Do the Bright Thing: Why Rehabbing for Solar Power Is a Great Fix-and-Flip Strategy

If there is one thing California has, it is sun. We could probably use more rain, but that’s not why people move out here. They’re drawn to this land of bright possibilities, where seemingly the only shadows are the ones cast by the always-overhead sun. The soil, the ocean, the mountains- those are benefits that come from endless sunshine. Advances in technology have made the sun an increasingly viable source of energy, and, if you are a rehabber looking to fix-and-flip, you should also look at how to retrofit a house for solar power.

The Increasing Viability of Solar Power

Something very interesting has happened over the last 15 years. Just as recently as the dawn of the millennium, you might have been ridiculed for thinking that solar power was the way of the future. It seemed too expensive, too unrealistic or too much like a science fair project for rich people. But California saw the potential and began treating solar power seriously even if they still thought it might be too expensive.

Then, all of a sudden, the price of photovoltaic cells reached an incredible—and unforeseen—low. It had been dramatically but quietly decreasing since the late 70s, but then its rate of decline slowed down. The price continued to decline until, in 2013, it reached what is called “grid parity.” Grid parity is the name of the phenomenon where comparatively new resources (in this case, the photovoltaic cells) achieve economically viability when compared with traditional economic sources. This was a huge development in the expansion of solar power.

California kept on top of this development, offering comprehensive tax credits for people and companies going solar (the state government was perceptive enough to know that in order to reach a solar tipping point you needed to provide some incentive). More surprisingly, and more of a sign of success, was that solar energy grew even without of tax incentives, meaning, in sectors that didn’t receive credits. That was a tremendous testament of the viability of solar power, but there are still obstacles remaining.

Batteries and the Solar Solution

The problem is that solar is still solar. The sun isn’t always shining when you need it to, and it is sometimes shining when you don’t need any more power. For some people, this is like owning sprinklers that only work when it’s already raining. The problem has to be solved before solar power can reach that crucial tipping point.

The push might come, unsurprisingly, from Elon Musk, who has been working on a revolutionary new solar battery while teasing it’s announcement (now, it sounds like the announcement will come at the end of the month). What this battery will do is allow for the storage of green energy in order to power a house, or possibly a place of business. Consumers won’t need the sun to be shining in order to have power; rather, they’ll be able to maintain a steady supply of power. The Musk battery might be expensive to start with, but Tesla, or one of their competitors, will keep improving it, increasing the chance that solar will become the dominant energy source of the future.

Why This Matters for the Rehabber

Maybe you have been on the fence about whether or not to install solar panels on your rehab project, even with the tax incentives. After all, some potential buyers might see it as a boondoggle, an extra expense that doesn’t really help out.

The benefits of installing solar power systems with your equity-based hard-money loan are numerous. Here are just a few:

  • Environmental cache. Don’t underestimate this. There is always a market for people who want to help, regardless of the cost.
  • Lower bills. California has long relied on hydroelectricity, but we’re currently in an epic drought. That source may be getting more expensive. Solar can help offset the rising cost of electricity.
  • Selling back to the grid. Especially with the rise of batteries, and especially in California, excess solar power can be sold back to the grid. Companies already make huge money off of this, and homeowners can save a lot by entering into deals with them. Having the panels on a house is a step ahead in the game, which increases the value and makes it easier to sell.

We all want to do our part. Having a hard money fix-and-flip loan from a trusted lender means making the right decisions to make a house more valuable and to increase the chance you’ll sell it. Working with solar power means you can do both. Doing good while doing well is the rehabbers dream. It’s a bright future.

At Socotra Capital, we’re proud to be the premier direct hard money lender for California real estate. Contact us today to learn more about how we can help.

 

Leave a Reply