People passionate about solar panels and companies that sell them will tell you that buying and installing them will increase the value of your home. But do they really add to your home’s value?
In this article I will discuss when and why it might be the right decision for you to buy solar panels. (Renting solar panels will be in further discussions.)
When it is a good time to buy solar panels:
- When you have already invested in sufficient insulation and upgraded windows.
- When your motivation is to reduce your carbon footprint.
- When you plan to be in your home for 20 or more years.
- When your electric bill is high for your neighborhood.
- When your income is high enough to justify the tax write-off.
When not to purchase solar panels:
- When the home is an investment/rental property.
- When you plan to sell the house within 5 years.
- When your aging roof is within 5 years of needing to be replaced.
Recently, a friend purchased solar panels for her home. She and her husband have no plans to move in the next 20 years. Their electric bill is high compared to their neighbors’ because they lack upgraded windows and sufficient insulation in their home. At the end of their first full month with the solar panels installed, they got a notice from Xcel Energy that the company owed her $6 for adding to the power supply of the electrical grid. When considering her electric bill prior to the solar panels, and the savings that she accumulates from the purchase, she found that it would take about 20 years to repay the investment in the panels. She also wonders how large her electric bill would have been if she had first invested in better insulation.
My friend has no plans on moving, but if you are thinking of selling your home in the next few years, consider this: solar panels are not considered a financial asset. Unlike new appliances in your kitchen, appraisers do not add value for solar panels. If you add $30,000 of solar panels onto your roof, you might not be able to raise the sale price of your house to justify that cost. In other words, if you deeply desire putting solar on your roof, only do so only if you have a fairly new roof and are planning on staying in your home for many years.
The benefit of installing insulation and new windows is that you can then know the needs of your home so that you install the right amount of solar panels. Without installing the upgrades, you run the risk of over-installing solar panels, which will cost you more money, rather than saving you money.
When I purchased my first house, it was specifically purchased as a rental property, not as a primary residence. The house already had solar panels, but they were not yet paid off. I tried to wrap the price of the solar panels into our current mortgage, but couldn’t and was told that we had to buy them outright. This added $20,000 to the down payment and cost of the house. Worse, since it was an investment property, I would never see any benefit (moneywise) of having the solar panels, though they make my tenants happy since their electric bills are low. I was a new homebuyer/investor and didn’t think to negotiate with the seller for the price of something I would never use. Since it is part of the utilities, I cannot charge extra rent to my tenants for solar panels – or at least, not enough to make it worth having them. The only benefit of having them is the carbon footprint reduction.
One thing to understand in renting versus buying: when owning solar panels, you are fully in charge of the maintenance costs. Two years after I purchased the house, I did some renovations on the house and the roof. The removal of the solar panels and electric wiring cost over a thousand dollars. I had to coordinate getting the solar company, the roofers and the electricians all aligned when it was removed, then again when it was replaced. When considering adding solar on my own house, I would be happy to offer some of my yard space for solar – but not my rooftop.
We all want to make a positive environmental impact during our lifetime, which includes leaving the world a better place than when we arrived. The issue is, is rooftop solar really the way?