Different asset types have different depreciation profiles

Depreciation is a non-cash tax deduction that allows owners to deduct a portion of a property's cost each year, even if the property is increasing in market value.

As taxable investors, we want to evaluate investments on an after-tax basis.

If you are someone that can use those depreciation benefits, then one investment might become more attractive than it would be otherwise.

Some real estate asset classes include:

• Single-Family Rental - lower depreciation profile because there are fewer site improvements and common area assets

• Multifamily Apartments - better than SFRs due to amenities, parking lots, landscaping, pools, clubhouses, and common area improvements

• Manufactured housing communities (MHCs) - often the highest depreciation profile because a large portion of value is in land improvements (roads, utilities, pads, sidewalks, lighting, drainage, etc.) that qualify for shorter recovery periods

It’s so important that you make sound investments ignoring the tax impact. No amount of tax savings is going to be worth a bad investment.

But I think it’s possible to do both at the same time. So your checklist should be:

✅ Good investment
✅ Tax-efficient

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Quantitative Financial Strategies, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. This material is for educational purposes only and is not tax, legal or investment advice. Investing involves risk, including possible loss of principal.