I always had to get an explanation after the fact.

If you're not familiar with depreciation, read this detailed explanation: https://www.biggerpockets.com/...Depreciation will lower your net income and, accordingly, lower your taxes.

My recommendation would be to plan to achieve a diversified portfolio across sponsors, geographical areas and asset classes. 

It almost seems intuitive to provide a discount for the security of having a renter that long, but your explanation of why it may not be is spot on. 

After reading the above comment and your explanation, in a word: NEXT.Why try to catch a falling knife--if you can't get real equity when all is said and done, just pass and go on to the next deal.Good luck.

But I do understand that explanation for it but I'm definitely not a fan of it going forward.

And when you get that response 8:10 accept it after working through all the details and explanation of it all as long as your really good at detailing and explaining it all and not doing anything shady. 

Reason for asking is that I am trying to understand what a reasonable target rent per unit is for specific geographical areas. 

@Patrick Roberts thanks for the explanation this helps.

@Michael Plaks - great explanations as always!