Installing a solar system on your commercial building is a terrific method to boost revenue and is becoming increasingly popular. Is it, however, permissible to sell electricity to your tenant? Do you have to register as a utility firm and comply with a slew of complicated billing and licensing requirements?
Is it possible for a landlord to sell power to a tenant?
Yes, you can sell power to your tenant, in a nutshell. However, the crucial words are in that statement. The landlord can offer power to their renter in exchange for a portion of their rent. It is done on a regular basis.
What do you do if you’ve previously agreed to a lease rate depending on the tenant purchasing electricity? You create a lease addendum depending on how much electricity they consume on a long-term basis, then make periodic changes up or down to keep things balanced. You can only charge as much as the utility company. They will keep their utility account, but they will also receive a charge from their landlord. If you charge the same as the utility, their net bill will be the same. If you provide them a ten percent to twenty percent discount, they will save money and you will have a long-term tenant.
The lease addendum must follow a specific format, which CitiGreen may provide. You cannot require the tenant to purchase this electricity from you in a lease addendum, but you can make it a demand in a new lease. Because solar electricity has no drawbacks, there should be no reason why any tenant would not want pure, clean energy generated on site. There will certainly be no explanation if it comes with a discount. It shouldn’t, however, necessitate a discount to win permission.
You’ll need a revenue-grade monitoring system installed alongside your solar system to track the quantity of electric power consumed by your renter in order to know how much to bill. These systems are inexpensive and come standard with every CitiGreen system. They’re online, and you can enter the start and stop dates to get the number of kilowatt hours (kWh) used. When you multiply this number by the rate you charge per kWh, you obtain an amount to bill your tenant. CitiGreen, or any other bookkeeping tool, may create a template invoice for you.
You can’t bill for anything else than utility bills, a monthly meter charge, or demand costs (since this would double bill for this). Simply divide the usage fee by the number of kWh on their electricity bill to get the kWh rate. Depending on the rate and utility, you should get a value between $.10 and $.30 per kWh.
By selling power to your tenants, you can boost the income and value of your properties by following a few easy regulations.
Is it necessary for me to install solar panels on my rental property?
As a landlord, you’re certainly always looking for new ways to make your rental property more profitable, and solar panels are a terrific way to accomplish just that.
Boston Solar can assist you and your tenants profit from a solar installation by installing solar energy systems for multi-family complexes and other types of rental properties in Massachusetts. We’re the leading solar firm in Massachusetts, having completed over 4,500 solar installations.
How Can Landlords Benefit From Solar?
Solar panels can help you whether you’re an onsite landlord (you live in one unit and rent out the rest) or an offsite landlord (you rent out all units and live somewhere else). The following are some of the most important advantages of solar panels for rental properties:
- Your personal electric bills can be reduced or eliminated (if you live on site)
- Assist tenants in lowering or eliminating their electric bills.
- If you pay your tenant’s electric bills, you can lower your running costs.
- In order to offset the expense of electricity in communal areas,
- Justify a higher rent for tenants on a monthly basis (if tenants pay their own electric bills)
- Reduce the carbon footprint of your building.
- Increase the number of tenants.
- Enhance the value of your home
- Make yourself eligible for tax rebates and other solar incentives.
How Does Solar Work With a Rental Property?
Your solar system will need to be connected to a meter when you install it at your rental property.
You can connect your solar panels to that meter if your building only has one electric meter and you cover your tenants’ electricity as part of their rental agreements.
We’ll assess your circumstances to find the optimum net metering and SMART strategy if each apartment has its own meter and your tenants pay their own power bills.
Following our evaluation, the connected units will be able to utilise electricity generated by your solar panels, as well as draw electricity from the grid when the solar panels aren’t producing enough.
When you install solar panels, the utility will need to replace your present electric meters with bi-directional meters because electricity will be traveling to and from the grid.
Add a Virtual Tenant with Solar
Solar panels on a multi-family property are like having a virtual tenant on your roof! You might reduce or eliminate electricity bills (for on-site landlords) and earn on-time, monthly incentive payments that are extra money to invest in your properties by earning a tax credit on your solar energy installation and solar incentives like net metering and SMART.
Understanding Your Solar Financing Options as a Landlord
For long-term financial benefits, purchasing your solar panel system (rather than leasing it) is the best option. However, the initial expense of a solar system can seem overwhelming. There are solar finance options accessible, thankfully.
You can own solar for no money down and make a fixed monthly payment until the loan is paid off with a solar loan. Because you are the direct owner of your solar panels when you finance them, you are eligible for all solar incentives, including SMART and the federal solar tax credit.
Is leasing solar panels a good idea?
From a financial standpoint, leasing solar panels for your home is not a good idea. It is simply not something we recommend. In most circumstances, looking into other financing choices like an FHA Title 1 loan or a regular loan through your personal bank will save you a lot of money in the long run.
When you buy, loan, or lease your system, the graph below displays the average return on investment. The difference between getting a loan and paying cash for a system is little, with leases and PPAs (power purchase agreements) lagging far behind.
Why aren’t solar panels installed in apartments?
“However, solar energy is found in less than 1% of apartments and even single-family rental homes.” This is due to the split-incentive problem, which occurs when the interests of renters and property owners are not matched when it comes to rooftop solar.
Is it possible to deduct solar on a rental property?
The US government grants tax credits for solar-powered systems in an effort to encourage Americans to utilize solar energy. Let’s look at some of the advantages of the solar tax credit and how to apply for it.
Tax benefits of going solar
Using the sun for energy has a number of advantages. Consider solar energy:
- Our usage of coal and other fossil fuels is reduced.
- As a result, your own carbon footprint is reduced.
However, because solar power equipment installation can be costly, the solar tax credit can help you offset some of the expenditures.
Solar tax credit amounts
If you install renewable energy equipment in your house, you may be eligible for a tax credit of up to 30% of the entire cost. The percentage you can claim is determined by when the equipment was installed.
- Equipment installed between 2017 and 2019 will receive a 30% discount.
- Between 2020 and 2022, there will be a 26% increase in equipment placed in service.
- 22% for equipment that will be put into service in 2023.
As a credit, you deduct the amount from your tax payment instead of deducting it from your taxable income.
Qualified homes
You must have made energy-saving modifications to your U.S. residence to qualify for the solar credit, which can include:
- Apartment in a cooperative
- Federal Manufactured Home Construction and Safety Standards-compliant manufactured home
Qualified equipment
The following is a list of qualified energy-saving equipment:
- Units that use the sun to create electricity or heat water.
- Heat pumps that use geothermal energy
- Wind turbines that are small in size
- Property of a fuel cell (maximum of $500 per half-kilowatt of capacity)
- Roofs and roof products that gather solar energy
- Solar energy storage devices
- Some labor and installation charges
The solar tax credit does not apply to leased systems or systems that are used to heat a pool or a hot tub.
Claiming the solar credit for rental property you own
Solar panels installed on rental properties that you own are not eligible for the residential solar credit. However, you can claim it if you live in the house for part of the year and rent it out while you’re not there.
- To represent the time you’re not there, you’ll have to lower the credit for a vacation property, whether it’s a rental or not.
- For example, if you only live there for three months a year, you can only claim 25% of the credit. The 26 percent credit would be $2,600 if the system cost $10,000, and you could claim 25% of that, or $650.
- $10,000 system cost multiplied by 0.26 (26 percent credit) equals $2,600 credit.
- $650 credit amount = $2,600 credit amount x 0.25 (25 percent of the year)
Filing requirements for the solar tax credit
You must include IRS Form 5695 with your tax return to receive the credit. On Part I of the form, you’ll compute the credit and then enter the result on your 1040.
- If you have a larger credit than income tax due in 2021a $3,000 credit on a $2,500 tax bill, for example, you won’t be able to use the credit to receive money back from the IRS. You can instead carry the credit forward to 2022.
- You can file an updated return if you didn’t claim the credit the prior year.
The household solar tax credit is currently scheduled to expire at the end of 2023. If you’ve been considering adding solar energy to your home, now is a good time to do so.
Cost
The cost of purchasing a solar system is relatively expensive at first. Solar panels, inverters, batteries, wiring, and installation are all included in this cost. Nonetheless, because solar technology is continually improving, it’s realistic to predict that prices will continue to fall in the future.
Weather-Dependent
Although solar energy can be collected during overcast and rainy days, the solar system’s efficiency is reduced. Solar panels must be exposed to sunlight in order to collect solar energy. As a result, a couple of overcast, rainy days can have a significant impact on the energy system. It’s also important to remember that solar energy cannot be collected at night.
Thermodynamic panels, on the other hand, are an option to consider if you need your water heating solution to work at night or during the winter.
Check out our video for a breakdown of how effective solar panels are in the winter:
How much do solar panels really cost?
According to the Center for Sustainable Energy, installation and the system together might cost between $15,000 and $25,000 on average. Electricity rates are heavily influenced by where you live. According to year-to-date 2021 data from the US Energy Information Administration, the national average is around 13 cents per kilowatt-hour.
What is the amount of the solar tax credit in 2021?
You’ll be eligible for the federal solar Investment Tax Credit at the federal level (ITC). In 2021, the ITC will offer a 26 percent tax credit on solar panel installation costs, as long as your taxable income exceeds the credit amount.
This ultimately translates to a 26% reduction on your home solar system for most households. So, if your system costs $20,000, the ITC will allow you to claim a tax credit of roughly $5,200.
What does leasing solar panels imply?
A contract with a solar firm that allows you to have a solar energy system put on your roof for little or no money up front. You will “rent a solar system in exchange for the benefits (i.e. the electricity) the system produces under this contract.
Is it possible for me to install solar panels in my apartment?
Yes, solar panels can be installed in your residence. Solar panels for apartments are available from a variety of companies; nevertheless, powering your complete flat with solar energy may be a difficult endeavor.
To power an apartment, how many solar panels are required?
The usual home solar system has 20 to 25 panels, but the actual number you’ll need depends on a variety of factors, including where you live, how much energy you consume on a regular basis, and how much power your panels can generate.