Are solar panels worth the investment for your rental property?

Are you thinking about investing in solar panels for your Portland Oregon rental property? If so, you’ve come to the right place.

As the demand for greener energy continues to rise, rental property owners are increasingly considering solar energy as a way to reduce utility costs, attract environmentally conscious tenants, and contribute to sustainability efforts. But are solar panels a worthwhile investment for rental properties?

The answer isn’t straightforward and depends on several factors such as location, financial circumstances, tenant preferences, and long-term goals of the property owner. This article explores the key considerations to help property managers decide if solar panels are a smart move for their rental properties.

1. Financial Incentives and Rebates

One of the primary motivators for installing solar panels is the availability of financial incentives that make solar adoption more affordable. Governments at both federal and state levels offer tax credits, rebates, and incentives to encourage property owners to switch to renewable energy. For instance, the federal Investment Tax Credit (ITC) allows property owners to deduct a portion of their solar installation costs from their federal taxes. As of 2024, this tax credit covers 30% of the installation cost, providing significant savings right from the start.

Oregon offers the Solar + Storage Rebate Program, which provides cash incentives for property owners installing solar panels and energy storage systems. Local utility companies also offer rebates and performance-based incentives, further reducing the financial burden of installation.

However, it’s important to note that many of these incentives are tied to owning the solar system. Property owners who lease solar panels from a third-party provider may not be eligible for the same financial benefits. For maximum financial gain, purchasing or financing the system directly might be the best route.

2. Long-Term Savings on Energy Bills

Solar panels offer significant long-term savings by reducing energy bills. Once installed, solar panels can generate electricity to offset much, if not all, of the building’s energy consumption. The extent of savings depends on the size of the solar array and the energy needs of the property.

For example, in Oregon, where electricity rates are relatively high, property owners could experience substantial reductions in their monthly utility bills. On average, solar systems can cut electricity costs by 70-90%. While this sounds appealing, it raises an important question: who reaps the benefits—the landlord or the tenant?

In single-family homes where tenants are responsible for their own utility bills, they would be the immediate beneficiaries of reduced electricity costs. However, the reduced utility expenses could make the property more attractive to renters, enabling landlords to justify slightly higher rental rates. For multi-family properties where landlords cover the utilities, the savings on energy costs would directly benefit the property owner.

Regardless of the structure, solar panels can enhance the appeal of the rental unit, resulting in lower vacancy rates and potentially increased rental income.

3. Impact on Property Value

Another advantage of installing solar panels is their potential to boost property value. Studies indicate that homes with solar panels tend to sell faster and at a higher price than homes without them. This means that solar energy not only helps reduce ongoing operational costs but can also increase the asset’s overall value, providing long-term financial security.

However, the impact of solar panels on property values varies depending on the region. In states with abundant sunshine, like California or Arizona, solar panels add considerable value. In regions with less sunlight, such as the Pacific Northwest, the value increase might not be as pronounced, though it still exists.

Sustainability is an increasing priority for homebuyers and renters alike, making solar-equipped properties more appealing to eco-conscious consumers. As cities like Portland continue to promote environmentally friendly building practices, the demand for properties with solar power is likely to grow, offering landlords a competitive edge in the market.

4. Tenant Appeal and Marketability

Attracting tenants is always a top priority for rental property owners, and solar panels can serve as a powerful marketing tool. More renters—especially younger generations like millennials and Gen Z—are prioritizing sustainability when deciding where to live. Offering renewable energy could make your property stand out from the competition.

In environmentally focused cities like Portland, advertising your rental as a green, eco-friendly option could drive higher demand. Tenants might be willing to pay a premium for a property that aligns with their values and offers lower utility bills. Solar panels could also help reduce vacancy periods, ensuring a steady flow of rental income.

However, tenant appeal depends on properly communicating the benefits of solar energy. Tenants need to understand how solar panels translate to cost savings and environmental benefits. Some may be skeptical or lack knowledge about solar energy, so proactive marketing and education are critical to maximizing solar panels’ value as a selling point.

5. Upfront Costs and ROI

Despite the clear advantages of solar energy, the upfront costs can be a major hurdle for rental property owners. Installing solar panels for a residential property typically ranges from $15,000 to $30,000, depending on the system’s size and location. Even with financial incentives, this remains a substantial investment. It’s also worth considering the potential impact on property insurance, as solar panels may raise premiums.

The return on investment (ROI) for solar systems varies but usually falls within a 5-10 year range. For rental properties, the ROI could take longer to materialize, depending on the rental agreement and utility structure.

Owners can also consider financing options like loans or leases to help manage the initial costs. While leasing solar panels may reduce upfront costs, it could limit long-term financial benefits since the property owner doesn’t fully own the system and may miss out on key tax credits and rebates. Loans, on the other hand, offer full ownership and access to all incentives but come with additional financing costs.

For properties in areas with high electricity costs and strong demand for sustainable living, the long-term savings can make the initial investment worth it. However, in regions where electricity is cheaper, or tenant interest in green energy is lower, it may take more time to see a positive return.

6. Maintenance and Longevity

Solar panels are known for their durability, with most systems lasting 25-30 years. For rental property owners, this is a significant benefit since minimal maintenance is required. Keeping the panels clean and free of debris is typically the only necessary upkeep.

Many solar companies also offer maintenance packages, which can ensure the system operates at peak efficiency without requiring much effort from the property owner. Compared to the long-term energy savings, these maintenance costs are minimal.

A Smart Investment For Every Rental Property 

Solar panels can be a smart investment for rental property owners, but the decision requires careful consideration. Factors like financial incentives, long-term utility savings, increased property value, and tenant demand all play a role in determining whether solar energy is the right choice.

In markets like Portland, where green living is highly valued, solar panels offer an opportunity to enhance property appeal while cutting operational costs. However, with significant upfront costs and a longer timeline for ROI, solar may not be the right fit for every property owner.

For those with a long-term outlook, solar panels provide a way to future-proof properties while meeting the growing demand for sustainability. As more tenants seek eco-friendly living spaces, solar panels could become an increasingly valuable asset in the rental market, offering both financial rewards and environmental benefits.

At Rent Portland Homes – Professionals, we have decades of combined property management experience that saves busy owners the time, money and hassle of managing their rental properties themselves. To learn more about the services that we can offer you contact us today by calling (503) 646-9664 or click here to get a property management quote online.