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John Sedlazek, a homeowner in Somerset, New Jersey admits he was nervous laying down $80,000 to install solar panels on his roof.  But thanks to his state’s generous rebate, as well as a federal tax credit and the significant drop in his monthly utility bill, he’s no longer sweating the investment.

"There was hesitation, seeing the initial outlay, the bulk of the money to put [the solar panels] on [the roof]," he says.  "But [over a period of time] you’re basically seeing you have free energy.”  The state of New Jersey awarded him a $35,000 rebate.  He also scored a $2,000 federal tax credit, along with a dramatically cheaper utility bill.  Sedlazek says he saves 90% a month on his utility bill, paying roughly $30 versus $300.  At this rate, he estimates it will take him seven years for the project to pay for itself, evidence that patience can go a long way.

Before you make the investment, here are FIVE ways to weigh the financial benefits of going solar.   

Know Your State’s Perks.  DSIRE, which is the Database of Solar Incentives for Renewable and Efficiency, provides all state-wide financial incentive details for free at  New Jersey, for example, has offered $170 million in rebates for 3,100 installed solar systems. While the average rebate in NJ for residential solar projects is $20,000, not all states offer such high financial benefits.

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Act Fast. The Federal Solar Tax Credits Program is slated to end on December 31, 2008. Additionally some states are considering modifying or doing away with their rebate programs, so this may be the best time to secure the highest return on investment.

Calculate S-RECs.
As a solar system owner, you may qualify to receive Solar Renewable Energy Certificates (or S-RECs) every time your solar electric system produces 1,000 kilo watt hours of electricity. These certificates can be traded in for cash. Call your utility company to provide you with an estimate.

Get as Green as Possible. Prior to investing and installing solar panels on your roof, what other smaller investments can you make to reduce your monthly energy bill? Buying energy efficient light bulbs and EnergyStar appliances, and caulking your windows can help dramatically reduce your utility bill.

Shop Around. At this point, most solar installation companies offer similar rates of $6 to $8 per watt, depending on the size of the residential project. But what is negotiable is the maintenance fee.  Some companies include that in their overall package, while others will charge you for the proper upkeep which includes regular maintenance, washing and check-ups.   Ask neighbors who’ve already had installations for recommendations.

Catch more of Farnoosh’s advice on Real Simple. Real Life. on TLC, Friday nights at 8 p.m.