All Topics / Value Adding / Adding Equity Through Solar Panels?

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  • Profile photo of bugeye23bugeye23
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    @bugeye23
    Join Date: 2012
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    Hi guys, this is my first post in this forum, i am currently adding a 5kw solar panel system to my house cost $10499 and through all my calculations averaging out the system will produce $954 a quarter worth of electricity. My average bill is $490, so this means i will generating on average $464 quarterly income.  Or $1856 every year + my bill of $1960 = $3816 So from these calculations it will of effectively paid for itself in just under 3 years.. Quite excited about this :)

    Now what i am interested in knowing is will this addition to my house add equity to my home? if so how much?
    I think it definitely would my reasons are as follows
    1. It is an income producing asset
    2. whoever buys my house in the future would never have to pay for electricity again.
    3. if I was to rent my house out, I could also include electricity in the rent as well as pocketing the excess they don't use every quarter

    thanks for reading my first post and looking forward to all replys.

    Profile photo of grantos_champosgrantos_champos
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    @grantos_champos
    Join Date: 2009
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    Should definitely add value. How much? Probably not as much as if you spent $10.5k on paint/carpet/fittings/move some walls/re-do the entrance/build a deck etc etc. I don't know much about solar panels but I assume there is probably more maintenance involved than with normal power?
    I would be spending that money on giving the house some real wow factors for when people come through.

    Profile photo of bugeye23bugeye23
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    @bugeye23
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    Thanks for your reply, My house was built 3 years ago so everything that could of been done has been done. Its a brand new home! so their isn't anything I would  upgrade. Surely having an income producing asset within the house would add more value then repainting walls and new carpets or fittings or decking in a new home?

    If i went to buy a house, And House 1  was 3 years old granite bench tops, the works a really nice house for say 400k, and then a couple of streets over was a very similar house but it was producing money every year  that would most likely cover the rates as well as having no power bill surely it would have to be worth …..well I don't know that's why i started this topic to see what people think something like that would be worth compared to house 1. How much extra would someone be willing to pay?

    The only maintenance involved with Solar panels is you are recommended to give them a clean with water and a sponge once a quarter.. apart from that you don't have anything else to do with them to maintain them.

    I bought award winning solar panels that produce the most amount of electricity out of all the panels on the market and also have a quality inverter that everyone I know recommends. so i have peace of mind knowing that this system will not be breaking down any time soon it comes with a 25 year warranty.

    Profile photo of BMWBMW
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    @bmw
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    The problem is your income is only possible due to government subsidies and rebates. 
    How long will these last?  Probably not long with a slowing economy and a general push back against green madness (thanks to the Carbon tax).
     
    In NSW new installations only recieve 20c per KW tariff down from 60c.  this also applies if a connection changes.

    also inverters need changing after 10 years, panels 20 years but loose some generation capacity over time.
     
    Depending on the feed in Tariff and location your estimated income may be incorrect.
    try this calculator

    Profile photo of bugeye23bugeye23
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    @bugeye23
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    Thanks BMW, Energy Matters is the company who i bought my system off!
     I also live in Townsville Queensland which is one of the best places in Australia for solar. the current Feed in Tariff is 44c per kw and i think they lock this in until 2028? from memory give or take a couple of years.

    I'm more interested in keeping my house a PPOR but want to get it re-valued so i can access the equity to buy a investment property.
    i'm currently at 80% LVR and they bank wont really let me do much because i have other debt credit cards ect…

    Profile photo of BMWBMW
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    @bmw
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    Barry O'farrel tried to cut the tariff for existing installations but caved in to public pressure.  Cambell Newman might have more guts though ;).
    we have a 1.5KW system cost us $400 in total ($9000 by the tax payer), and havent paid a power bill for 2 years.  Doubtful if it has added any value to the house although solar systems are in some RE adds.

    Profile photo of luke86luke86
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    @luke86
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    I doubt it will increase the value by anymore than $10k (at best).

    As I see it, adding value through renovations/improvements works best with items that make an immediate impression like new paint, new kitchen, bathroom renovation etc. These are things that add a wow factor and play on the emotional side of the buyer. Another reason is that fpr $10k, you will hopefully be able to complete renovations that would cost some people $30k to complete by doing some of the work yourself, by organising trades efficiently and by making smart purchasing decisions.

    With solar panels, it is easy for a buyer to just arrange to get them installed themsleves, so if they had a choice between your house and one that was pretty much the same but $10k cheaper, they are just as likely to buy the slightly cheaper house and make one phone call to get some solar panels installed (or even make an offer for $5k more for your house as they figure they could buy your house and save money as the solar panels are already there). However if that house for $10k cheaper had a far inferior kitchen and a run down bathroom, then it would be very likely that they would pay $10k extra to buy your house because it looks much nicer and they could see themselves living there and impressing their friends with how nice the house is.

    We understand that your house is new- it is just that renovations and value adding strategies are usually confined to older houses as it is very hard to add value to a new house as they typically already have all the features that the target market wants.

    Anyone else have sopme thoughts?

    Luke.

    Profile photo of bugeye23bugeye23
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    @bugeye23
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    Thanks for your reply luke, I think your last paragraph hit the nail on the head, its very hard to add equity to a new home which is the very reason i am interested in this topic and apart from wiping out my power bill and have ergon pay me which covers my rates.

    Profile photo of Monty BurnsMonty Burns
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    Just check the fine print, we have solar panels on our PPOR (50.5c Per KW) and it is my understanding that if/when I sell the house the new owner has to re apply for a new contract at the existing tarrif (if it is still going- our would now be 42.7c) therfore not providing a real selling point for potential buyers.

    Profile photo of bugeye23bugeye23
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    @bugeye23
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     The angle i'm coming from here is I don't want to sell my property in the near future but want to see if the banks would recognise the value difference in my property  with a income producing asset added to my PPOR? Because what the bank values my house at and what the market would pay for it are 2 different things..

    Profile photo of IP FreelyIP Freely
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    @ip-freely
    Join Date: 2008
    Post Count: 353

    It may be green, lower your running costs etc but it means jack yo anyone who is not paying your electricity bill as they aren’t living in the house & can’t see any value in it.

    Profile photo of janinewooljaninewool
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    @janinewool
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    If you sell your house the tariff stays with the house.

    Profile photo of thecrestthecrest
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    @thecrest
    Join Date: 2004
    Post Count: 992

    Would a tenant pay more for a house with “free” electricity and the option to be a bit wasteful with electricity ?
    Surely the answer is yes.
    So if you get more rental income from your property, that should affect the value.
    Cheers
    thecrest

    thecrest | Tony Neale - Statewide Motel Brokers
    http://www.statewidemotelbrokers.com.au
    Email Me | Phone Me

    selling motels in NSW

    Profile photo of bugeye23bugeye23
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    @bugeye23
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    Thanks thecrest, If their are any property valuers on the forum i would love to hear how much value that could add to the property?

    Profile photo of bugeye23bugeye23
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    @bugeye23
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    thought this page had something interesting to say about adding solar to your home, it could increase its value by up to 4%

    http://www.sunconnect.com.au/solar-panel-benefits/increase-in-home-value/

    Profile photo of thecrestthecrest
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    @thecrest
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    That’s an interesting site.
    It would appear that perhaps the tenant segment of the market’s has a clearer and more urgent perception of the value of cost reductions in utility expenses than the freehold buyer. After all, for the tenant, all money paid in relation to a property is immediately gone forever whereas the freeholder owner has continued rent income and CG to look forward to as an offset for expenses.

    It’ll be interesting to see a valuer’s opinion of the effect of market rent on valuation, all other things being equal.

    So me too hoping a valuer would clarify this for you, and me.

    Great post.
    Cheers
    thecrest

    thecrest | Tony Neale - Statewide Motel Brokers
    http://www.statewidemotelbrokers.com.au
    Email Me | Phone Me

    selling motels in NSW

    Profile photo of IP FreelyIP Freely
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    @ip-freely
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    janinewool wrote:
    If you sell your house the tariff stays with the house.

    As far as I know, it id the occupant who enters into a supply contractwith the energy company at the prevailing feed-in tarriff. If you change supplier or tenant or contracted parties you go on yo the current tarriff. The high feed in tarriff is no longer available to new customers…..It does not pass with the house.

    As far as adding value, sp are a diminishing asset,the return generated is linked to usage, feed in tarriff & efficiencies of the system. Greater efficiencies are becoming the norm due to technological advances, reduced capital costs etc. From a val. perspective, running costs are not part of the considerations when determining value (like good design) so returns aren’t considered material in the residential valuation methodology.

    Profile photo of thecrestthecrest
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    @thecrest
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    Are you saying that if a valuer were considering 2 investment properties which were side by side and identical in every way except one property returned $75 more rental per week because of reduced utilities costs, then the valuer would place the same value on both ?

    cheers
    thecrest

    thecrest | Tony Neale - Statewide Motel Brokers
    http://www.statewidemotelbrokers.com.au
    Email Me | Phone Me

    selling motels in NSW

    Profile photo of IP FreelyIP Freely
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    @ip-freely
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    1) No two properties are identical
    2) Houses are not valued on the basis of capitalisation of returns, direct comparison and summation are used.
    3) The return from the sp goes to the user not the investor
    4) $3900 pa is a substantial return which would not be indicative of the feed in tarriff unless the installation was substantial ie more than your 10 pane/1500 wl system and pays no consideration to the initial infrastructure cost.
    5) Market forces are in play.

    If this were a commercial property, the income generated would still benefit through tenant and the effect on value would be considered if it increased the nabers ratings resulting in a higher effective net rent.

    Profile photo of janinewooljaninewool
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    @janinewool
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    IP Freely wrote:
    janinewool wrote:
    If you sell your house the tariff stays with the house.

    As far as I know, it id the occupant who enters into a supply contractwith the energy company at the prevailing feed-in tarriff. If you change supplier or tenant or contracted parties you go on yo the current tarriff. The high feed in tarriff is no longer available to new customers…..It does not pass with the house. As far as adding value, sp are a diminishing asset,the return generated is linked to usage, feed in tarriff & efficiencies of the system. Greater efficiencies are becoming the norm due to technological advances, reduced capital costs etc. From a val. perspective, running costs are not part of the considerations when determining value (like good design) so returns aren't considered material in the residential valuation methodology.

    This is how it goes in Victoria;

    The Premium Feed-in Tariff is linked to the property where the solar panels are installed, so when moving house you cannot take the Premium Feed-in Tariff with you. But any house which is signed up to the premium scheme will remain eligible until 2024, even if the house is sold and new residents move in.

    This is from here http://www.dpi.vic.gov.au/energy/sustainable-energy/solar-energy/solar-energy-for-consumers/feed-in-tariffs/premium-feed-in-tariff

    Cheers
    Janine

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