Do you use depreciation savings in your pro forma?

[Chase Gochnauer]

Hey guys,

I have about 55 rentals but most are smaller units. Typically on my pro formas I don't figure in depreciation tax savings. I am pulling the trigger on a much larger complex, though, and the depreciation expense is substantial. I am in a very high tax bracket so taxes are costly. The annual tax savings would make a full 1+% cap rate difference.

Do you guys typically factor in depreciation tax savings when running the numbers on a large complex?

[John Lenhart]

@Chase Gochnauer when evaluating the deal to determine the price, I do not. When evaluating the deal for my own personal benefit I do. On the evaluation side, if you are looking for an 8 CAP your personal tax rate and savings are irrelevant. This will affect your own IRR and return on your cash, but it should not change the value of the property. The property is worth what it is worth whether you are in a 15% tax bracket or a 39% bracket