Solar Panels for IPs?!
- Thread starter Cloudy_
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Does this increase rental? Will a tenant prefer a property because of solar panels? I doubt it. Rather save the money an put a new kitchen or something that you are certain it'll raise the rent.
My two cents
My two cents
We just got our first power account since having solar. We paid $12.5K for a 5kw (?) system. Our saving for the 90 days (I think we were connected most or all of that time) is $290. Our power bill was $166. For 60 days of that, we had an extra two people living in our house using power like it was "free" 
.
We don't sit around in the dark, but we do try to be sensible in our use through the day. I wash at night (used to do that mostly anyway) and I'm running the pool filter at night. I also run the dishwasher at night (used to do that too mostly).
So we have not changed too much except to tweak a few things.
I'm happy for us in our PPOR, but would not be prepared to spend $12.5K (or even less for a smaller system) to save our tenants money unless we asked for higher rent to compensate us for the cost of installation. So the tenant would be asked for higher rent in order to get a lower power bill.
Tenants may like the thought of lower power bills, but they are not going to pay higher rent to get a house with solar, and why would they?
I believe the solar has added value to our house if we were to sell, or at the least, has made our house more attractive due to the substantial savings future owners can obtain because of having solar installed. We went for a more expensive German system, better quality inverter etc, so I am hoping it will hold its value more than some of the lesser quality set ups we could have got for a bit less.
As power costs more and more, who knows whether tenants will seek out those houses that save them money along the way... like houses with dishwashers and air-con being fairly standard now, but were not that way ten years ago? Right now, I cannot imagine any tenant being prepared to pay extra for solar power.
.We don't sit around in the dark, but we do try to be sensible in our use through the day. I wash at night (used to do that mostly anyway) and I'm running the pool filter at night. I also run the dishwasher at night (used to do that too mostly).
So we have not changed too much except to tweak a few things.
I'm happy for us in our PPOR, but would not be prepared to spend $12.5K (or even less for a smaller system) to save our tenants money unless we asked for higher rent to compensate us for the cost of installation. So the tenant would be asked for higher rent in order to get a lower power bill.
Tenants may like the thought of lower power bills, but they are not going to pay higher rent to get a house with solar, and why would they?
I believe the solar has added value to our house if we were to sell, or at the least, has made our house more attractive due to the substantial savings future owners can obtain because of having solar installed. We went for a more expensive German system, better quality inverter etc, so I am hoping it will hold its value more than some of the lesser quality set ups we could have got for a bit less.
As power costs more and more, who knows whether tenants will seek out those houses that save them money along the way... like houses with dishwashers and air-con being fairly standard now, but were not that way ten years ago? Right now, I cannot imagine any tenant being prepared to pay extra for solar power.
Hi wylie,
This is the reason why solar hasn't taken off.
Even at a risk free, unleveraged 5% p.a. bank deposit rate, you could have preserved your 12.5K capital and received $ 156 in interest for the 90 days.
Obviously, exposing the same amount of capital to a prudent amount of risk and a sensible leverage would see the returns easily outperform the solar panel returns.
I understand people purchase these for the feel good factor, and that's great, but it certainly doesn't stack up economically to buy solar panels.
Unfortunately, everyone who buys a solar system tries in vain to justify to everyone who will listen that it is a good move from a money perspective. Nothing could be further from the truth.
...and that's in year 1.
In 15 years time when the system is stuffed / rusted / cracked / conks out and your capital has gone and you need to inject further amounts of capital to replace it, that is when the solar industry is really exposed as a greeny feel good thing, and nothing more.
Everyone looks at the lowered opex, and deliberately ignores both the opportunity cost of the capex and the large back end capex required to continue having slightly lower opex charges.
For it to work, supply charges will need to come down dramatically, as well as installation and commissioning costs. With Australian labour components in most of those 3 areas, I won't hold my breath for any major downward movements.....and hence the solar industry will be a dead duck for a good while yet.
The benefit of solar really depends on how smart you are with the way you use it. We only had a 1.5kw system on our house that we sold and paid a total of $400 for power over a 2 year period (would have been less if I hadn't been so careless at times with my use of the clothes dryer). Granted we did have the benefit of the generous PFIT. I can't imagine still paying anything with a 5kw system though! We are currently completely off grid and looking to put a 5kw system which will cover all of our power use and some (currently running a measly 600w of panels and need to start the generator for the bigger appliances)
In saying that, I wouldn't bother with the expense on a rental property. Having just sold an incredibly energy efficient home and seeing that it had no effect on the price fetched or the interest in the property, I can't see that there would be a lot of benefit for a landlord to do it.
In saying that, I wouldn't bother with the expense on a rental property. Having just sold an incredibly energy efficient home and seeing that it had no effect on the price fetched or the interest in the property, I can't see that there would be a lot of benefit for a landlord to do it.
Hi Dazz. Its a bit misleading to compare yield returns without considering taxation imo.
A bank deposit of the 12500k at 5% will yield $158 gross allowing for tax (say 30% MTR and looking at one quarter) leaving you with $111 and an after tax annual yield of 3.5%. Allow for 3% inflation and a potential real return of 0.5% ...
With Wylies solar.. on his 12500k he has achieved an after tax return of $290 (assuming the feed in grid is offsetting his power bill no tax should be incurred)
If we make the assumption that this quarterly return will be averaged for the year. Wylie is achieving an after tax yield of 9.28% Again removing 3% for inflation leaving a potential real return of 6.28%. Not even taking into consideration the depreciation taxation benefits.
I dont think theres anything particularly wrong with the returns provided by his investment in solar.
I understand entirely your points of potential opportunity cost of capital and the potential of future costs to add to the cost base of the solar investment as the system depreciates. They are quite valid and would need to be taken into consideration.
But I feel the risk that needs to be undertaken to achieve a Real Return of 6.28% from direct property or shares would far outweigh the risks associated with the solar system that wylie has. I would go so far as to say the vast majority of people are simply incapable of actually achieving that level of return in there investing endeavours. You could be an exception
this is an old argument ,
the people with solar can see the monetary benefits and the people without solar see it as a waste of money
RandR - in your comparison of benefits, don't forget that the hot water system has a limited life. A deposit in a bank does not. That's what the "benefit" of depreciation is about.
I don't know the likely life so I couldn't say. But a lifetime of say, perhaps optimistically, 20 years, reduces the numbers you mention by 5% pa.
I don't know the likely life so I couldn't say. But a lifetime of say, perhaps optimistically, 20 years, reduces the numbers you mention by 5% pa.
Fully agreed - taxation must always be considered, in any calculation.
My simple example of cash in the Bank earning interest must always be considered as the default (no brain necessary) position for any decision as to what to do with your capital.
You seemed to ignore my further statement, that with a sensible amount of risk applied, and a sensible amount of leverage, the return on capital applied could easily achieve greater returns than what solar panels deliver.
I don't see any large investor (company or individual) throwing huge amounts at this type of "investment".....as the numbers simply don't stack up.
The discounted cashflow models which make the back end capex requirements of solar seem irrelevant in today's money won't be in 20 years time.
Those who chose to pay thru the roof (literally) and installed old inefficient panels back in the early 90's have now lost their capital completely, and if they wish to continue with their yield, will now have to spend another large amount of capital to replace their rusted / stuffed units.
arms - I guess it's an old argument because, like politics, you only see what you want to see. Selectively viewing mathematical numbers is a nonsense. There is no personal opinion with maths.
Those who proceed to invest with solar panels do so knowing full well they don't care about and ignore the capex. They sacrifice their capital for the "feel good" factor...but then try to assuage their real loss by emphasising the initial yield on the opex.
Anyone with an old busted solar system keeps very quiet about how much more money they'll need to pour into it to get it back up and running producing a return again.
To be honest, with three sons who don't care about the environment and who would leave air-conditioners running until I notice they are still on four hours after they left the room, and who would leave a room with a huge plasma still turned on, we decided on solar purely to save money as power bills increase through the coming years.
The only financial thing we looked at was to try to ensure that this system is paid for by the savings we make within about ten years. The figures we were shown seemed to show it would be, and now our first account seems to back this up.
This first bill covers winter. We have ducted air-con and three individual splits in three bedrooms. We don't use it a lot, winter or summer, but on a really cold day we'll turn it on or an hour to take the chill off the air. In summer, if it is really hot, I'll run the air-con... that's why we got it.
One son ran his aircon many nights (summer and winter) and when he lived here, that plus the pool plus a really stinking hot summer has seen our power bill go over $1K a few quarters, mostly due to a stinking hot summer.
Last four bills before installing solar were between $500 to $700 from memory. I'm careful, more trying to lessen our impact on the environment than financial reasons.
We also would not have done anything with the $12.5K that made us money, so it is not like we are sacrificing any investment potential.
We also hope that in 20 years (or whenever) this unit runs out of puff, that it will be much cheaper to replace.
Like plasma TVs that were $20K to buy and can now be bought for $1K.
Anyway, we are happy with it, happy that the kids seem to have worked out they need to turn things off when they leave a room (still haven't worked that one out properly), but I would not be putting these systems into an IP until it is much cheaper to do so.
Whilst we don't want a "return" on our $12.5K we would not want to spend that sort of money as incentive for our tenants to be more power aware. I know how much tenants will do to reduce water use (and cost to themselves) once they are paying for it, but that didn't entail landlords spending thousands of dollars. There was not so much care about water use when the landlord was paying...
The only financial thing we looked at was to try to ensure that this system is paid for by the savings we make within about ten years. The figures we were shown seemed to show it would be, and now our first account seems to back this up.
This first bill covers winter. We have ducted air-con and three individual splits in three bedrooms. We don't use it a lot, winter or summer, but on a really cold day we'll turn it on or an hour to take the chill off the air. In summer, if it is really hot, I'll run the air-con... that's why we got it
.One son ran his aircon many nights (summer and winter) and when he lived here, that plus the pool plus a really stinking hot summer has seen our power bill go over $1K a few quarters, mostly due to a stinking hot summer.
Last four bills before installing solar were between $500 to $700 from memory. I'm careful, more trying to lessen our impact on the environment than financial reasons.
We also would not have done anything with the $12.5K that made us money, so it is not like we are sacrificing any investment potential.
We also hope that in 20 years (or whenever) this unit runs out of puff, that it will be much cheaper to replace.
Like plasma TVs that were $20K to buy and can now be bought for $1K.
Anyway, we are happy with it, happy that the kids seem to have worked out they need to turn things off when they leave a room (still haven't worked that one out properly
), but I would not be putting these systems into an IP until it is much cheaper to do so.Whilst we don't want a "return" on our $12.5K we would not want to spend that sort of money as incentive for our tenants to be more power aware. I know how much tenants will do to reduce water use (and cost to themselves) once they are paying for it, but that didn't entail landlords spending thousands of dollars. There was not so much care about water use when the landlord was paying...
No Dazz, I did not ignore your statement -
Well I am sure you have the experience/knowledge and means to be able to do so. The majority of people (imo) seem incabable of actually realizing any return. Just because you cant see any potential for acceptable returns from this area doesnt mean they arnt there Dazz
Personally I know someone who has invested a considerable sum of money into solar PV, and done so quite succesfully.Hey jeoffw, this discussion I believe is in regards to solar PV systems
not hot water. Your right, the limited life of the system would need to be calculated to produce a 'life of system' return on capital employed. Fwiw alot of PV panels come with 25 year performance output warranties, according to manufacturers the efficiency tends to trend downwards after that time period.The solar system is only generating during the day. This is when you need to be consuming the power.
Advice to us was to avoid using power through the day when we are "selling" what we generate back to the grid. The less we use through the day of what we are generating via the solar panels, the more we can sell back.
We then use washing and dishwashing machines at night, using power from the grid in a time when we cannot generate and sell our own solar to that grid.
I have mostly washed at night anyway, so this is easy for me. Same with dishwasher. Running the pool filter at night could be problematical for some people, but our pool is not close to any houses and doesn't present any noise issues for neighbours (so far).
That statement makes no sense whatseover. In your opinion most people seem incapable of actually realising any return at all....in any investment....surely you jest.
Just because you cant see any potential for acceptable returns from this area doesnt mean they aren't there Dazz
I didn't say that. What I said was....
I don't see any large investor (company or individual) throwing huge amounts at this type of "investment".....as the numbers simply don't stack up.
Come now - why so coy ?? Let's see the numbers without the smoke and mirror show.
Hahaha.....and what type of warranty comes with the manufacturers themselves ?? How long are they guaranteed to be in business for, without going into receivership, taken over by another company who doesn't honour previous warranties issued by the company being taken over, bankruptcy etc etc ??
If you've ever sat down and read the detailed warranties that the solicitors write, with strict instructions from the company executives to limit their liability to the customers to the absolute barest minimum....you'll know that as a customer, there ain't much joy in any of those warranties, even if the company is still there to honour it.
To me, having fully franked dividends being paid by very large companies, the proceeds of which carry imputation credits which alleviate a lot of the taxation issues, and can be applied to a power bill....and where the capital can not only be preserved but enhanced, seems eminently more sensible.....with zero effort.
Best to let it feed back into the grid during the day and get paid for it and then use things during the night to use off peak power. We were getting the PFIT at 66c and only paying about 11c for off peak so used power as little as possible during the day. This is one thing many don't understand about maximising the benefits of solar.
Not much use to those on the new crappy FIT though.
I guess it depends on what sort of metre you have. where we are any appliances need to hard wired to the off peak metre, otherwise you are charged peak rates no mater what time its used.
