Supercharge Your Depreciation

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Millionaire Now! by Larry Nusbaum

This blog is based on the organizational principles found in my new book, "Millionaire Now! - A Financial Toolbox with Seven Steps to Wealth".

Supercharge Your Depreciation

Posted on 03/30/2007 05:48 AM | Link | Post Comment

Supercharge Your Depreciation Deductions and Save Thousands in Taxes.

How much extra did you pay in taxes not using the component method of depreciation because your accountant did not know about this powerful legal strategy? And, with little risk.

Use the Multi-Component/Land-Residual method. By componetizing you can substantially increase depreciation deductions by first identifying 5-year personal property and 15-year land improvements. Componetizing the depreciation components first is a also a way to arrive at a lower, leftover ("residual") land value. With this method, you do not start with the non-depreciable land. Instead, you start with the depreciable components that have the lowest recovery periods and therefore yield the largest depreciation deductions.

The last (or residual) allocation will be towards what's left over -- non-depreciable land. Here you allocate the property cost into four major components in this order: 1. Personal Property, 2. Land Improvements, 3. Building, and 4. Land. (You can also further segment the building into its structural components)

Also read: Importance of Rental Property Depreciation

Apartment Market Sizzles in the Valley of the Sun:

Apartment brokers Marcus & Millichap, in ranking Phoenix the nation's No. 10 market for apartment investors (down from No. 12 in '06), says of the local rental climate ...

"Asking rents are expected to gain 5.4 percent, to $1,543 per month, while effective rents are forecast to increase 5.9 percent, to $785 per month, this year. Asking and effective rents each climbed5.7 percent in 2006. Vacancy is expected to remain steady at 4.6 percent in 2007 as new units are quickly absorbed."

• Declining housing affordability will continue to support the Phoenix apartment market in 2007. While the local housing market has cooled, the median price for a single-family home in Phoenix is approaching $255,000, making it tougher for current renters to become first-time buyers, but still more affordable than both coats.

• While condos will tempt some renters, the gap between mortgage payments for the median-priced condo and the average Class A asking rent has increased significantly in the past year.

• Strong fundamentals will continue to attract institutional buyers to Phoenix. Investors may target more affordable properties to the west and in Pinal, while strong revenue growth should continue to drive prices higher for downtown properties. To read more, CLICK HERE.

I first noted this trend in September HERE & October, HERE, with an update in February HERE when Apartment Owners Remained Bullish.

The S&P composite index of 10 major U.S. cities fell at a 0.7 percent annual rate, the first drop since 1996. This index tracks "repeat sales" rather than a median price for single-family residences in the region. That means it tracks the typical gain or loss a local seller experienced, then combined all those results into a two-month moving average of the math. Read more HERE and read Eddy's take HERE.

S&P/Case-Shiller Home Price Indices/January 2007 - Dire?

REAL ESTATE IS BORING: IT JUST GOES UP.