With sunshine as your tenant, there is no chance of late payments or eviction. Good investors use good debt every day to acquire investments that pay for themselves. An old rule of thumb, but a good one, is that an investment should have a seven year payback. This is how many real estate investors quickly decide if the rental income justifies the price of a property.
Right now with tax incentives and rebates, a solar investment will pay for itself in 5 to 6 years. that’s a 16% return. Compare that to a bank CD with a 2% return and a 22 year payback period, or to a higher risk investment with an 8% return and an 11 year payback. Solar tax credits and rebates are are realized when a tax return is filed. This may require solar purchasers to finance some or all of the installed cost of the system until next tax season. When returns are filed 80% of the balance can be paid off.
The 20% remaining may be financed and paid for with the utility savings over a few years. After the payback period all of the monthly savings go right in your pocket. Solar equipment has been made exempt from property tax assessment. Although the system will increase the appraised value of the property, it can not be factored into the assessed value for property tax purposes. Your home made electricity is tax free as well.
Any CPA will tell you, reducing expenses goes straight to the bottom line. To gain $100 in income after taxes might require $150 in pay or earnings. $100 in solar income is an immediate $100, it’s part of the beauty of letting the sun work for you. For the finance savvy out there, we have not done a discounted net present value of cash flows because we also did not include utility rate increases in the calculations.
Although solar is an incredibly durable technology with no moving parts to service, some maintenance expense and cleaning is required. Again, with utility rates increasing by 33% from 1997 through 2008*(data from the U.S. Energy Information Administration) energy inflation and interest rate adjustments very nearly cancel each other out.
If you would like more information about hiring Sunline Energy or to find out how we can custom tailor a solar system for your usage simply fill out the form below or give us a call at (858) 252-2280.