Posted on December 21, 2012

Ever since the housing crash of 2008, investors have been leary to put their hard earned money into their home. But if I told you there is a home improvement that is earning investors 10%, 20%, or even 30% annual IRR (Internal Rate of Return on cash), I’m sure you would want to see if it’s a good fit for you. Between the dropping costs of PV panels (80% in the past 3 years ), federal and state tax breaks, and rising energy costs, solar panels have a lucrative opportunity for many investors. Knowing whether investing in solar panels is a wise investment is usually the largest hurdle for many homeowners. To help solve that information gap, here are 5 things to consider to know if you should invest in solar panels.

2. You Get Adequate Sunlight

Although the amount of sun necessary to justify solar panels has decreased dramatically, you will want to make sure your home gets enough sunlight to justify the costs. Shade is the greatest obstacle for getting sun to your panels. If there is a 300 to 600 square foot section of your roof that faces the south, east, or west and is free from shade, your house should be a prime candidate for PV panels. If your roof is covered most of the day by shade, there is a good chance the roof will not get enough direct sunlight to justify installing solar panels.

3. Your Electric Bill is Over $80/mo

Since your ROI is dependent on saving energy costs, your household will need to use enough energy to justify investing in solar panels. As energy costs have skyrocketed over the past few years, it is rare for this to be a barrier anymore. However, if your energy bill is consistently below $80/month, you are not using enough energy to be a prime candidate for having solar panels installed on your home. If your bills are considerably higher, be aware that most energy companies do not give discounts for additional energy usage, but actually charge higher rates for the more energy your household uses.

4. You Have a Strong Tax Appetite

One of the variables that makes investing in solar panels such a profitable opportunity right now is the availability of tax credits. Depending on your tax bracket, you can receive up to a 30% federal tax rebate on solar panels. In California, there are additional tax rebates as part of the California Solar Initiative. If you are unable to benefit from tax rebates, then you won’t be able to see as high of a return on your investment in the initial years. If you do have a strong tax appetite, the benefits are compounded by the fact that your investment comes in the form of savings as opposed to taxable income. Since the return on solar is pre-tax, solar is an effective preservation of wealth strategy for the wise investor.

5. You Have the Means to Invest (Without A Large Loan)