It would be nice if they would allow us to credit it, but alas…Depreciation is a value that we can deduct due to a diminishing life-span of the structure, usually 27.5 years for residential (no land can be included).

The biggest flaw with this is, once you start to expand on it, it has substantial diminishing returns as you increase the property value as compared to the market competitive rates.

You hit a point of diminishing returns over 100k for price vs. rent received.

Those that are more comprehensive in covering of utilities can have super high fees and make your cashflow potential diminish.

In fairness, I also think that if you buy quality property in quality neighborhoods then you are more likely to attract quality tenants and make your PMs job (and in turn your life) much easier ... the downside is that these type of properties will not cash flow as much on paper compared to rougher and more depressed areas, but the cash flow is steadier, less management intensive to collect, can actually be achieved in reality, and is more likely to grow over time rather than diminish ... so, make your PMs life easier by buying these type of properties and hopefully they will make your life easier in exchange.

I think you could avoid the hit for the small loan amount if you buy single family homes of about $120k, but the returns are diminished for me in that case.

2) Intuitively, one might think that renting out or selling a place where someone was recently murdered might be difficult, but I would imagine that would diminish with time.  

Not to diminish the fact he did an amazing job on the project, per the photos below.We started with a rehab budget of $104,880 and in reality spent $146,410!

Thomas is partially correct, however when the rents are much higher the % towards capex is diminished significantly when comparing physically like for like.

The reason why it's hard to underwrite this is that the possibility of someone moving from a cozy SFH to a 3F is low because it diminishes the quality of life significantly.