Tax Savings ROI Through Net Loss

[Kyle R.]

Hi BP I am running through some scenarios for a first rental property which will be out of state using a PM. The scenarios range from a couple hundred cash flow positive per month to a break even per month. I have read a lot about the deprecation factor along with the other write offs and expenses (mortgage interest, PM expense) Cash wise we can make a profit per year whether large or small, but by being allowed to depreciate the prop over 27.5 years and deducting the other expenses we show a paper net loss for tax purposes. Say net loses for the year equal 10k, as a single member pass through LLC, I understand that 10k can be deducted from personal W2 salary under 100k. At a 25% tax rate that 10k of lowered taxable income will save personal taxes $2500. Even though the $2500 aren’t considered business income would I‎t be reasonable to count that onto income earned per year from the property for cash on cash return purposes? Say initial investment was 30k, can you add the hidden 2500$ saved in taxes to whatever the income earned on the property was to find the ROI for analytical purposes?