Alright, Hivemind--should I go solar?

[LN1_Casey]

Background: I am in the Navy, and as such I move around a lot. I have a home from my last duty station that I am currently renting out. It is a 1400-ish sq ft home, and I have tenants (couple with young child) whose contract ends in September, and they may or may not relocate at the time. The home is located in Ridgecrest California, which is near Death Valley and as such gets A LOT of sun. So much sun.

My home faces west-ish, and the roof is an L shape low A-frame so I have roof that faces away from the street towards the morning sun, and towards the street for evening sun. There are no trees that are around the area to provide shade to the roof.

My house would be an excellent candidate for solar, from a production standpoint. When I lived in the house, due to the stupidity of BAH rates, I could not afford the cost of a solar installation. I also, as a single person, didn't use enough electricity to even qualify for one of those lender ones.

I am energy conscious, and I want to put solar on my home. I don't know if I should, however, and would like advice to that.

Points of focus:

1) I don't know whether to absorb the electrical utilities into the home's rent at a flat fee and pay the difference myself, which could only go into effect after the contract ends and may scare away my current tenants. If I don't, however, I'm basically just handing my tenants some unknown 100-300$/month amount, while I'm paying the $200/month loan.

2) If I did take it over, how much should I add to the rent? I'd want to cover the costs, for obvious reasons, but I've no idea how much said tenants use, and if that would increase with me taking it over. I.e. they're energy conscious now, and pay $150/mo, but once it's absorbed for 150 to their rent, they go buck wild and now the bill is 300/month including the solar savings because they have now gotten a electric car to capitalize on the free electricity.

2a) Should I adjust the contract to add a, IDK, 50$ per electric vehicle charge?

3) I want to first and foremost buy a Tesla, so much so that I would very much go for selling my home and use some of that funds to get my hands on one. I only purchased the home at the time because it was cheaper than renting (see BAH rant above), and I will likely never go back to Ridgecrest again. I have heard that Solar panels not only increase the value of the home by roughly their cost of installation, they actually increase the speed of such home sales. Would installing panels actually help this, if I decided to sell in the next 1 1/2 years?

 

[miimura]

The problem with tenants that have utilities included is that they have no motivation to conserve or monitor their usage at all. Wasteful habits easily become the norm because there is no consequence.

If you do put solar on a rental property, estimate how much the bills will be reduced by the production and increase the rent by that amount. The utility bill should still be in the tenant's name and be their responsibility.

As far as selling the property, you should look at the rent vs. your mortgage if any and look at your cash flows versus selling the property. If you are deriving significant net income from the property, then that will help you afford the Tesla that you want. Selling the property is a one-time capital gain and using that money to buy a depreciating asset like a car is not a good idea to my way of thinking.

 

[Shygar]

We do our rental property a little differently. We have essentially 4 rooms and we rent out each one individually. To make things easier for the tenants, we just pay all the utilities and charge them a flat fee each month. We also have solar installed and based it on their usage for the prior year. I also installed a Neurio to measure exactly what they are using and what appliances are the most energy hogs, so I know what to expect.

We also did the PPA (I think that's the term) with Tesla, not sure if they still do that. We did that because we couldn't get the ITC because it wasn't our primary house. I'm not exactly sure how that would work in your situation, but may want to ask a tax professional.

 

[LN1_Casey]

The problem with tenants that have utilities included is that they have no motivation to conserve or monitor their usage at all. Wasteful habits easily become the norm because there is no consequence.

If you do put solar on a rental property, estimate how much the bills will be reduced by the production and increase the rent by that amount. The utility bill should still be in the tenant's name and be their responsibility.

As far as selling the property, you should look at the rent vs. your mortgage if any and look at your cash flows versus selling the property. If you are deriving significant net income from the property, then that will help you afford the Tesla that you want. Selling the property is a one-time capital gain and using that money to buy a depreciating asset like a car is not a good idea to my way of thinking.

That's a good point about just offsetting the savings to the rent vice just letting it go or absorbing the bill. I may do that.

Going by Zillow's current est. price of the home, and my current status of the mortgage, I have about 30k in equity (I purchased the home in 2015). That would drop a 90k car to a 60k car, and with my thus planned 20k deposit, and then a 40k car loan. I'd be able to get a 2017 P100DL, which is something I want a lot more than I want that house.

I understand that a home is a much better investment. But it certainly isn't my forever home, I am not planning on leaving the military for at least another 10 years so that's 4-5 more moves, and I only got the home because rent out there is terrible in comparison to what we get for our housing. My rental income, since I do employ a manager system as I can't obviously do so from a foreign country, is about 200-ish dollars over my mortgage cost, and 100 over what I currently pay towards my mortgage, not including the monthly home warranty cost, or any possible "oh *sugar* this broke" incidents. So it's almost a wash from cost/rent, which does not really help me towards my Tesla were I to keep it. I don't make enough to benefit from itemizing my taxes vs taking the standard deduction (I think I only got that the first year, and even then it only was like a $50 increase).

I am in my 30s, I fully understand the supposed benefits of having a home vs something that could literally crunch into a useless brick because a teenager wasn't paying attention at a light (something I have had happen to me twice, in two different vehicles), but really. I don't care about that. I can get another, nicer home in an area that I actually plan on living at for more than 3 years, then I won't have to file taxes in two different states, from a different country. If I hadn't been stationed overseas, I would have sold the house upon my PCS, and used the money to buy a Tesla upon my then lease terminating.

Now, getting possibly a cash out refinancing, or an equity loan. Eh... maybe? I think that'd hurt my credit, though, getting one of those basically right before applying for a car loan. But that's OT.

 

[LN1_Casey]

We do our rental property a little differently. We have essentially 4 rooms and we rent out each one individually. To make things easier for the tenants, we just pay all the utilities and charge them a flat fee each month. We also have solar installed and based it on their usage for the prior year. I also installed a Neurio to measure exactly what they are using and what appliances are the most energy hogs, so I know what to expect.

We also did the PPA (I think that's the term) with Tesla, not sure if they still do that. We did that because we couldn't get the ITC because it wasn't our primary house. I'm not exactly sure how that would work in your situation, but may want to ask a tax professional.

That's an interesting rental set up. I suppose it works for your particular building, but mine is a single family home.

Do you notice that any particular tenant abuses the free utilities (lights on, water left running hot, etc)? Or do people just kind of live normally?

 

[smalltownguy]

That's an interesting rental set up. I suppose it works for your particular building, but mine is a single family home.

Do you notice that any particular tenant abuses the free utilities (lights on, water left running hot, etc)? Or do people just kind of live normally?

I had an apartment years ago that had paid unlimited hot water. When I would get annoyed at my 7 year old daughter. I would put her in the bathtub with the shower running behind her and she would play for an hour with her water toys. She loved it and I got some peace. The landlord probably didn't like it as much...

 

[Shygar]

That's an interesting rental set up. I suppose it works for your particular building, but mine is a single family home.

Do you notice that any particular tenant abuses the free utilities (lights on, water left running hot, etc)? Or do people just kind of live normally?

We've been doing it for 2 years now, so far no abuses. Bills are pretty normal. Energy is higher than when we lived in the house but not unreasonably high. Part of why we got solar to offset that.

Plus it's a selling point for us that you can move in and not have to think about any utilities. I lived in so many apartments that I always hated having to manage utilities. My latest landlord in SF had the laundry connected to my floor so she just paid a flat $100 extra a month to me to make up for extra laundry usage. Never could know if it actually offset it or not.

Also since they are living together as roommates, there's no complaints between them of who is using more of what.