Craig Stevens
Only about 5% of U.S. rental property owners have solar installed, according to SEIA data. That number has always struck me as striking, given how loudly the solar industry talks about the economics. Then you look at the reasons, and it starts to make sense.
Rental properties sit in an awkward middle ground. The person paying the electricity bill usually isn’t the person who owns the roof. The person who owns the roof usually isn’t the one motivated to invest $15,000-$25,000 into it when the savings flow to someone else. This is the “split incentive problem,” and it’s real. But it’s also solvable, if you go in with a clear head about what you’re actually buying.
I’ve sat across from a lot of landlords over the years who came in thinking solar was either a no-brainer investment or a total scam, and almost none of them were right. The real answer lives somewhere specific, and it depends on a handful of variables that most solar salespeople won’t bother to work through with you.
- The 30% federal tax credit applies to rental properties, but only if you have enough tax liability to use it.
- Landlord-owned solar typically increases property value 3-4%, per Zillow research, which can matter more than monthly savings.
- Utility-included leases are where solar ROI for landlords actually works; tenant-paid utilities flip the math entirely.
- Payback periods on rental solar average 8-12 years, about 2-3 years longer than owner-occupied installs.
- Single-family rentals almost always pencil better than multifamily for solar; the economics are just different.
The Tax Credit Math (And Where It Gets Complicated)
The federal Investment Tax Credit currently sits at 30% through 2032, then steps down. On a $20,000 system, that’s $6,000 back. But here’s where I’ve watched landlords get genuinely burned: the credit only offsets federal income tax liability. If your rental income and other income don’t generate at least $6,000 in federal taxes owed that year, you don’t lose the credit forever, but you do carry it forward, sometimes for years before it’s fully absorbed.
I worked with a landlord in Phoenix a few years back, a retired couple with two single-family rentals and modest Social Security income. Their installer told them the 30% credit would make payback happen in under six years. What nobody told them was that their federal tax liability was about $2,200 per year. That $6,000 credit took them almost three years to fully use. Not a disaster, but not what they were sold.
The depreciation angle is worth mentioning too. Rental property owners can depreciate the solar system under MACRS (Modified Accelerated Cost Recovery System) over five years, which is genuinely useful if you have a real accountable income to offset. Talk to a CPA who knows rentals before you sign anything. That’s not a hedge, that’s the actual answer.
Utility-Included vs. Tenant-Pays: The Question That Changes Everything
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This is the single variable that drives more solar ROI decisions on rental properties than anything else. And most landlords don’t frame the question clearly before they start getting quotes.
If you pay the utility bills as part of an all-inclusive rent setup, solar reduces your direct operating costs. That’s clean math. A system generating 9,000 kWh per year at $0.14/kWh average (NREL’s national residential average, as of this year) saves you around $1,260 annually. Over 25 years, that’s real money, even before any rate increases.
If your tenants pay their own utilities, you lose the direct savings unless you restructure leases to add a “solar surcharge” or roll the savings into higher rents. This is legally possible in most states but socially awkward and practically complicated. Some landlords do it. Most don’t, and they end up with a system that produces electricity someone else benefits from while they wait for property appreciation to pay them back.
Short-term rentals like Airbnbs are actually one of the strongest cases for landlord solar, and I don’t see it talked about enough. You control the utility account directly, turnover is high so you’re not renegotiating with long-term tenants, and solar can be a genuine marketing differentiator in some markets.
What the Numbers Actually Look Like: Three Real Scenarios
What Type of Solar Panel Should You Buy? · The Solar Lab on YouTube
Let me give you some concrete examples that reflect real-world installs, not hypotheticals cooked up by a sales spreadsheet.
Scenario 1: Single-family rental in Albuquerque, NM, utility-included lease, 6.4 kW system, total cost $17,800 after installer discounts, federal tax credit of $5,340 absorbed over two years → Annual savings of $1,580 from reduced utility bills → Payback period of 7.9 years → At year 25, net gain of approximately $21,000 after system cost.
Scenario 2: Duplex in Cleveland, OH, tenant-pays utilities on both units, 8 kW system, total cost $22,000, federal tax credit of $6,600 → Landlord earns no direct utility savings, adds a $75/month solar surcharge per unit after lease renewal, one tenant leaves over the change → Net savings after vacancy and turn costs: closer to $900/year → Payback stretches to 14+ years.
Scenario 3: Three-bedroom Airbnb in Scottsdale, AZ, owner-managed, 7.2 kW system with a solar monitoring system to track production per guest stay, total cost $19,500, federal tax credit of $5,850 → Annual utility savings of $1,840, plus owner lists “solar-powered home” in listing and sees 9% higher nightly rate in A/B test over 60 days → Payback estimated at 6.2 years.
That third scenario is genuinely one of the better use cases I’ve encountered. The energy cost savings plus the marketing upside on short-term rentals can change the whole calculus.
Property Value: The Argument Landlords Actually Underweight
Zillow’s research found solar installations increase home values by about 4.1% on average. For a $350,000 single-family rental, that’s roughly $14,350 in added value. EnergySage’s market data consistently shows buyers will pay a premium for a home with owned (not leased) solar. The word “owned” matters here enormously.
If you’re considering a solar lease or PPA (power purchase agreement) for a rental property, I’d push back hard. Leased systems complicate sales and tenant transitions, and the financial benefits are usually thin compared to ownership. The only case where a lease makes sense is if you genuinely can’t absorb the tax credit and have no desire to hold the property long-term. Even then, think hard.
| Ownership Type | Tax Credit | Property Value Impact | Lease Transfer Complication | Best For |
|---|---|---|---|---|
| Owned (cash) | Full 30% | +3-4% | None | Long-term holds |
| Owned (loan) | Full 30% | +3-4% | Low | Mid-term holds, 7+ yrs |
| Solar Lease | None | Minimal or negative | High | Rarely makes sense |
| PPA | None | Neutral to slightly negative | High | Rarely makes sense |
| PACE Financing | Full 30% | +3-4% | Moderate (stays with property) | Cash-constrained owners |
PACE financing is underused by landlords and worth researching in your state. The lien stays with the property, not the borrower, which can simplify things when selling, though buyers need to understand what they’re assuming.
What Installers Won’t Always Tell You
The roof matters more on a rental than on your own home because you’re less likely to be monitoring it closely. I’ve seen landlords install solar on a roof with 6-8 years of life left. When the roof needs replacement, the panels come off, get stored, get reinstalled. That bill, including inverter checks and potential re-mounting, can run $3,000-$5,000. On a rental you’re not living in, this catches people by surprise.
A home energy monitor connected to your system is worth the $150-$300 it costs to install. You’ll know the system is producing correctly without having to visit the property or trust that tenants will alert you to problems.
Also: check your insurance. Some standard landlord policies need a rider for solar. It’s usually inexpensive ($50-$150/year), but a few landlords I know found out about the gap only after a hail event.
Sources
- SEIA (Solar Energy Industries Association): U.S. solar adoption data including residential and rental sector trends
- NREL (National Renewable Energy Laboratory): Residential solar cost and generation benchmarks, national averages
- EnergySage Solar Marketplace: Installer pricing data, consumer solar reports, lease vs. own analysis
- Zillow Research: Home value premium associated with solar panel ownership
- U.S. Department of Energy, Homeowner’s Guide to Solar: Federal tax credit guidance, MACRS depreciation information
Photo: Kindel Media via Pexels
Recommended Resources
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- Renogy 200W Solar Starter Kit + 30A Charge Controller (~$169), Complete beginner solar kit, 200W monocrystalline panel, charge controller, and mounting hardware included.
- EF EcoFlow DELTA 2 Portable Power Station (1024Wh) (~$599), 1024Wh LFP battery with 1800W output, top-rated solar generator for home backup power. Charges in under 2 hours.
- Renogy 2×100W Monocrystalline Solar Panels (~$99), Expandable 200W panel set from the most trusted DIY solar brand, used widely in off-grid and home backup systems.
