Getting solar for your rental property can increase property value, earning potential and tenant satisfaction. You can get a good boost to your income thanks to tax deductions, the solar feed-in tariff, and virtual power plants (VPPs). Landlords can also charge higher rents as tenants want to live with lower electricity bills. Solar is a great addition to any rental property that you own.
We break down the many benefits that solar provides to landlords below.
Can I put solar on my rental property?
How easy it is to install solar on your rental property depends on what type of residence it is. If your property is a freestanding house, it’s a relatively straightforward process. Your solar provider typically helps you figure out the appropriate system size while handling the necessary approvals and paperwork. This is the same whether you’re installing a solar-only system or a system that has a solar battery.
However, things get trickier if your rental property is part of a strata. While you still own your property in a strata situation, the block of land is jointly owned. Installing something on the outside of your property, such as a solar system, requires permission from the other homeowners in the strata.
While this may seem like a roadblock, it’s also a potentially useful opportunity. If you can effectively outline solar’s merits to the other homeowners, they may get solar installed across the whole complex. This saves you money on installation since you will be splitting the cost with other people. If you have a shared connection to the grid, it could also mean that you can install a larger solar system and benefit even more.
Can you install a solar system on a granny flat?
A solar system can be a great addition if you have a granny flat. Granny flats are ancillary dwellings built on the same land as an existing property, most often with a shared grid connection. As the owner of a granny flat, you are free to install solar panels if you have approval from your local council. This will not be an issue in most local councils, but it’s important to double-check the regulations where you live.
Why should I add solar to my rental property?
You should add solar to your rental property to increase your investment return. Given installation costs, the financial benefits may not be obvious. People generally assume you must be living on a property to get the benefits of solar. But even as a landlord, solar systems more than makes up for these costs over time.
Higher rental value
Rental properties with solar systems are a hot commodity on the rental market. Tenants are prepared to pay higher rent for lower power bills and a reduced carbon footprint. This increase in your passive income quickly covers installation costs and provides excellent long-term financial returns.
Feed-in tariff
Feed-in tariffs are a great way to earn extra money from your solar system. When your solar system generates enough power for your home and battery, it can feed power back into the grid. A feed-in tariff refers to the financial compensation you receive for doing this. While feed-in tariffs have been consistently declining in price, and the exact amount you receive depends on how much excess power your system generates, they are still a passive income source. If your rental property is on the same property that you live on, or you are the one paying the electricity bill, you will benefit from the feed-in tariff.
Virtual Power Plant
If you install a solar + battery system for your rental property, you have the opportunity to join a virtual power plant (VPP). VPPs are networks of solar batteries used to create decentralised power supplies. They support the electrical grid by providing it with extra power when it’s struggling to meet demand. When the power from your solar battery is used, you are compensated by your solar provider.
Are solar panels tax deductible for landlords?
Landlords can claim solar as a tax deduction on their rental property. Since a rental property is considered a source of income, you are eligible to claim deductions for related expenses.
Solar system components are classified as plants and equipment and are allocated a useful life by the Australian Taxation Office (ATO). This allows you to write off their depreciation in value every year. Over the course of twenty years, this adds up to quite a tidy sum.
Are solar panels and solar batteries tax deductible for landlords?
Landlords can claim solar as a tax deduction on their rental property. Since a rental property is considered a source of income, you are eligible to claim deductions for related expenses.
Solar system components, including batteries, are classified as plants and equipment and are allocated a useful life by the Australian Taxation Office (ATO). This allows you to write off their depreciation in value every year. Over the course of ten to twenty years, this adds up to quite a tidy sum.
Case Study: Hamilton Hill Sustainable Home
Chris Ferreira with Plico's Harry March at the Hamilton Hill Sustainable Home.
Plico Member Chris Ferreira created an innovative infill development on his Hamilton Hill property. Boasting ‘four homes, four families, and forty trees’, the dwellings have been carefully developed around his award-winning garden. The property includes the original house, a granny flat occupied by a tenant, and two new eco-apartments that are owner-occupied.
Chris has installed a Plico solar + battery system on the original home that serves all the dwellings on the property. The ongoing benefits of the system were factored into the sale price of the eco-apartments and the rent Chris receives from the granny flat. Chris has the full benefit of the feed-in tariff, higher sale, and rent prices, plus the ongoing cost savings of having solar + battery at his home.
“For me, getting a solar and battery was a no-brainer. Everything we do here at the Hamilton Hill Sustainable Home is about pushing the boundaries on how we can be more sustainable and build climate resilience. I think so many more people are going to embrace this as the way we move forward into the 21st century.”
Should I install solar on a second rental property?
Installing a solar system on a second rental property lets you enjoy more of the same benefits. Higher rental value, potential feed-in tariff, VPP payments, and tax deductions still apply for a second investment property. In fact, this is the case no matter how many investment properties you own. The benefits only stack up, so adding solar is almost always a good idea.
Is it worth installing solar on a holiday home?
Adding solar to a holiday home or summer cottage is a solid investment strategy. Since you won’t be using the holiday home for most of the year, the electricity generated can fill up your battery and flow into the grid. This means a charged battery to cover all your standby power, contribute to a VPP, and maximise income from the solar feed-in tariff.
Alternatively, you may use your summer getaway as a short-term rental, like an Airbnb for holiday-goers. Much like long-term rentals, solar systems make holiday houses more appealing for environmentally-conscious renters. This allows you to set a higher price and increase potential income.
Does solar increase property value?
Solar systems provide a reliable way to boost property value. Home buyers are willing to pay a premium price for the additional benefits. Some of these benefits are financial, like tax write-offs, rebates, and lowered energy bills. Other helpful features allow you to be self-reliant and well-protected. One example, included in Plico solar + battery systems, is blackout protection. This feature allows you to keep using electricity during a power outage.
The exact value increase depends on a number of factors. For the solar system itself, the size of the system and the presence of a battery are important to consider. Other factors such as the property’s current value, the housing market and your location also impact value. It’s evident that increasing a home’s sustainability credentials and reducing its ‘running costs’ increases its value and makes it more attractive to potential buyers.
Installing a solar + battery system is a great option for your rental property. Chat with one of the switched-on Plico team members on 1300 175 426 to find out how much a solar + battery system could save you.
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