How to increase your ROI: Solar Power

Solar PanelsSince my properties are in locations that get a lot of sun (Las Vegas!) I’ve often wondered what the ROI on installing the panels are. Especially now that I’m looking at this commercial property in Modesto! In my head (without any real knowledge) I was looking at it this way: If I can rent my roof space at .10c a soft I’ll get about 80% coverage.

Math Time:
.80 * 775000 = 62,000 sqft
62,000 * .10c = $6,200/mo
$6,200 x 12 = +$74,400 to my NOI
$74,000 x 10 = +$740,000 to equity
$740,000 to the Value of the Property

For not having to do anything for 25 years! Well the wonderful thing about not knowing what you don’t know, is that you don’t know anything that you should know! This pretty number was dancing around in my head and it made a lot of sense to follow-up on whether my brain was traveling down this magic path to profits. Thanks to LinkedIN (Add me), I had a solar panel guy! So I waited patiently until 9am this morning and gave the guy a call.

I heard the sound, I’m not sure if it was more like a volcano of disappointment erupting, the crash of the waves destroying my beautifully built sand castle, or the screeching of tires as that car behind you slams into your trunk. But there it was crushed. But I learned a lot about what it takes to add Solar Panels to your properties and increase your ROI!

  1. Southern Exposure – And plenty of it. If you aren’t facing south, try to face south-east!
  2. Flat Rood – The less of a slant your roof has the cheaper it is to mount Solar Panels
  3. Roof Top Blockades – It’s not good to have HVAC they occupy too much sqft!
  4. You get paid by tenants – This is the part I love/hate. You take on the Power Bill and sub meter back to your tenants. The cash flows to you and then you cut that by the yield of your solar panels and you keep the difference!
  5. The ‘lease’ is your cost – Apparently they are priced to break even at 7 years, and last 25

My Solar Panel guy did some google work while we were on the phone and he talked me through what the likely hood of me being able to profit from this endeavor:

Arlene – With Slopes, Tree, and Southern Exposure I could probably cover the cost of the common area expenses. After 7 years! Nope. Next.

Hopkins – I’d get a 50% of optimal yield which in Vegas would be about 50% of the power bill. So I could expect to shave 25% off the cost of the bills, and pocket that amount. Roughly. Now is that a benefit? I’d have to know what my tenants were spending on electricity but if I recall that would be roughly $25/mo. At 4 units x 12 months $1,200! Which is nothing to shake my head at. And would only be a benefit if I was planning on holding the property for more than 7 years (when I’d actually start getting the $100/mo).

Modesto – Remember the sound of the tree scratching the window in the middle of the night keeping you awake, or that horror movie rah-rah-rah sound? Yeah. I could cover less than 10% of my roof sqft. And then have to deal with the extra responsibility of paying electricity bills and sub metering.

So with the properties that I have, and the property that I am looking at it doesn’t make sense. But I learned, I dreamt, I tried, and I reached. Thinking outside of the box is how you go from having 15% Cash-on-Cash returns to 20 to 30% Cash-on-Cash returns. Keep dreaming about those dollars, because as the saying goes: If it makes dollars, it makes sense!

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