#1 Home Improvement Project: Solar
Bet you thought it landscaping, or maybe a new kitchen would be the #1 home improvement project (HIP). But when compared to solar there is no comparison. Between solar adding $15,000 of direct equity to your home on average and getting a 100% ROI (while most other HIPs barely reach a 75% ROI), it's truly a no brainer.
During the past year, solar powered homes sold for 4.1% more on average than comparable homes without solar power. For the average-valued home, that equates to an additional $9,274!!
LOCATION! LOCATION! LOCATION!
As it has always been in the real estate industry, it's always about location and the sale of solar homes varies substantially by market.
EX1: In Riverside, Calif., for example, homes with solar-energy systems sold for 2.7% more than comparable homes without solar power—a markup of $9,926 for the average-valued homes in the area.
EX2: In the greater New York City metro, solar-powered homes have a premium that is double that of Riverside. At 5.4%, that’s an extra $23,989 in value for the typical home in New York.
In three other coastal metro areas—Los Angeles, San Francisco and Orlando, Fla.—homes with solar power can fetch a premium of around 4%
Personal Preferences Play A Role, Too:
Our society is more cognizant of our energy use over the past couple decades. We have transitioned our homes with LED lights and our appliances have been upgraded with Eco Modes, so we keep making progress towards being energy efficient. And that mentality has carried over to home buyers too. More than 80% of home buyers say energy-efficient features are important, according to the Zillow Group Consumer Housing Trends Report.
UC Berkeley Study: Solar Panels Increase Property Values
Multiple studies have shown that homes with solar panel systems are valued and sold at prices above similar homes in their area. Early studies focused on established solar markets such as California found that home values increase by four percent or more when homes are equipped with solar panels.
Lawrence Berkeley National Laboratory, a research laboratory affiliated with the Department of Energy, continues to expand on that research as solar grows across the U.S. The Lab’s 2015 Selling Into the Sun report analyzed sales of solar-equipped homes in eight different states over 11 years with the goal of determining just how much value solar adds to a home’s sale price. The key finding: on average, homebuyers are “consistently willing to pay PV home premiums” of approximately $4 per watt of installed solar capacity (note: this study only covered homes where the solar PV system was owned, not leased).
For a standard 6-kilowatt solar PV system, this means that solar can add $24,000 to your home’s resale value!!
Can your property value increase if you lease your solar panels?
Installing solar panels on your home can increase its value, but ONLY if you own the system. If you install a solar panel system through a lease or PPA, you are essentially “renting” it from the third-party owner.
Since you don’t own the system, it cannot be included in assessments of your home’s value. Most studies about solar and home values focus exclusively on owned solar energy systems. Many of the same factors that drive your overall financial returns also drive increases in property values.
Not surprisingly, the largest increases are in areas where electricity rates are high and strong solar incentive programs exist. All of this is great news for property owners with solar PV systems: they not only recoup the initial cost of their systems when they sell, but also receive a premium that will increase their returns on their investment.
Recognizing that solar power systems add value to a property, the real estate industry is working to create more sophisticated methods for accurately determining the market value of solar, as well as the financial value of properties equipped with solar power systems. The point is this, solar is the most affordable home improvement project that adds the most direct equity to your home as well as a 4% higher resale value all with a 26% government provided discount.