Before you decide to install a solar system onto your roof, you might want to know how it will affect your home’s value. Does a solar system increase your home equity? What about depreciation? How to calculate home equity with solar?
In this article, we’ll answer these questions so you can make an informed decision if a solar system is the right investment for your house.
Let’s get started!
Does the Solar System Increase Your Home Value?
As a homeowner, buyer, or appraiser, you probably already know that solar panel installation increases a property’s value. A study published in 2015 points to a price incentive of almost $4 a watt for solar installations on homes. So, if you have a common 8kW solar system, you will add about $32,000 to your home’s resale value. Or, if you install 3kW solar panels, the value-add would be $12,000.
How did we get those numbers? There is a simple equation you can use. Let’s say you have a 5kW solar system. 5kW equals 5,000W, which means you should calculate 5,000W x $4 = $20,000.
Furthermore, a study conducted by Zillow in 2019 states that houses with solar systems sell for an average of 4.1% more compared to those without them. Of course, it all depends on the location. For example, homes in New York City have a 5.4% higher value-add, while Riverside in California shows only 2.7%.
A typical solar payback period in the US is around eight years. But if you want to sell your house, you should still be able to get back the amount you invested simply from the value of the solar system added to your home.
Factors That Will Influence Your Solar Panel’s Value-Add
While the numbers we mentioned above can clue you in on what you can expect, several factors can influence how much value solar panels will add.
As discussed above, different cities have higher or lower value-add. Among other things, this happens because communities don’t have the same electrical costs. Usually, the higher the cost, the greater the value of your solar system. Also, your location will affect how much sun exposure your home gets.
The Price of Solar System Installation
Your geographic location will also affect this factor because the expense of installing a new solar system depends on the area you live in. For instance, if a person in your city will save money by buying a house that already has a solar system, your home will become more expensive.
Generally speaking, larger systems that generate more energy have a higher value-add.
How Old is the Solar System
Older systems won’t add as much value as newer ones because chances are, the buyer will have to invest in repairs sooner rather than later. Therefore, if you own an older system, you need to consider depreciation.
Every year you have the system, its value-add will go down at about 4% a year. So, let’s say you had your 8kW system for five years, 5 years x 4% depreciation = 20%. $32,000 (the new system’s value-add) x 20% depreciation = $6,400 depreciated amount. In the end, $32,000 – $6,400 = $25,600. All in all, after five years, the value of your 8kW system will be $25,600.
System Repair Value
How costly or complex it will be to repair or replace the parts of your solar system will also influence the value-add.
In the end, you can only increase your home’s market value by installing solar panels. If you need any advice on which solar system is the right fit for your home, contact Atlantic Key Energy and get the best estimation today.