Solar Maximizes Commercial Real Estate Profits

If you’re a commercial real estate investor, you already know the main ways to maximize your profits and increase your property’s appraised value.  When you acquire a new multi-unit residential or retail building, you have the main goals of decreasing expenses, increasing income, adding value to the building, and finding tax advantages.  This article explores the ways that solar maximizes commercial real estate profits.

Everyone knows that the main objective of solar energy is to reduce electrical costs.  Just through knowing your electric bill and having your property’s address, our designers can quickly create a design that will show with great accuracy how much your electrical costs will be slashed.  Residential systems typically have a net present value of $25,000-$50,000 just on saved electrical costs, and the NPV can be exponentially higher for commercial systems.

Solar panels are an asset in every way, because they can turn your entire building into a power plant.  Excess power never goes to waste.  The power company will buy it back from you, which can create a nice revenue stream (in some areas).  In other cases, it will totally offset your electric bill, resulting in a minimal net expense (just to remain connected to the utility company’s power).  Having lower electrical costs can also appeal certain types of tenants who will lease for longer periods of time.

In many circumstances, adding solar to a building can result in a dollar for dollar increase in building equity.  This depends on many circumstances beyond the scope of this article.  Talk to a real estate appraiser to see what this type of upgrade could mean for your property.  Buildings that have solar panels often sell much faster than other buildings.

2018-2019 are the last year sto enjoy the full tax advantages of buying solar panels for your real estate.  The government discounts 30% of the initial system cost a generous tax credit.  This credit can be carried forward.  Additionally, system cost can be depreciated for even more savings.  Lastly, energy efficient upgrades like these are exempt from property taxes in Missouri and Kansas.  There are few ways to increase a building’s value like this without having to pay the price on the back end in taxes.

Here are a few more reasons why solar is ideal for commercial buildings:

1. Solar panels attract a certain type of customer.  Solar is trendy with the rising millennial crowd.  It can draw media attention and improve the public image of your business.
2. Commercial buildings often have flat roofs that make design and installation faster and easier.  They also often have optimum solar exposure by being in areas with few trees.
3. Your internal rate of return on your commercial project will be boosted.  Many solar panel systems have an IRR of 10-15% or more.
4. Solar provides a dependable cash flow.  Whereas economic demand can fluctuate, resulting in uncertainty about rental leases, solar is a fixed supply that meets the relatively fixed demand of the property’s electrical bill.