Solar for Rental Properties; A Good Investment?

THE BASICS

We are asked a lot about payback, and as time goes on the financial performance of solar continues to get better. It has become a stable and worthwhile economic venture; especially when a grant program is available to help offset upfront costs.

Increasingly, property owners are starting to put solar to work for them as well. On the surface it seems counterintuitive to invest in something that only helps your tenant offset their costs, but let’s take a look at how both the landlord and tenant can benefit.

A WIN-WIN DEAL

Solar on a rental property works with one key agreement in place. Including utilities (or at least the electricity fee) in the rental rate gives the tenant a stable rate, that they know they can rely on during their entire tenancy. It also allows the owner to recover the cost, turning the solar array into an asset which generates a steady income.

By collecting for the electricity bill and offsetting the cost with solar, a property owner can create a win-win situation with their tenant. The renter and landlord from the photo below agreed on a base electrical cost at the average monthly amount from the previous 12 months, and agreed to cap the usage at 1000kWh/month (unfortunately no Bitcoin mining allowed on this deal). The renter is insulated from utility cost increases and can budget every month identically in terms of cost of living, rather than waiting for the bill to arrive and then adjusting. The landlord is able to manage the utility bill, and, in Alberta, take advantage of Solar Club in the summer months. This allows the landlord to pay off the initial investment of the array, and generate additional monthly income in the peak production months.

IS THERE A CATCH?

As with most things in life, communication is key. The deal should always be a win-win; the property owner needs to charge a fair monthly amount to the tenant, and it should be locked in for at least one year, with an agreed upon escalation rate. In this situation the renter needs to be conscious of their consumption i.e. running 3 space heaters 24/7 in the uninsulated garage doesn’t benefit anyone let alone reduce GHG emissions. If the owner and renter work together and negotiate a fair agreement, solar on rental properties should be a no-brainer for both sides.