Solar Panels – 3rd Passive Income

solar panels

Hello, Well it’s time to add another source of Passive Income. We are in the process of applying and installing solar panels. This year will be the last year of the Program in Ontario, in which you can sell the power you generate to the grid. The microFIT guaranteed rate for 2017 is 28.8 cents per kWh for system sizes between 6 and 10 kW for a 20 yr contract . A typical 10kW system generates about 12 MW per year. With a southern facing roof area approximately 800 sqft, you could earn up to $3,500/yr or over $290 per month. (They think we will make approx $2900 per year)

MicroFit Program

The MicroFIT program was created in 2009 and offered a rate of .80 per kwh for 20 years. At the time systems were more expensive and the high rate promoted going green and creating the businesses needed for the solar panel industry. In 2012 the rate dropped to .54 cents per kwh for a 20 yr term. 2013 they dropped it down to 39.6 per kwh. 2014 38.4 cents per kwh, 2016 29.6 cents per kwh. And here we are today at 28.8 cents per kwh.

rich

Back when the program was first introduced I was really interested in it, but living in a condo it was a no go. The rich got richer. At the time the systems cost a lot and the stock market wasn’t doing to hot. I saw a lot of my wealthy clients installing them as there was no risk vs being in the market. I have one client who installed a lot of panels in a different program when this was first introduced on his businesses and now brings in over 200k per year just from his panels! No point bitching though. That’s awesome, and you know what? He spends his money and keeps us busy so its all good. Moral of the story, simply put. Do what the rich do.

The New Place

2 Years ago we bought the place where we live now. In the country on 3/4 a acre property. The roof has a nice pitch and I got excited about the potential to have solar panels. Soon reality hit me, the grid could not support us feeding it with more electricity. Since we lived in the country the transformers really weren’t up to par since there isn’t a massive demand on the system. About a week and half ago I tried my luck again and BAM we passed!! Oh shit time to start contacting the solar companies. It’s time to add our third source of passive income! (dividends, ads/affiliates on this site and now hopefully solar panels)

Quotes

Naturally I started reading up on it again and noticed this is the last year of the microfit program. We have gotten a couple quotes now ranging from 25k to 32k. I would get the hst back so basically 29k. The 25k one seems too cheap and there was some errors on the design. The other 2 were close in the 30k range offering way better warranties. It would take 2 days to install the panels but its all the paperwork and red tape. If we signed the dotted line today the panels wouldn’t even be installed until around November, missing all the prime sunny days. After we sign everything there is still the potential for no room on the grid as someone could of gotten that spot before us. Here’s hoping!

west side

Our house isn’t all ideal as the southern portion of our house couldn’t fit all the panels and some would have to be put on the west side! The system would generally take 9.5 years to pay for itself and then after that it would be all profit. They say it would average a 10.5% roi based on the current rate.(but I’m banking on it being lower, maybe 8%)

Only downside I see of them is the potential sale of our home. We think we are lifers here but you never know what happens. They advertise solar panels increase your real estate value but I hear different stories. Some people don’t like the looks of solar panels. Ellon’s Tesla panels look great but I priced it out at over $80,000 so we need to pass on that. Who Cares about the looks when I’m inside cashing the hydro cheques! I also love the green aspect of going solar.



ALL-IN

Its time to go all in, who cares if I’m holding deuce seven off suit. We don’t have the cash just sitting here for potential things like this. Its either I sell some stocks or precious metals, use a line of credit and pay it down fast or Refinance the house.

Equity

I have always been in the mindset of paying down debts and eliminating the mortgage. As I read and talk to clients and others, I’m realizing with current rates as low as they are its time to step up and use other people’s money. Before I started investing we used to just throw money at our mortgage constantly, then we sold our other house and bought this one leaving the equity practically alone.

Then the housing market went CRAZY! If you don’t know about Ontario’s housing market. More specifically the GTA and surrounding areas, its basically the hottest market in the world from what I understand. Another plus when I moved to the area I live, it wasn’t that desirable now its ones of the most expensive areas around! We recently got our place appraised (last week) and its increased about 80% from when we bought it. Yup that’s basically a 40% increase every yr not exactly but you get the point. We bought the house as a fixer upper and I have done a lot but DAM!

Refinancing

So I spoke with my bank the other day (RBC) they are currently doing promos to get your mortgage and I will get $500-1000 to switch over to them. Also if I have my mortgage with them, it will lower my banking fees to 5$ per month vs the $10.95 I pay now. It will also make finances easier as everything will be with them then. Currently my mortgage is with another provider at a rate of 2.80% the 5 yr term expires next April. There will be a fee to cancel earlier and transfer over but hopefully the cash rbc will give for my business and the difference in interest rate will nullify that cost. RBC is offering us 2.59% for 5 yr fixed.

solar panels

I’m currently playing with the idea of pulling out $75000 – $150,000 in equity. Now that is not the max we can get but I still want the mortgage to be affordable. (We also have the option of increasing the amortization another 5 years for basically same bi-weekly payment)

  • 30k would be for the solar panel system
  • 18k for possible new roof / maybe almost max my tfsa
  • Sons resp for yr ($2500)
  • 50k in a private investment I know of that offers a 12% rate of return
  • 52,000 to completely start and max the wifes TFSA.
WHAT DO YOU THINK?

One of my goal’s for the year was to create another passive income source, which the panels will provide. Either way they are going to get done its the last year for it. I’m curious about what you the readers think though. Would you refinance your mortgage to use that money for these purchases? I’m pretty sure I can easily get a greater return then the 2.59% interest rate on the new mortgage balance. I also feel it would be great to max the wifes tfsa and start collecting those dividends.

Again like I have stated in other posts. This community makes me better I’m always learning and pushing to increase my passive income thanks to everyone here. If you haven’t made a website why not?

Cheers!

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23 Responses

  1. John R says:

    solar panel idea: On the basis the total installed cost is $30k + $18k roof + any maintenance costs = $48k+. x 2.59% interest on the borrowed money.

    The Payback of $3k/yr x 16 years straight line calculation before you are profitable, closer to 20 years when factoring in the interest on the loan carrying charges. Will you use the $3k/yr to pay down the loan or use it to invest in something else?

    Doesn’t seem like a good investment, maybe I missed something

    What about solarbonds? http://www.freedomthirtyfiveblog.com/?s=solarbonds&searchsubmit=

    On the leveraged money from your mortgage/HELOC.

    On the $50k private investment paying 12%, is it guaranteed 100%, sounds too good to be true.

    Maxing your wifes TFSA. You do know that you cannot deduct the interest you pay when using the proceeds of that in the TFSA for investment,

    http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns206-236/221/menu-eng.html

    On the basis you are paying 2.59% on the $52k, you’d need to make sure the capital never goes down as well as the dividends are always more than what you are paying in interest

    • Hey John good points. As for the roof that’s worse case scenario. Best case our roof is good and solar panels go on for 28,000 after hst refund. If the roof needs to be done I can reshingle it or go metal roof. Costs would range but I’ve always wanted a metal roof anyways.

      The private investment is family company and they have been doing it for years with great results.I agree it almost sounds to good to be true but they have been very successful and we trust them. As for writing off the loan intrest I don’t really care. We did a quick calculator today and with the lower rate at 2.59 and extending the mortgage ammorization by 5 years. We could get $150,000 cash and our biweekly payments would only increase $100. Of course our mortgage gets extended another 5 years tho. But with those investments listed above we could earn 11,000 in passive income just off that.(3000 for solar panels, 6000 family investment and approx 2000 from dividends in tfsa (Like you mentioned if the tfsa keeps paying dividends) I averaged 4% return on that dividend.
      Seems fantastic and if it all works out we would smash our current financial goals!

      Also all income would be reinvested or used for extra principle mortgage payments.

  2. John R says:

    thanks for that PCI, looks like you have the investments as well as the risk & carrying charges all figured out.

    Good luck to you

    Just a thought on the remortgaging.

    Have you looked at or considered a combined mortgage with HELOC. Leave the remaining mortgage balance as is and take out a HELOC for however much they’ll give you?

    • Hey John no I haven’t actually something I should look into.I know it will be a higher rate I think like 3.5 and would that mean I need to make 2 different payments? You always give me something to think about. Thanks

  3. John R says:

    On the remortgage vs HELOC, TAKING $100K, you’ll be paying more per month in payments on the mortgage to what you’d be paying on the HELOC. Maybe also consider a margin account for non-registered investments. Interactive brokers (IB) charge 2% interest on margins

    https://www.interactivebrokers.com/en/index.php?f=interest&p=schedule2

    Half way down the page in the link in $Cdn

    FWIW, heads up, the following tool may be of interest to you when looking at whats in your portfolio or considering a new stock buy

    https://www.canadabulls.com/SignalPage.aspx?lang=en&Ticker=Zhy.TO

    at the top of the page in the url you can change the symbol to look at other stocks.

  4. I’m interested in solar power as well, and think your thoughts and analysis is thorough above. Given that you think you might sell or move in the near future, I don’t really know if it’s worth the expense right now. That being said, another income stream + saving the environment is always a good thing 🙂
    Erik @ The Mastermind Within recently posted…Happy Money: The Science of Happier SpendingMy Profile

  5. I’m really interested to see what Tesla does with solar roof tiles. I am waiting for that to come out before I throw money on solar panels at this point. Even if it’s a couple of years I think solar roof tiles will be the future. Although I could be really wrong 🙂
    MUSTARD SEED MONEY recently posted…Small Acts of Kindness, Big Results: Pay It ForwardMy Profile

  6. Leo T. Ly says:

    Since love to use debt to accumulate wealth. I am going to say, go for it PCI. I also locked in my mortgage refinance at 2.59% last year. There are quite a few dividend stocks that you can buy to easily create a dividend portfolio to get a 4% yield on your money. This means you are pocketing about 1.5% a year or more if you factor in the tax benefits. It takes money to make money.
    Leo T. Ly recently posted…The Benefits Of Investing With A PartnerMy Profile

  7. I am all in for refinancing for solar panels. That is the one thing I cannot do because of living in a condo. Keep raking the money. I think, the housing prices will not get affected by the solar panels. They can see the value in that.

  8. You should wait a little for the new Tesla rooftiles! They look really good, and over the long run are cheaper than standard rooftiles.

  9. Dave says:

    Thanks for your article. I live in Ontario as well and am looking into the solar panel option myself. I am personally sitting on the fence about it and thought I’d share some other thoughts:
    – I’ve heard you can write off (tax deductible) the portion of your new roof that gets covered by the solar panel if the solar panel is completed within a short time period
    – you can write off some other small expenses, as the solar panel is a business (e.g. internet can be written off if you download a solar panel app)
    – not sure if you’ve checked into your home insurance, but might be worth it as I believe it goes up a little bit with solar panels on your roof
    – how did you shop around the solar panel installer/company and who did you end up picking?

    • Hey Dave thanks. I had no clue I could write off a portion of the roof repair if need be. Intresting about the business expenses I got to look more into that. As for the insurance I knew that there will be a minimal increase. When shopping we applied and emailed about 4 sites. 3 companies replied. One was 5k cheaper then the other 2 and the design wouldn’t actually work on the house. 1 guy actually came to the house and told us all about it and was the middle price and had micro inverters. Another company was higher and was string inverters (which I really don’t want) generally string inverters cost 3-4 less from what I have heard. I liked Gala Energy the most so will be signing with them. Will keep updating the progress. It’s mostly paperwork and only 1 or 2 days for the install.

  10. I love the idea of solar panels and green energy. It still feels really early in the game for most of it so it costs a lot more until they can improve the technology. I do think that we are moving toward being green so it will be huge in the future. May pay off to get in early. Just have to do a cost/ earnings analysis and you have to stay in that house for a while to make it worthwhile.
    Dividend Daze recently posted…How to Decide Between Paying Off Student Loans Early Or Investing (Or Both)My Profile

  11. Love the idea of solar panels as a passive investment. We looked into it for our home but our south facing roof is too small. Panels would have to be placed on the East facing roof which also faces the street. Aesthetically its not a big deal for me but my wife doesn’t like the look.

    If you’re going to stay in your home for a while then it seems like a good opportunity.

    I’m assuming you’ll add this to your passive income report? Will you also add the loan to the report for the net impact?
    Owen @ PlanEasy recently posted…First-Time Home Buyer? Boost Your Down Payment!My Profile

    • Hey owen thanks yea I’m looking forward to.it but right now it’s in hydros hands if we get approved. Honestly it would be in my passive income report but not the loan. We are in the process of refinancing house and by extending oue mortgage 5 yrs the payments only increase 100$ bi weekly. For well in excess of this cost. Maybe i will try to calculate that.

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