As a savvy property investor, you’re always looking for better returns from your properties. With prices rising and rental returns flattening, yields are under pressure and it’s becoming more difficult to grow your portfolio. You need a way of making your properties work harder. And everyone is looking for ways to reduce their energy bills; tenants are no exception.
Digital Solar is an exciting new way to help both landlords and tenants get what you want; better returns through cheaper, clean energy. By monitoring the output of the solar in real-time and automatically generating a bill for the energy produced, our Digital Solar service enables landlords to sell solar energy to tenants.
If a property is suitable for solar and the tenant can utilise 50% or more of the energy produced during the day the economics start to become attractive for both parties. Most property investors can expect to earn five times the cost of the panels and save tenants on average 20% off their energy bills or $300 annually.
As an example, imagine a tenant, Tina, a married mum of two who works from home and rents a 3 bedroom home in Sydney’s outer suburbs on a 12 months lease from Wes, her landlord. Tina’s energy company charges her on average 30 cents per kWh (across peak, shoulder and off-peak rates) for electricity and her annual bill is $2,656, about $51 a week.
If Tina signed up with Wes to provide her with Digital Solar at 24c/kWh, a 20% discount to her electricity price, and sources half her energy from the grid and half from Digital Solar, over a year Wes could earn around $1,060 and Tina would save around $265.
The excess Digital Solar energy that Tina doesn’t use goes back to the grid through Tina’s utility supplier who will pay a feed in tariff of around 6.2c/kWh. If Wes agrees to share 20% of that tariff with Tina he’ll earn another $60 a year and Tina will earn $15. That takes Wes’ earnings up to $1,120 per annum and Tina’s savings to $280.
Tina benefits immediately from the savings, and Wes has an opportunity to maximize his return on investment by depreciating the asset, optimising his tax position across his investment portfolio and finding the lowest cost way to finance the solar.
The case for Digital Solar is compelling with typical expectations of:
1. Increased yields of 20 to 30 basis points, payback in 5 years and an expected life of 25 years.
2. A 5 times greater ROI on Digital Solar over that of the investment property itself.
3. A net present value of 3 times the cost of the system and IRR of over 20%.
Landlords can now earn a new income on their investment properties, whilst tenants enjoy cheaper, cleaner and more efficient energy. Everybody wins!