Cap rates for real estate investors continue to be compressed. Predictions of rental growth are hovering around 2%, while costs are on the upswing. In some markets, rents are actually declining. 

Many investors are reluctant to add to their portfolios in such an environment.

Acquiring another door today often means stretching on price, assuming renovation risk, and hoping for appreciation to justify thin yield. Insurance resets higher. Property taxes rarely move down. Financing is no longer cheap. Expanding a portfolio adds operational complexity without necessarily adding meaningful net operating income.

But there is another way to grow income without buying another house.

Before you buy another door, consider solar panels.

Solar, when structured properly, is not an ESG decision. It is not about marketing. It is not about saving the planet. It is a yield-producing infrastructure asset attached to a property you already own. Most investors look at it and do not understand the upside, and therefore conclude it “doesn’t pencil.” The issue isn’t the panels. It’s the structure.

The average single-family rental has an embedded revenue stream most landlords ignore: electricity. Every tenant consumes it. Every month they pay a utility for it. In high-cost states like California or outage-prone markets like Texas, electricity is becoming more volatile, more expensive and more political. Utilities are capital constrained. Infrastructure is aging. Time-of-use pricing is expanding. Yet landlords, who already own the roof, rarely participate in this value chain.

The traditional model is simple. Tenant opens a utility account. Tenant pays the electric bill. Landlord has no exposure and no upside. A property owner who installs solar under this structure and simply passes on the savings to the tenant engenders goodwill but does not get any upside on the NOI. A landlord may ask for a modest rent increase, but higher rent will rarely capitalize the full savings from solar. Tenants view solar as a perk, not as a utility replacement. In that structure, the return profile weakens considerably.

The structure where the alpha lives is landlord-owned solar paired with energy monetization. The landlord owns the system and keeps the utility account in-house. The tenant pays a flat monthly energy service fee. Instead of tenant-to-utility, the flow becomes tenant-to-landlord, and the property owner settles with the utility behind the scenes. In effect, the landlord becomes a micro-utility.

The math doesn’t need to be complex to see the appeal:

After spending $14,000 out of pocket to install a system, a landlord can reap a yield in the  low-to-mid teens, before taking into account depreciation. 

Solar qualifies as five-year MACRS (Modified Accelerated Cost Recovery System) property, not 27.5-year residential real estate. That accelerated depreciation materially changes after-tax returns, particularly for investors with taxable income to offset. In contrast, a cosmetic renovation may help rent but does not create a parallel infrastructure income stream with an accelerated tax shelter attached.

When framed against the alternative of buying another $350,000 house at a 6% cap rate, the comparison becomes interesting. Acquiring a new property introduces financing risk, vacancy exposure, potential cap rate compression, and transaction friction. Deploying capital into owned energy production on stabilized assets increases NOI without meaningfully increasing operational complexity. It is yield manufacturing rather than yield chasing.

Of course, state-level regulation matters. Electricity resale rules differ, and net metering policies can alter how excess production is credited. Markets like Texas and Florida tend to offer more flexible frameworks for landlords, while places like California operate within a more complex regulatory environment. Policy risk is real. This is infrastructure investing, and infrastructure is always intertwined with regulation.

There are practical constraints as well. Roof age is non-negotiable; installing solar on a roof with less than a decade of life remaining is asking for unnecessary capital stacking. Vacancy risk must be underwritten honestly; if a property sits empty, the system does not stop costing you capital. Insurance carriers may adjust replacement values. And tenant psychology matters. A flat energy fee must feel stable and fair. If structured poorly, it creates friction instead of predictability.

The broader strategic insight is that single-family landlords have historically monetized shelter and appreciation. Energy has remained external. Yet every house is a small piece of energy infrastructure waiting to be activated. Utilities are regulated monopolies raising rates to fund aging grids. Landlords already control the physical platform where electricity is generated. The question is whether they should continue outsourcing that revenue stream entirely.

This is not a strategy for flippers. It is not ideal for three-year churn cycles. It works best for long-term holds in high-rate markets with strong sun exposure and owners who can utilize tax benefits effectively. It requires operational clarity and legal diligence. But when executed properly, it converts an existing asset into a dual-income property: rent plus energy.

In a market where rent growth is muted and acquisition spreads are thin, increasing NOI internally may be more rational than expanding outward. Solar, structured as landlord-owned infrastructure with direct monetization, offers a path to do exactly that.

Before stretching for another acquisition, it’s worth asking whether the highest-return investment in your portfolio could be installed on your roof.

Investors with more than 100 single-family homes would be barred from buying additional properties, according to a recent memo from the Trump administration. This prohibition would hit institutional investors, which are generally considered to own more than 1,000 homes, and mid-market operators, which own 100-1,000. These smaller operators only account for less than 1% of single-family housing stock in most states, SFR Analytics reported, while institutions own only about 2-3% of the country’s homes, though there are some cities where their share can be as high as 10-15%. These proposals are unlikely to impact housing affordability issues, or the shortage of homes, which is some 5-7 million in the US. 

Home price increases failed to outpace inflation in 2025, one the most closely watched measures of the industry reported, and though they have fallen from the spikes seen during the Covid pandemic, they are still 50% higher than they were in the before times. According to the S&P Cotality Case-Shiller index, prices across the nation grew 1.3% in December 2025 over the previous year. Chicago had the highest annual gain among the 20 main cities surveyed, with a 5.3% increase in December, followed by New York and Cleveland with annual increases of 5.1% and 4%. Tampa had the worst return in the past year, falling 2.9%.

JUST BECAUSE

Nearly 70 percent of real estate agents reported in a recent survey that they were using AI in listings, saving money by bypassing the professional stagers in favor of a few prompts to make their properties appealing. But as the old saying goes, humans make mistakes but it takes a computer to really screw things up. Wired magazine wrote recently about real estate’s slop AI era, including fake video walk-throughs, a magically expanding loft, and stair hallucinations that home shoppers are encountering. But a realtor listing a property for rent in Washington, D.C., may have jumped the AI shark, failing to notice that a demonic creature was poking out of the mirror in a picture of the apartment’s bathroom. One commenter on Reddit compared it to their “sleep paralysis demon.” (See demon above.)

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