Key Takeaways:
Solar Lease Payments: Typically distributed over 25 to 50 years, these payments are fixed and do not increase with production or inflation.
Selling Solar Lease Payments: Offers a lump sum payment upfront, which can be more beneficial than waiting for periodic payments.
Market Demand: High demand from energy investors for solar rents due to the renewable energy boom and ESG investment trends.
Inflation Consideration: Selling now can protect against inflation, as future payments may lose value over time.
1031 Exchange: Selling solar lease payments may qualify for a 1031 exchange, reducing capital gains tax impacts.
LandGate's Role: Provides a marketplace for selling solar royalties, helping landowners receive competitive offers from investors.
Solar Rents / Solar Royalties Explained
When you lease your land for a solar farm, you can expect to collect your earnings over the period stated in your solar lease agreement, typically 25 to 50 years, in the form of solar lease payments. These solar rent payments are distributed at a fixed amount over this period and don’t increase based on production or inflation. While a solar land lease positions you to receive these payments monthly, quarterly, or biannually, selling your solar lease royalties provides you with a lump sum payment upfront rather than waiting years to collect your earnings.
Have you leased your land for a solar farm? Are you interested in potentially selling your lease payments up front for a lump sum? LandGate can help, and our service is free.
"I started receiving offers to sell my solar rent payments and wasn't sure if they were good offers so I reached out to LandGate to find out. I ended up receiving an offer that was 3 times higher than any of the others I received within a few days of listing on LandGate. I would highly recommend you work with them if you want to sell your solar rents. The process was quick and easy and they handled the work while I made the decisions." -MD
Now is the Time to Sell Solar Rents
Your solar land royalties are currently in high demand from energy investors who are scrambling to add ‘green investments’ to their portfolios. Amidst a frothy market and a renewable energy boom, solar cash flow buyers are willing to pay a premium for solar rents, meaning more money in your pocket today. If you are getting $10,000 of solar lease royalties this year, in 30 years this $10,000 won’t be worth much at all due to inflation. LandGate has helped landowners find solar royalty buyers for their solar rents that pay close to ‘inflation cash’ for 30 years of future solar royalties. This means that they’d pay you today what you’ll be getting over 30 years, minus inflation.
The reason investors do this is because Wall Street is desperate to show that they invest in green energy. Investors are increasingly utilizing ESG (Environmental, Social, and Governance) to analyze risk factors and growth opportunities when they are looking to invest in companies. They are viewing companies that lack a focus on sustainability as “riskier” investments.
Therefore, companies are eager to purchase your solar rents to prove to potential investors they have an eye on sustainability, giving experts like LandGate the upper hand in the negotiations to present you with the best deals. While green energy is currently heavily incentivized, the future of these incentives is uncertain and can change at any time, which could decrease your solar royalty's sale value. Strike while the iron is hot.
Solar Rent Payments Over Time
It is important to note that the majority of solar leases do not account for an increase in production or the value of the megawatt-hour or kilowatt-hour. If the value of the kilowatt goes up, the solar developer leasing your land for solar energy production makes more money but your solar rent payments stay the same. For example, take what happened in Texas during the winter snap of 2020/2021. The electricity producers were the ones that benefited financially rather than the landowners. Many solar leases also include clauses that the developer can get out at any time. Operational problems can also happen to the solar farm which can cause your lease to get canceled. So your 20 years of receiving rent checks has the potential to get cut drastically short. If you sell now, you can take the future money from your producing solar farm and invest in something more stable.
Selling Solar Lease Payments May Qualify for 1031 Treatment
Not only does selling solar lease payments combat inflation and mitigate the risk of terminated future lease payments, but these types of transactions can also qualify for a 1031 exchange, allowing landowners to reduce capital gains tax impacts and invest in other properties.
How Our Client Made Money Selling Solar Lease Royalties
As an example, a landowner from Colorado signed a solar option agreement with a solar developer 3 years ago. The developer has now exercised their option to enter into a formal long-term solar lease with this landowner. The lease provides for annual payments for 25 years. His 1st year’s payment was $35,000. The annual payments will increase by 4% each year for 25 years. The total of his annual rentals will be slightly over $1,000,000.
This landowner is in his 70s, and he and his wife would like to enjoy these funds sooner rather than receiving an annual payment for 25 years. He started receiving offers to buy his solar rents and contacted LandGate. He asked LandGate to market his solar royalties for sale. In a matter of days, we presented several offers for almost the cash value of his future solar rent payments (minus inflation). The process was very easy for the seller: his LandGate listing generated multiple offers, and the seller made all the decisions. The closing happened very fast.
LandGate Can Help You Sell Solar Cash Flow
We have hundreds of buyers looking to make you an offer for selling your solar royalty payments. LandGate is the Zillow for land resources. LandGate's open marketplace enables the buying and selling of land resources, and we help landowners receive top offers from institutional energy investors around the world to purchase your cash flow.
It is free to list your interests, and there is no obligation to accept any offers. Whether you are ready to list your solar royalties on our leading marketplace or simply want to calculate how much the resources on your land are worth, LandGate is here to help today.
