Correct Financial Model for Rental Property

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Paul Gilman
Correct Financial Model for Rental Property

I would like to model a small system 4-6kW where the owner installs the system on a rental property she owns. She does not benefit from or pay the utility bill; her tenant does. Would this be a commercial model? I anticipate she will be eligible for SRECs and a rebate as well as the federal ITC and accelerated depreciation as the system owner. Thanks in advance for your assistance.

The Residential and Commercial models are identical except for the handling of debt interest and depreciation: The Commercial model assumes that debt interest payments are tax deductible, and allows for depreciation in the tax calculations. The Residential model allows for debt interest payments to be tax deductible (Mortgage) or not (standard load), and does not allow for depreciation. So if the property owner plans to use the accelerated depreciation, you should choose the Commercial model.

Both models calculate metrics from the perspective of a single entity: The system owner. They assume that the system owner pays for the installation and operation of the system, benefits from any incentives, and uses electricity bill savings to offset the cost of the system.

In this situation, you could remove the benefit of the electricity bill savings from the analysis by modeling a system with no load and setting the electricity rates to zero. To do that, on the Electric Load page, choose "No Load Data" from the blue list at the top of the page, and on the Electricity Rates page, choose the "All generation sold at sell rate(s) and all load purchased at buy rate(s)" and then set all of the charges and rates to zero, and disable demand charges. When you run a simulation, on the Cash Flow tab of the Results page, the "value of electricity savings" should be zero for all years.

Best regards,

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