Solar Apartment Buildings! “Maintain a firm grasp of the obvious at all times.”

When Jeff Bezos, founder of Amazon, made this quote, it was my understanding he was referring to selling books over the internet, a new concept at the time. He was looking for a reasonably expensive item relative to size and weight. A book became the obvious thing, and Amazon was born.

A whopping 33% of the U.S. population lives in a rented apartment, and they are paying the electric company every month for their power. What if the landlord could supply their tenant’s electricity needs using solar panels? The landlord could increase the rent from each tenant to cover the solar installations cost, plus some profit. 

I would like to think Jeff Bezos would agree on two points:

1) There is going to be a rush to put solar panels on apartment house rooftops. The internet was the catalyst for Amazon, and Virtual Net Metering, (a method in which one solar power system sends electricity back to the grid, then applies the credits from that energy to each of the units in the building), is the catalyst for solar panels.

 2) Environmentally, this is a way to reduce the carbon footprint of 50 to 100 people per building

When you put solar panels on your own personal rooftop it is to save money, and do right by the environment. When you place solar panels on your apartment building, the tenants pay you for their electricity thru increased rent, and you are producing their electricity inexpensively from your panels. This also increases the value of the building.

The great wealth shift from the utility companies to the landlords is happening. This transfer of wealth will take place as the utility company’s stream of revenues starts shifting to the landlords, the Proverbial Gold Mine. Utility companies need a 20, 30 or 40 year investment payback period, while a “solar landlords” payback is 5 to 7 years.

• “The Stars Have Aligned” for Solar Panels on Apartment Buildings!

Virtual Net Metering is the Game Changer:

TIME: solar panels have continued to drop in price and gain wider acceptance. The cost of solar panels today is about 100 times lower than the cost of solar panels in 1977.

TECHNOLOGY: Virtual Net Metering is a method in which one solar power system feeds one master meter, sending electricity back to the grid. The power company then applies the credits from that energy to each of the tenants in the building, thru sub-meters, offsetting each tenant’s electricity costs. The utility handles all the record keeping, while the landlord collects the utility payments from the tenants. One of the great advantages of solar multi-tenant housing is education. Tenants at the solar apartments learn and understand how they are using energy and how solar energy can help.

LEGISLATION: Utilities are on board with the California Solar Initiative, in giving the go ahead thru the MASH Program to Virtual Net Metering. This is similar to the scene in the movie the Graduate when the advice given to Dustin Hoffman is, “One word:Plastics”

This is a game changer in the solar industry. Apartment owners can now become a Utility Company. Assume rents increase roughly 3% per year, and electricity prices increases about 5%: "We are now in an era of rising electricity prices," said Philip Moeller, a member of the Federal Energy Regulatory Commission. .. “In California, residential electricity prices shot up 30% between 2006 and 2012, adjusted for inflation, according to Energy Department figures. Experts in the state's energy markets project the price could jump an additional 47% over the next 15 years.”

For EXAMPLE: Historically, rents and electricity are both rising in price at an average of 4% per year. You purchase an apartment building and install a VNM system. In your purchase, you used 4 to one leverage, (a 25% down payment), so a 4% price increase becomes a 16% leveraged return. You have now almost accomplished what Warren Buffet recommends for a good investment: “Investors are always looking for stocks that are going to double in a year or two years- that’s why they want tips. Instead, they should be looking for stocks that are going up a more reasonable amount, such as 20% or 25% a year for the next 20 years. That’s where fortunes are made.”

Currently, there is a bestselling book by Thomas Piketty: "Capital in the Twenty-First Century.” Per The Economist summary:"Mr. Piketty derives a grand theory of capital and inequality.  As a general rule wealth grows faster than economic output, he explains, a concept he captures in the expression r > g (where r is the rate of return to wealth and g is the economic growth rate).” To boil this down, the landlord owns the apartment building = wealth, receiving a leveraged return of roughly 16% per year, compounded. The economic growth = wages, hopefully grow at 3% per year, giving landlords a 5 to 1 financial advantage over their tenants. Landlords and tenants have historically been a good example of Mr. Piketty’s theory.

Steve Nauert, the GreenLandlord.org