New poster so please be kind. I'm a high income professional and so is my wife, and we are looking into a vacation rental purchase that will serve for both tax depreciation (cost seg study and bonus depreciation against other income) as well as hopefully break even or even provide some positive cash flow going forward. Because of the huge benefits of the up front tax savings, it seems to me like it makes even a very large purchase work by the numbers. 

Here is what we are considering:

Amazing 4br, 2.5ba house in an extremely popular area of CA Sierra Nevada mountains, approx 2400sf. Asking price 1.38MM, likely to sell for over that. Very few homes go on sale in this area and this is a very unique listing for anything of this quality/design features. AirDNA shows 82% average occupancy for listings in this category this year, average per night ~$575 and most are not as luxurious as this particular home and I suspect that with some excellent marketing we could do $650 or more (but would want to be conservative in our initial calculations). No HOA, ~450/mo insurance (expensive, high fire area), $400/mo other utilities. 3% maintenance reserve, 3% closing costs etc. 3.2% 30 year fixed 20% down mortgage...could likely shop for better terms with an accepted offer.

I'm assuming 20-30% of home value depreciated in the first year via cost segregation study and purchase price of 1.55MM which is an "outlandish" bid well above asking I'm considering but am shocked at how the numbers are still working. 

Worst case scenario I'm looking at 40% vacancy rate and $550/night which is a bit below average and that gives me a Cash on Cash return of 7.7% according to my calculations and a 5 year IRR of around 20% plus a wonderful house to occasionally use for family vacations.

Average scenario 25% vacancy rate, average $575/night, and taking accelerated depreciation for the income tax savings (which are all but guaranteed so long as we can put the place on the market by the end of the year) gives cash on cash of 33% per year and IRR at 5 years of 56%.

Best case scenario would be 20% vacancy (could likely do better but I want to hold back a few dates etc), $650/night which is easily achievable, plus tax savings gives COC of 51% and IRR at 5 years of 70%.

How do you decide how much to bid? I would love this house even if I could only cover some of the expenses via the business side, but I'm also a driven businessman at heart (just new to real estate) and like to run things in the black all across the board if possible.