The environmental benefits are a major reason that renewable energy is popular among Australians. For many Australians, taking advantage of natural resources, such as the sun and wind, seems logical when doing so can save you money on your bills.

But what about investment properties? What are the benefits of installing solar panels on an investment property?

In 2017, installation of rooftop solar reached 1057 megawatts, which equates to nearly 3.5 million solar panels being fixed to Australian rooftops.

With this trend looking like it may continue into the future, it is possible that the rental market will see solar panels become a popular feature of rental properties.

If solar power was to become a standard feature in properties available for rent, investors who are hesitant to embrace solar could risk a potential loss. If your investment property doesn’t boast the features tenants look for, you could see vacancy rates rise due to a lack of interest from applicants.

So, let us help you weigh up the decision.

Positives

For now, the installation of solar panels could be a fantastic way for an investment property to differ itself from the competition. More than 26% of residential rooftops already have solar panels. The proportion of tenanted homes that have solar panels is much lower: one in every 100 is a commonly cited estimate. So, along with the environmental benefits, solar panels can also provide a point of difference from other properties available to rent.

Another positive is the potential savings that your tenants can have on their bills. If tenants can save money on their electricity, they may be more inclined to pay a higher rent and allow you to have an increased return on investment.

The extra income earned could be reinvested into improving your investment property’s solar capabilities or simply used to pay off a mortgage quicker.

A further way that solar panels can help an investor improve their return on investment is through depreciation. It can be considered a big bonus because investors may be able to claim back the annual decline in value.

The effective life of a solar energy system is measured at 20 years by the Australian Taxation Office. As a result, investors that embrace solar can claim a 10% decline in value each year.

Thanks to technological advances, the price of solar technology has gone down since initial production. This makes it easier to recoup the money that has been spent on their installation and purchase.

Negatives

Firstly, for those that have invested in apartments, it simply may not be possible to take advantage of renewable energy like solar power. There is almost never enough space for installation to cover all the units, even in smaller apartment buildings. Unfortunately, there is no clear solution to this as a solar system is mostly better suited to houses.

While renewables have significantly decreased in price and look to continue to do so, installation and maintenance can still be an expensive process. For those looking to the short-term value, the high amount of capital that is needed can be perceived as too much to be worth it.

When purchasing a solar system, there is not only the cost of the panels to consider but the storage system as well as any installation costs.

While solar energy can be a polarising topic, it is certainly a worthwhile consideration.

For more information about how you can maximise your return on investment, contact the team at Little Real Estate today.

Disclaimer: The information in this publication and the links to further information within it are provided for general information only and should not be taken as constituting professional advice from Little Real Estate. You should not rely on the accuracy of this information and should seek independent legal, financial, taxation or other advice to check how any of this information relates to your unique circumstances. Little Real Estate is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, or from our website.