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October 3, 2023
Leveraging Solar: A Guide to Increase Property Value for Rental Properties
Nikki Chi and Austin Young

Switching to solar energy to power multifamily rental properties is becoming more attractive for property owners and investors. Installation costs continue to decrease due to innovative systems and low financing rates. Property owners can also avail of solar tax credits, CapX deductions, rebates, and other incentives, all while they and their residents enjoy utility cost savings. And on top of these benefits, going solar has been reported to significantly increase property value. This post looks into the ways you can leverage solar and maximize the value it adds to your rental properties.

How Solar Energy Increases Rental Property Value

A study published in the Appraisal Journal of the Appraisal Institute, the nation’s largest association of real estate appraisers, reports that properties with solar systems are sold at more premium prices than non-solar properties. Furthermore, the study calculated that property values increase by around $20 for every $1 utility savings through solar. However, there are many more ways that solar increases rental property value:

Low Energy Cost and Reduced Carbon Emissions

Solar-powered multifamily properties attract residents with the prospect of paying lower utility bills while reducing their carbon footprint. Although rent in solar properties is higher than in non-solar, studies have found that people are willing to pay more for sustainable options. Even residents in low-income housing categories are willing to pay a higher rent for the eco-friendly benefits and the savings, albeit long-term, they will get from choosing solar.

Also, solar power is not only cheaper but more stable than grid-based power. The stable solar rates mean that residents in solar-powered rental properties will experience fewer rate hikes in their utility bills. Stable utility rates result in higher resident retention, lower turnover rate, and consequently, higher property value.

Energy Efficiency and Better Weatherization

Switching to solar makes rental properties more energy efficient. High energy efficiency means less reliance on the grid and better weatherization or better protection from heat, humidity, ice, and other elements. These characteristics make multifamily buildings naturally attractive to residents, thus increasing their value.

Faster and Easier Resale and Attraction of Investors

Real estate investors, ESG-minded (Environmental, Social, and Governance) ones in particular, also place a high value on properties with energy efficiency and better weatherization. Investors and property buyers are likely to invest in properties that have an in-house supply of clean energy and can stand strong against the elements. Investors also value solar-powered properties for the substantial tax credits and incentives they can avail of upon buying them.

Enhanced Marketability

Solar-powered properties make it easier for real estate businesses to promote their products, services, and brand image. This is because the majority of Americans are environmentally conscious, have a positive attitude towards living sustainably, and view living in solar-powered homes as the easiest path to sustainability.

The National Renewable Energy Laboratory (NREL), a government-funded research center, reports that 8 out of 10 Americans want home builders to offer solar power options. And half of those surveyed are even willing to pay up to 10% more for a solar-equipped property. Thus, rental properties running on solar power have a better chance of standing out in the crowded market. On top of that, the added clean energy amenity allows you to offer a higher rent to compensate for your solar investment.

How to Maximize the Added Value of Solar

Although it has been proven that solar increases the value of a property, the degree of this increase can vary according to the property size and location, applicable state and federal policies, the abundance of sun power, solar system specifications, and many more. We recommend taking the steps below to ensure that you maximize the added value of solar in your rental property. 

1. Consult with an NREL-qualified energy auditor or contractor.

Doing solar right for multifamily properties starts with talking to the right people. An NREL-qualified energy auditor or contractor will help you identify your business goals and evaluate whether these goals align with your building requirements for solar. It’s easy to get the cheapest quotes for a solar system, but getting the wrong system for your building or business goals will only jeopardize your goal of increasing your property value.

2. Build a business case.

Thorough planning lets you evaluate your options and manage potential risks. Noting the recommendations from the energy auditor or contractor, write a detailed business case to jumpstart your solar project. Your business case for going solar should include the following:

  • Positive and negative cash flows 
  • Potential risks and how to manage them
  • List of financial incentives and the requirements to avail of them
  • List of financing options, including private and government-offered

If you’d like some expert guidance on the revenue possible from adding solar to your multifamily rental property, click here to request a Solar Revenue Estimate.

3. Always stay up to date.

The solar power industry is always evolving. The ever-changing technologies, policies, billing, maintenance, and other areas result in a solar landscape that is not the same as in past years. Staying up to date with the current and future solar landscape will help you take advantage of more solar benefits that increase your property’s value. 

To illustrate, less than a decade ago, multifamily property owners were rejecting solar because of the high investment and seemingly residents-only benefits of utility savings. But with the development of policies like Virtual Net Metering (VNM), property owners can now monetize their solar assets. With the help of innovative solutions like Ivy’s Virtual Grid software, your rental property has the opportunity to generate a new NOI (net operating income) and transparent energy billing for residents.

Leverage Solar with Ivy Energy

The rental property business is yet to utilize solar power to its maximum benefit. As discussed above, increasing your property value through solar is possible with the proper steps. And with additional support from Ivy Energy, the door is open for property owners to simplify the process of increasing property value through solar. Ready to increase your property value with solar energy? Request a free demo from Virtual Grid today!

Did you know?

CA has passed laws like AB802 and Title 24, mandating renewable energy on certain multi-family properties?

Click Here to learn more about how you can comply while turning a profit with Ivy’s Virtual Grid alternative to traditional Sub Metering.

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