How I Added $30,000 to The Value of My Home with This FREE Home Improvement Project
Note: This project was essentially “free” because it required no money out of pocket beyond what I was already spending on my home energy costs.
When I decided to invest in a PV (photo-voltaic, otherwise known as “solar”) system for our home last spring (2018), it wasn’t because I needed to increase the value of my home.
And it surely wasn’t because I was looking for a fun home improvement project to work on.
Quite the opposite, I’m a man with little to no extra time on my hands, and very little patience to try new projects that will no doubt end up in misery and regret, taking me twice as long as it would take a pro, and probably just as much money.
For those wanting the bottom line evidence, click here to read details on home valuation before solar vs. after solar, one year later.
A Personal Choice
I decided to invest in solar, like many, because it made great financial sense. Even though it may take up to a decade for the amount I would pay the utility anyway, to add up to what I’ll have invested in my solar system, it still made sense, because eventually, I would be “free” and clear of paying for (investing in) someone else’s infrastructure. After the loan is paid for, I expect my energy costs from the utility to be close to zero, probably until 30 years from now when I may eventually need an upgrade.
I was able to pay for my system slowly over time with no down payment beyond what I opted to pay from the bonus tax credit I would be qualified for, and receiving about a year later in April 2019.
A Huge Incentive
In 2018, I had started a new job and was making a decent salary. Even with the income tax deductions of children, children’s private schooling, and a few minor business write-offs and charitable giving, I learned from my tax advisor that I might still qualify to receive all of my 30% solar energy incentive tax credit (ITC), even though my income was well below $100,000 and I was the single income provider for my family.
This meant a refund, just for the Solar ITC, that is equivalent to 30% of the total price of my system. It’s essentially like working a few months with tax-free, and investing in an asset for my home at a discount.
Because the solar company had great financing and a program where they would allow up to a year and a half (18 months) from the time the system was installed for me to make a down payment using the “free” ITC money, I was able to start off with a really low monthly payment, and keep that monthly payment low for the entire term of the loan as long as I paid the ITC back into the loan (or the monthly amount would adjust upwards at month 19).
And even if I didn’t qualify for the full 30% ITC this year, I could apply any remaining balance forward onto next year’s income tax return, and the following three years after that if needed. There was a high probability I would qualify for most of it even before the rollover period expires.
As potential sellers of our homes, it’s important to consider where the value is in the mind of a prospective buyer. Not all buyers will want solar on their home. Certainly, the neighborhood, curb appeal, schools, floor plan, cleanliness of the home, and layout of the property are all very important factors. Something else to consider in the 21st century is the cost of utilities and property taxes which all factor into affordability measures (and seem to be ever-increasing).
And no, adding a system won’t increase your property taxes. Section 73 of the California Revenue and Taxation Code allows a property tax exclusion for solar energy systems installed before December 31, 2024. (https://www.energy.gov/savings/property-tax-exclusion-solar-energy-systems)
Now that I “own” my power with an attractive, high-performing solar energy system, and have a low and steady (never increasing) monthly energy payment (solar loan), I’m confident my home is more valuable than if it did not have solar.
Do your research and decide for yourself if an investment into your own energy-producing asset is right for you.
Some Additional Facts and Resources to Consider
According to Zillow.com, the estimated value of my home in Redding, CA increased from $473,700 in March 2018 (when solar was installed) to $562,804 in March 2019 – an annual increase of 16% (about $90,000). This was in a local market that suffered the worst October on record since 2011, and a year that saw the average home across the U.S. increase in value by only 4.4% (https://www.reddinghomes.com/blog/4-reasons-buy-home-spring/).
A steep increase was recorded in the Zillow Estimate (Zestimate – Value Tracker) soon after installing the solar system. This may have been primarily due to the fact that home prices typically go up in spring and summer because of more sales on account of better weather.
I am highly confident though, that even if I sold my home the day after installing my system, the home would have sold for more money, even close to what the added system cost was.
More Evidence, Solar Adds and Retains Value
Here is a study conducted by a group of economists on solar system value and home prices in San Diego and Sacramento counties from 2003-2010 (including the real estate recession years). The result: on average, homeowners in California recovered 97% of their system costs–and that’s not even factoring the annual energy savings. (https://www.forbes.com/sites/ashleaebeling/2011/08/01/how-much-do-solar-panels-boost-home-sale-prices/#276153fb11f2)
Lawrence Berkeley National Lab (LBL) conducted a study that concluded homes in California with a system size of 5KW should add $20,000 in extra value to a home and a 10KW size system would add $40,000 in value. (https://emp.lbl.gov/publications/selling-sun-price-premium-analysis)