Is It Worth Putting Solar on Your Investment Property

Solar panels are a hot topic among owner-occupiers and business owners… But what about property investors and the rental market? Whether you’re a landlord seeking a way to increase property value and claim the expense on tax, or a renter who wishes to lower their electricity bills, there are a few key reasons why we would recommend solar to be installed on an investment property.  

In this blog, we’ll look at the pros and cons of solar for investment properties as we aim to answer the pressing question: Is it worth installing solar on a rental property?

Solar Will Increase Your Property Value

An impactful move you can make to improve your investment property’s worth is to install solar panels. It's more than just a trend; it's a solid financial strategy that can significantly increase your rental property's value.​

The logic behind this is clear-cut. Solar panels represent a tangible, long-term saving on energy costs, not just for current tenants but for future owner occupiers if you decide to sell. This added value is a powerful negotiation tool, enabling higher rental rates or resell value and ultimately enhancing the profitability of the property. What makes this investment even more appealing is its durability; solar panels have a long lifespan, ensuring that the property continues to reap the benefits for many years to come.

But the advantages don't stop at just financial gains. By integrating solar power into your properties, you position your investments at the forefront of the eco-friendly movement. This not only appeals to a broader market segment but also aligns with the growing societal push towards sustainable living. Incorporating solar power into your rental properties is a decision that pays dividends on multiple fronts. It's a testament to the power of renewable energy as not just an environmental choice, but a savvy investment strategy.

Your Rental Will Be More Attractive to Prospective Tenants

One notable risk as a landlord is the inability to secure a tenant for your property. Although this isn’t a problem in 2024 with the rental crisis persisting, there are always fluctuations in the market and sometimes, finding a decent, reliable tenant can be difficult. When the rental crisis eventually quietens, there are steps you can take to make your investment property more desirable and attract quality tenants; installing solar and advertising the system is one way to achieve this.

From a renter’s perspective, the prospect of saving on energy bills is not just appealing - it can be a game-changer. With solar panels, tenants can self-consume the energy the system produces during the day, lowering their grid electricity consumption during daylight hours and thereby reducing their overall bill.

Your Tenants Will Enjoy Low Energy Bills

It’s pretty easy to imagine that lower electricity bills = happier tenants. Happier tenants will be more inclined to stay long-term, take care of the property, and pay their rent on time.

As a tenant, living in a property with a solar system means manageable and predictable electricity bills. No more dread as you open your monthly utility bill; instead, you'll find yourself in a comfortable position to allocate funds to what matters to you. The financial breathing room solar power provides isn't just a temporary relief - it's a sustainable, long-term benefit that enhances your quality of life throughout your tenancy.

As a tenant, the benefits of solar energy might seem like a pipe dream, but it can be possible to reap the benefits without owning the home. It can be considered a big ask to request your landlord to install solar panels on your home, but it’s definitely worth proposing if you have a good relationship with your landlord and a long-term agreement. In conjunction with the benefits mentioned above, you can make the proposal more attractive to your landlord by including some of these options:

• A Split-Cost Agreement: Agree to a small increase in your rent to help cover the cost of the system
• Solar Feed-In Tariff Credit: Offer your landlord credits from the solar exports that could go towards the upfront costs
• Installation Rebates: Mention any relevant rebates that might be available to help your landlord offset the outright cost of the installation
• Renter to Purchase Outright: If you’re really keen, you could offer to purchase the system yourself.  With ROI’s typically 2-5 years, you could begin reaping the benefits if you have a long-term agreement with your landlord.
  

Your Property’s Rent Rate Can Increase

When your property stands out with solar installations, it no longer competes in the standard rental market. Instead, it appeals to a premium segment of tenants who value sustainability and are willing to pay more for it. As a landlord, this means you're not just recuperating the installation costs over time, but you're also setting up a more lucrative revenue stream. ​

By capitalising on the added value that solar brings, you position your property as an elite choice in the rental market. This strategic differentiation allows for a justified increase in rent. The decision to install solar panels is not just about today's benefits but also about securing your property's competitive edge and financial health in the future. 

Increase Sale Price & Turnaround Time

The initial investment in solar energy brings forth benefits to the value of the property, elevating the appeal and, subsequently, the financial worth of the asset significantly. By making a forward-thinking move towards sustainability, you can meet the contemporary demands of environmentally conscious renters and buyers and also position your property as a high-end offering in the real estate arena. This strategic alignment with green technology has facilitated a notable premium on rent and sale prices alike, mirroring the growing consumer preference for energy-efficient living spaces.​

The adoption of solar power can also have a profound effect on the liquidity of these properties in the sales market. Where once the period from listing to sale might have been protracted, the presence of solar installations has markedly accelerated this process. In 2022, Domain conducted a report on sustainable properties in Australia and found that “homes with energy-efficient features have greater buyer interest and sell quicker”. These findings were backed by Forbes, which reports that “homes with solar panels or systems sell faster than those without by 20%”.

​Prospective buyers, aligning with the surge in ecological awareness, are increasingly inclined towards homes that offer sustainable living options, showcasing a willingness to invest more in properties that promise reduced long-term energy expenses and contribute to a greener planet. 

This shift in buyer priorities has not only amplified the marketability and, consequently, the valuation of properties with solar systems but also significantly reduced the waiting times for sales to conclude. The advantages are twofold: a more compelling property offering for environmentally aware purchasers and a streamlined sale process that benefits sellers through faster turnovers and decreased holding costs.

Is the Return on Investment (ROI) Worthwhile?

Initially, the prospect of equipping rental properties with solar panels may seem like a great opportunity, however, when delving deeper into the financial returns for landlords, the picture becomes slightly more complex. The ROI of installing solar systems on rental properties isn't always as straightforward or immediately beneficial as one might hope. For landlords, the upfront costs of a solar system can be substantial and the payback period can extend beyond initial expectations, primarily when the financial benefits—such as reduced energy bills—are directly accrued by the tenants rather than the property owners themselves.

Furthermore, while the property's value might indeed see a bump, this doesn't necessarily translate into immediate financial gains unless selling the property is on the horizon. Rental price increases to recoup the investment can be marginal in competitive markets, where setting prices too far above the average can deter potential tenants.

However, despite these challenges, a strategic approach to investing in solar can indeed pay off. A combination of state and federal rebates, a careful cost-benefit analysis, and the ability to claim the system on tax, can minimise initial outlays and potentially expedite payback periods. Plus, if properties are structured under a solar lease agreement or a Power Purchase Agreement (PPA), landlords could secure a regular revenue stream. These financial instruments allow landlords to sell excess solar energy back to the grid or to the tenants themselves, hence turning the initially perceived drawback into a potential financial advantage.

The Upfront Cost Outweighs the Benefits 

The reality of installing a quality solar system is that it’s a hefty financial commitment. As a landlord, the initial expenditure would come straight from your pocket, creating a substantial financial outlay that doesn't offer immediate tangible benefits to you as the owner. 

This investment contrasts sharply with other property improvements that might increase the rental value or attract tenants more directly. Solar installations require a long-term perspective, banking on eventual returns through increased property value and potential tax incentives, rather than immediate financial benefits or savings. The reality is that while the tenants enjoy lower energy bills from day one, the return on investment stretches far into the future. This imbalance between upfront costs and delayed benefits necessitates a careful evaluation, especially considering the significant outlay required to go solar.

Landlords Don’t Benefit From Lower Electricity Bills 

The initial cost of the system is a significant investment that heavily affects the decision-making process for investment property owners, especially when their tenants reap the most reward. While the introduction of energy-saving solutions like solar panels directly lowers electricity expenses, offering an immediate financial reprieve for the occupants, landlords bear the cost of installation and maintenance. 

This discrepancy might seem off-putting at first glance; after all, the hefty upfront financial outlay needed for solar panel integration does not directly reduce your monthly expenses or increase your cash flow. However, when you look at the bigger picture and take into account your long-term goals for the property, this discrepancy might become less of an overwhelming negative. It is important to take the bigger picture into account when deciding on the feasibility of installing the solar system, as this can give you a clear idea of whether or not it's a worthwhile investment.

At the end of the day, there are plenty of factors to consider when deciding if installing a solar system is right for your investment property. While there are undeniable advantages like reduced utility bills, which in turn can increase property desirability and possibly extend tenancy durations, there are also considerations and potential drawbacks to be mindful of. Of course, we want everyone to be able to take advantage of the benefits of solar, but we aren’t blind to the reality that solar is still a considerable investment - which is especially important when it’s not an investment you’ll immediately see the benefits of. 

All of these factors need to be carefully considered to help determine whether or not putting solar on your investment property is worthwhile. If you’re considering investing in solar, we recommend reaching out to a reputable solar installer (like us!) to help guide you through the process and give you the key information you need to make the right decision.

Springers Solar | Queensland's Most Experienced Solar Installer 

Springers Solar provides quality components with proven performance, backed by industry-leading warranties, and dedicated after-sales support. Thousands of satisfied customers over 22 years of operation make Springers Solar one of the most established and experienced solar companies in Australia. 

Springers Solar has received multiple awards for design and installation and is a certified/preferred installer for a large range of solar panel, inverter, and solar battery manufacturers, including Sungrow, Tesla, and SolarEdge. 

Our dedicated in-house team of electrical engineers, project managers, solar PV designers, solar installers, and electricians work closely with you before, during, and long after your project is completed. Springers Solar offers an industry-leading 10-year workmanship warranty which is a testament to our qualified staff and offers you outstanding value and peace of mind.