Solar Panels in Investment Property

LMuffinman01 on 19/11/2019 - 18:30

Hey Ozbargain community

I currently live in an owner occupied place in Queensland, and would like to get solar. When I think of the future however, it’s highly likely in the next 12-18 months Muffinwoman and I will be moving due to one of our careers.

If and when this time comes, the plan is to convert this property to an investment property.

While we won’t be around to reap the full benefit of installing solar in terms of the electricity savings ourselves, does anyone on here have an IP with solar?

I’m wondering if having solar in a rental might mean tenants are willing to pay say a $10/week premium for example compared to similar properties?

I’ve had a quick Google and seems there are mixed responses, so would be keen to hear from anyone else’s experience, and if there’s anything else I should consider (aside from being able to claim depreciation on the panels).

Looking forward to your responses!

Thanks!

Home & Garden Solar Energy System

Comments

  • boomramada on 19/11/2019 - 18:53
    +1

    It's only give you better market exposure to yours compare to others.
    Sure you can add extra $10 than market value but that doesn't mean it will rent out quicker.

    • Muffinman01 on 19/11/2019 - 19:59

      Thanks, this is along the lines of what I was thinking

  • ihbh on 19/11/2019 - 18:59
    +1

    $X/week premium for example compared to similar properties

    Unless your property is on an estate with identical properties, it's hard to compare.

    Just be happy that there will be more demand for your property all things the same, meaning, less vacancy, and possibly more rent (less incentive you have to give away).

  • Soluble on 19/11/2019 - 18:59

    You're not gonna get $10 a week extra. You can try… But how long does it take at $10 a week to pay back the panels? If you're looking at moving in 12-18 months I wouldn't bother. I added solar panels prior to selling my house it added little to no value. (Had planned on staying there long term or else I wouldn't have bothered)

    Then there's claiming depreciation on the panels which is negated somewhat by an increase in rental return anyway

    • Muffinman01 on 19/11/2019 - 19:59

      That’s what I was thinking… it doesn’t seem like something that would command any additional rent, with the only real benefit being potentially making the place more inviting to a prospective tenant - which in itself isn’t necessarily a bad thing, but not sure it’s worth the cost of the panels.

      • qwerty on 19/11/2019 - 23:31

        Tenant would save X per week on electricity so would be prepared more for rent

        • LFO on 20/11/2019 - 22:10

          Savings are NOT guaranteed so it is not a very tempting option.

          If the new residents work all day and use electricity at night the savings will be minimal.

          Also an electricity meter with FID has yet another daily fee.
          So the savings are more and more diluted …

          • lgacb08 on 22/11/2019 - 08:18

            @LFO: Not minimal, depending on the states, even with 12c FIT and you export 100% a standard 6.6kw system can still give you around $700 a year

            • LFO on 22/11/2019 - 19:12

              @lgacb08: Minus daily solar connection fee.

              Doesn't solar panels need half yearly cleaning?

              Also some electricity retailers offer better rates without solar, just charging (more) per kW used.

              On top of that isn't taxable income as well??

              Yes there will be a benefit, you are correct.
              I just wonder if it is tempting enough.
              A double car lockable garage might be more seductive than solar panels for many.

              • lgacb08 on 22/11/2019 - 21:12

                @LFO: no, only fool pay for scammer to do that half yearly cleaning thingy, no idea where you get that idea from
                when you have solar, you'll have to shop around for better deal, but even with worse scenario like I said above that amount of savings is guaranteed, even the one with higher import tariff still have to offer FIT at minimum (12c like above), just a simple switch to another and you'll be guaranteed to save
                solar credit is not taxable, even with those still racking thousand $ of 60c/kwh premium FIT (we're talking about tenant savings here, so no point arguing about owner's tax implication, even so it'll be negatively geared anyway and the difference in tax is minimal)

              • Euphemistic on 24/11/2019 - 18:56

                @LFO:

                Doesn't solar panels need half yearly cleaning?

                No. They do need to be clean for maximum efficiency, but are designed to be cleaned by rain.

    • Lunarboogie on 20/11/2019 - 04:08

      Say what? Depreciation is a deduction which compounds the additional income earned in higher rents. It doesn't negate it.

      • Soluble on 20/11/2019 - 06:27

        But you're earning additional income which will affect negative gearing. I'm saying that even if you got the additional $10 if your depreciation isn't $520 a year(it won't be) you wouldn't get the full benefit.

        • Lunarboogie on 20/11/2019 - 10:02
          +1

          Wrong. OP will still be $10 ahead per week in real terms. The depreciation of $520 will cover the increased rent so from the perspective of the ATO, it is negated (and yes you can depreciate 10 per cent of the costs of installing panels each year, so $520 is about right for a $6000 system). But from the perspective of OP's hip pocket - he's ahead. Unless you work for the ATO, this is a net gain. To say nothing of course of the environmental benefits.

          I am moving overseas for three years in Janauary and I'm thinking of installing solar before I go. This thread has helped.

  • SnoozeAndLose on 19/11/2019 - 19:01

    My IP has solar panel 3kw system, always rent out within 2 weeks and $20 above the market avg.

    • Muffinman01 on 19/11/2019 - 20:03

      This is what I’d hoped (but didn’t think) everyone would say!

      I thought it might not command extra rent, but would be a good way to differentiate and make it less likely to ever be empty.

      What sort of demand for rentals is there in your area?

      • SnoozeAndLose on 19/11/2019 - 20:18

        Current tenant stay there for 2.5 years, previous one 2 years

        The vacancy rate is about 2.6% when it was advertised, rent went up $10 18 months ago and stay the same until the end of next year.

        I ask the tenant they say the panel saving them more than $20 a week easily, however when I bought the house it came with the solar panels, so I can't compare the increase in rent for the panel.

  • Seraphin7 on 19/11/2019 - 20:21

    Frankly, I can't see the investment case here. Another $10/week (less agent's commissions, etc.) vs. what capital outlay? How many years to pay that back? How much extra interest are you paying while you wait for it to be paid back?

    • Muffinman01 on 19/11/2019 - 21:04
      +1

      Yeah you’re exactly right. When we first started looking in to it, we definitely weren’t thinking longer term. As soon as I stepped back and thought about it long term, I struggled to see the value, but thought I would pose the question to see if I was missing anything.

  • elgrande on 19/11/2019 - 20:39
    +1

    I'd say no.

    One extra thing that can break and will need to be fixed.

    Also the tenant will be getting the saving, not you.

  • Mikey85 on 19/11/2019 - 20:53
    +1

    I think you need to confirm that tenants will pay a premium by hearing from them, or possibly real estate agents (not ones trying to win your business) and overlay this with cost, depreciation, additional sales vale in future etc.

    Also, do you have a pool? This would build a dependency on solar.

    Personally, if I lived in QLD I would pay $10 extra a week to save that and more in elec. And when you sell, who would buy a home with no panels? Unsure.

    • Muffinman01 on 19/11/2019 - 21:10

      This is what I was thinking too, I’m going to try and find some property managers to ask them if it’s something tenants look for. I’m obviously not sure myself, but if people are potentially willing to pay a small premium and/or if it helps someone choose my place over another meaning it’s rarely/never empty, then it’s possibly worth considering.

  • [Deactivated] on 19/11/2019 - 21:43
    +1

    I didn't get solar when I bought 10.5 years ago. Figured I'd move within 5 years. Still haven't moved. Still think I'll move within 5 years….

  • tryagain on 19/11/2019 - 21:55

    What part of QLD are you in, the QLD government is currently tryaling a solar for rental properties but it's only currently in FNQ and only for current rentals AFAIK

  • slowcoach on 19/11/2019 - 22:32

    You could investigate this option if it’s se qld:

    https://www.sunyield.com.au/

    I was considering a similar deal for a new house build. In that case the company would own if for first 5 years then it’s yours. Not flexible in brands or size of installation though. And the 30% off sounds really good, but it’s 30% off a not great rate and no other discounts. Might be better from landlord point of view.

    • Muffinman01 on 20/11/2019 - 22:22

      This is interesting, thanks for the info!

  • mrmachine on 20/11/2019 - 07:56
    +1

    https://www.solaranalytics.com/au/blog/solar-analytics-annou…

    I think you can easily make a case to charge more per week with solar if your system can demonstrate the savings and help people indentify where their usage is occurring. But the most benefit will be for users who work from home.

    • HeWhoKnows on 20/11/2019 - 12:34
      -1

      From 40 years experience your assumption is 100% incorrect.
      Tenats look at the property, the location and the amount of rent.
      Nothing else matters!

      • mrmachine on 20/11/2019 - 12:42

        You have 40 years experience renting properties with solar panels installed? Wow.

  • HeWhoKnows on 20/11/2019 - 12:33
    +1

    You want an anwser from a landlord of 40 years.
    Tenants will always go for the cheapest property that suits thier needs.
    Solar panels are NOT on thier bucket list.
    Neither is FREE electricity believe it or not.
    In fact neither of these items are tick boxes in property searches.
    So even if you mention in your advert it falls on death ears

    • Muffinman01 on 20/11/2019 - 22:21

      This is what I was thinking. When I think of it from a tenant’s point of view, they’re probably only going to look at price. If you consider search engines as you say, people will look at price first before they even get in to any additional features.

  • SlickMick on 20/11/2019 - 15:32

    I've got a note to look into this same question, because I believe there is a deal going around to get a government subsidy to install solar panels, and also bump up the rent, so everybody wins, but mainly the landlord??

    Sorry don't have time to even find what notes I made re this, but when I get around to it I'll check back here. Hopefully somebody else will provide clarification?? :)

    • Muffinman01 on 20/11/2019 - 22:21

      Oh that would be interesting if that were the case! I haven’t seen anything on it, but I’ll try my good friend Google and see what I can find!

    • Muffinman01 on 20/11/2019 - 23:03

      I've been able to find this, but it's only being trialled for properties in Bundaberg, Gladstone and Townsville at the moment. Is that what you're referring to?

  • Euphemistic on 20/11/2019 - 19:52
    +1

    It probably wouldn’t be a wise investment. The payback period is likely to extend into when you lease the property and you might not get the benefit.

    If, however, you are more motivated by the environmental benefits of the system then just do it.

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