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Updated about 9 years ago on .

User Stats

23
Posts
7
Votes
Adam Gott
  • Pocatello, ID
7
Votes |
23
Posts

Add expected tax savings into ROI?

Adam Gott
  • Pocatello, ID
Posted

First time rental purchase, I'm well in to the 25% federal bracket (and 7.2% state) and plan on being so for at least the next six years (retirement). I'm analyzing a lot of deals that barely get me 8% ROI but if I throw in expected tax deductions (expenses plus depreciation) it usually nearly doubles my ROI. Is there a flaw in looking at the numbers this way that I am not considering?

I know that as i increase my portfolio I might expect to bump down into a lower tax bracket (or actually show a profit!) but for now one of my primary reasons to get into real estate was to lower my tax liability.  Approximately 20% of my 2015 income went to state and federal income taxes and this year it would even be worse as our two primary residences were paid off last summer.

Thanks in advance!