split systems and electric hot water. Take advantage of a pay on time discount and bundle gas & elec.

If my landlord offered to install solar for a rent increase of $20/week I'd still hesitate, even though it has the potential to save us a little. Not sure why.

 

My power bills are completely wiped out. They're low at $200 which makes it easier to happen. But this could happen for power bills your size too.

I installed a sysetm half the size as the one I described in the original post on my in-laws place (A farm) and their power bill went from $700-$800 average to $180-$220 average. bills were paid every 2 months and they made no conscience change to how and when they use electricity.

Most systems make it easy to reduce your bills too, with the ability of downloading an app to watch how much solar you're making at any one time and the total amount you made in a day. Making it easy to tell when you use certain appliances to save energy. I understand this can't always be done, but I do believe it can definitely help.

 

That's what I'd like to believe, but a property manager would have a much better idea on this topic.

 

Tenants are consumers, if you bump the rent up $20/wk they will walk because the place next door is $10/wk cheaper. They don't compare apples with apples nor do they generally consider that the solar is cutting their outgoings or that water grows on trees. They won't consider that removalists will cost $1000 (or several trips to the physio, truck hire & a few slabs etc)

As much as we like to think that we are doing the right thing by the environment, most people care about their hip pockets and can't see past their noses on issues like this.

 

Some people use little power and others use a LOT. How can you price that into rent without a volume based allowance ?

 

As a tenant, I think this is my problem with the idea. If that Landlord charges me $20 and wears the risk by keeping the electricity in their name, sure. But I'm not confident in the stated numbers. So if the landlord wants me to still pay the balance of the bill it's a different situation unless you can definitely guarantee I'm going to save money.

 

I just asked this question of a couple of property managers. Their answer is no, the tenants are unlikely to pay extra.

They indicated that they have very few properties with solar, but compared it to blocks of units that don't have separate water metres. In this case the landlord pays for water usage because the can't apportion water usage to the tenants. They've tried to charge $20 above the general market rental but they rarely get it.

The market has an expectation of paying a certain amount and properties priced above that are overlooked by tenants despite having a lower cost of living.

A solar system would likely save tenants at least $100 per month, probably quite a bit more. They're not going to pay extra rent for it however and the government incentives are only a fraction of the cost. The market doesn't really recognise this as capital value either. There's no benefit to the landlord at all.

I'd only install solar on a rental if I were paying the usage. If tenants want solar, they can install it at their own cost (and I get to vet and authorise the instillation).

 

I reckon its a human psychology thing

most people, especially average people dont want to pay $20 extra to get a discount off future costs, as they see it as a $20 less in their pocket every week, even if they save $50 per week in bills,

have you seen the reaction some people give you if you say there is an option to prepay extra tax from your PAYG every week, so you get a larger return at the end of the year!!!
they react as though the ATO is ripping them off

 

A bit of psychology, but I think mostly a little lack of confidence in the numbers being thrown around. I'd pay the $20 if it guaranteed my $120/month electricity bill vanished.

 

Like you say, it's a confidence thing. The $20/mth is a tangible thing that you have right now. The $120/mth is hypothetical and something in the future that may or may not happen.

 

Vic Government are about to offer this for renters and landlords in Victoria - Solar for Renters I have one long term couple tenant who I might float this too as I know they're decent consumers of electricity. I may sweeten the deal with a new air con, as theirs needs replacing.