[Matt Kuzma]

In today's mortgage market every $1000 that you borrow will cost you about $6 per month. So if you look at energy-saving improvements in terms of what they save you, on average, per month, you can easily translate that into loan value.

For example, replacing an old washing machine with a new one that has an Energy Star rating, can save you $100 per year. That's about $8 per month, which translates to about $1333 in added value. This kind of calcualtion assumes that your improvement will last as long as your mortgage, which is frequently not the case. But you can keep the calculation accurate by including the fraction of years that the improvement is expected to last. If you expect your washing machine to last 10 years and you have a 30-year morgage, just take a third of the value, or $444.

So if you want to translate solar panel energy savings into home value, just devide monthly costs by $6 and multiply by $1000. Then factor in the number of years you expect the improvement to last, and you should also figure in maintenance expenses that you anticipate.

This calculation is working years into the future, when energy prices can change and if you have an adjustable rate morgage, the cost of borrowing can go up, which will all change the balance. If energy prices go up, the value of your improvement goes up. If morgage rates go up, the value of your improvement decreases (because the cost of borrowing increases, so you need to provide more of a benefit to justify the same value).

I should also mention that this is just a calculated value, so while it's useful information, it isn't cash in your pocket. The market determines the value of a house, so if you want to sell a house with these kinds of improvements and you want to get that increased value out of your sale, you need to do some work. You'll need to put some effort into selling the various energy improvements of your house, and how you do that is really up to you. I might be inclined to print up a sheet explaining the various energy savings your house provides and making buyers aware of the issue of utilities costs. Most people, when buying a house, assume that all houses will be the same when it comes to the costs of heat/water/electricity. So you need to get them thinking about that as they look at your house, and hopefully take that information away with them as they look at other houses.

[shadowbot]

I like that method of thinking. A lot of people dont realize that cutting tiny costs here and there and factoring it into the big picture really adds up. Sometimes just thinking about things in a different way can make you realize an investment is worthwhile.

[Logruve]

I definitely think solar will increase the value of the home. I feel like sometimes people are concerned with the "look" of the solar panels. As more and more people convert over this will become less of an issue. I hope more communities follow the trend of the San Diego neighborhood, Del Sur, who is mandating that 20% of homes have solar energy systems.

[ToddF]

The American Association of Realtors say that home values increase by at least the cost of the solar installation. This makes them a better home improvement investment than kitchen or bath remodels. They improve the cash flow of the homeowner and are gaining acceptance.

[stuboyle]

Originally Posted by ToddF

The American Association of Realtors say that home values increase by at least the cost of the solar installation. This makes them a better home improvement investment than kitchen or bath remodels. They improve the cash flow of the homeowner and are gaining acceptance.

I'm a little scepticle of this of this finding, even though I wish it were true.

From a cash flow perspective, this is an interesting question. Normally, if you were to finance the purchase of solar panels, it wouldn't be for 30 years. If you buy a house with existing solar panels and take out a 30 years mortgage, it would be interesting to project the cash flows. The outflows principal and interest payments versus projected lower electricity bills.

[ToddF]

Retscreen.net has simulations using actual equipment and with hundreds of weather collecting sites worldwide. Dial in location, equipment and cost of the system with the cost of electricity and the (projected) inflations to energy as well as maintanence. Payback is better with solar water heat, however.

[freeranger]

[quote=stuboyle;6654]I'm a little scepticle of this of this finding, even though I wish it were true. quote]

With the certain increase in grid power generation costs there is no doubt about the value of solar installations (at least here in Australia). The cost of adding solar power to a home is more than recouped in the sales price.

[renic]

There is a much easier way to calculate the increase in property value from solar (or any energy saving measure for that matter).

The Appraisal Institute, the world's largest trade organization for professional real estate appraisers, has done quite a bit of research on this matter and has published a very simple formula to determine the increase in property value.

For every $1 in annual utility savings, you should expect $20 back in increased home value.

So, a system that eliminates $2,000 in annual electrical charges would increase the value of a home by $40,000 in the first year. The study that determined this formula has been quoted by reputable organizations such as Wells Fargo. You can see for yourself, here:

http://acroelectric.com/fileadmin/re...st-payback.pdf.

The actual report is only about 8 pages, and a reprint is available here:

http://www.acroelectric.com/fileadmi...rket-value.pdf

One thing to keep in mind; however, is that pricing of real estate is a rather subjective task (more so in some real estate markets than others). If you want an appraiser to include the increased value from solar, you will need to give them copies of this information, and they will need to understand that the system reduces the occupant's cost of living.

There are even "green" mortgages available from some lenders that take into account issues such as grid-connected solar systems. The idea is that if you're not spending $200/month on electricity, you could be spending that same amount of money on your mortgage.

Remember, this is true for other home improvements as well, such as: dual pane windows, new insulation, attic fans, etc.