I want to calculate IRR while also factoring in the decreased return that will kick in about a year or so because of capital gains. 

HI All - I'm considering a post office purchase. The early year cap rate looks good, but there are problems in the out years. The tenant has three five-year options on the lease that are $16k lower than the first thre...

Purchasing an investment property increases the level of difficulty of your tax return.Purchasing a house-hack is even more difficult.To make it even more difficult - you plan to make improvements so you have to determine which costs are currently expensed and which are capitalized.Not only have you acquired an investment property but you also acquired a personal residence.As a result, direct expenses towards your investment property and indirect expenses are deductible business expenses that can be used to decrease your net income from rental activities.With all that is said - you are trying to operate a business so I would hire professionals to help you with your tasks.

@Jung Won Kim the IRS' meaning of depreciation is based on the purchase price, and date of purchase (placed in service date).Even though it is based on the concept that the value of something decreases with time, the tax definition of depreciation is very different than the bank's definition of depreciation of appraised value.

That said, I believe that the profitability of short term rentals will continue to decrease until maybe only the industry heavy weights or the owner occupants can stay afloat. 

The broker was initially trying to close the business portion first by 1/15/19 (which I think is why my father in law agreed to the transition date of 1/1/19) where the ABC license would close later and the new owner would just operate under a temporary permit or something along those lines.

I feel prices are so macro in the city that just by decreasing some vacant properties on a single street can have huge effect.

In order to increase cashflow, you need to increase income and/or decrease expenses.

That being said, our population is not increasing; it is decreasing overall. 

I am assuming, your townhouse will also come with HOA of some type which even further will decrease your profit.