How do you properly depreciate a BRRRR'd property?

[Account Closed]

Good Morning Everyone!

I purchased a SFH for $50k cash on Nov 15th. I am investing up to $30k in rehab into the property. I expect it to appraise for $127,450 in 6 months when I plan on cash-out refinancing it 75% LTV. I will hold this property as a rental.

This is my first BRRRR deal and I am curious as to how I should handle the depreciation aspect of it. I would like to depreciate off the appraisal (less land of course) but no sure how - or if - that would work since the property will simply be refinanced and not actually trade.

What are your thoughts?

[Ashish Acharya]

Originally posted by @Account Closed:

Good Morning Everyone!

I purchased a SFH for $50k cash on Nov 15th. I am investing up to $30k in rehab into the property. I expect it to appraise for $127,450 in 6 months when I plan on cash-out refinancing it 75% LTV. I will hold this property as a rental.

This is my first BRRRR deal and I am curious as to how I should handle the depreciation aspect of it. I would like to depreciate off the appraisal (less land of course) but no sure how - or if - that would work since the property will simply be refinanced and not actually trade.

What are your thoughts?

You are right. You cannot depreciate the FMV of the property.

Your depreciatiable basis would be :

Around 30k(for the building taking out land ) + 30k of rehab if you add all the expenses to the basis.