Depreciation accounted for in analysis?

[Dave Smith]

When analyzing cash flow, and with respect to depreciation:

• Do I calculate depreciation into cash flow projections?
• If so, is it on the total price, or just the building and not the land?
• And, is it figured on the basis, or the ARV?

Thank you.

[Andrew Johnson]

Dave Smith So...

1.) Depreciation doesn’t impact cash-flow.
2.) Depreciation can help you on taxes (like mortgage interest). Tax benefits differ between people and relative income.
3.) Depreciation recapture is something you have to take into account if you aren’t a hold-until-you-die-guy.
4.) Dirt (read: land) doesn’t depreciate, “Improvements” depreciate.