Depreciation Breakeven Rent
The minimum monthly rent at which this property breaks even when depreciation tax savings alone (but not mortgage principal paydown) are counted as a benefit.
Example Result
Sample DataBased on a sample $385,000 property with $2,850/month rent, 20% down, 7% interest rate.
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View PricingDepreciation Breakeven Rent Formula
Debt Paydown Breakeven + Monthly Principal
What This Means
A sample property priced at $385,000 with $2,850/month rent has a depreciation breakeven rent of $2,757 at Purchase (Month 0). The Depreciation Breakeven is the critical threshold for investors in higher tax brackets. Cash Flow from Depreciation™ — the actual tax savings your depreciation deduction produces — can be thousands of dollars per year, turning a cash-flow-negative property into a tax-efficient investment. Investors who fully understand and utilize the depreciation tax benefit often accept rents in this zone, especially in expensive markets where properties appreciate rapidly but rent-to-price ratios are low. If your rent is above the Dep Breakeven but below the Self-Managed Breakeven (NPM), the property works — but only if you're capturing those depreciation tax benefits. For high-income professionals (doctors, lawyers, executives) who qualify as Real Estate Professionals under IRS rules and can use passive losses, this zone can represent an excellent investment when combined with expected appreciation. For investors who cannot benefit from the depreciation deduction (lower income brackets or passive investor limitations), this zone means a cash-flow-negative property.
Where to Find This Value
Here's where you can find the value for Depreciation Breakeven Rent:
Cash Flow Power Meter™
Debt Paydown Breakeven + Monthly Principal Payment
CFPM Zone Calculation
At this rent level, the property breaks even when counting depreciation tax savings but not principal paydown
Inputs That Determine Depreciation Breakeven Rent
Calculations That Use Depreciation Breakeven Rent
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Unlock Rental Property CalculatorWhy It Matters
The Depreciation Breakeven is the critical threshold for investors in higher tax brackets. Cash Flow from Depreciation™ — the actual tax savings your depreciation deduction produces — can be thousands of dollars per year, turning a cash-flow-negative property into a tax-efficient investment. Investors who fully understand and utilize the depreciation tax benefit often accept rents in this zone, especially in expensive markets where properties appreciate rapidly but rent-to-price ratios are low. If your rent is above the Dep Breakeven but below the Self-Managed Breakeven (NPM), the property works — but only if you're capturing those depreciation tax benefits. For high-income professionals (doctors, lawyers, executives) who qualify as Real Estate Professionals under IRS rules and can use passive losses, this zone can represent an excellent investment when combined with expected appreciation. For investors who cannot benefit from the depreciation deduction (lower income brackets or passive investor limitations), this zone means a cash-flow-negative property.
Detailed Explanation
The Depreciation Breakeven Rent is the second zone on the Cash Flow Power Meter™. It answers a specific question: at what rent does the property break even if you count the depreciation tax savings as a real financial benefit, but do NOT count the mortgage principal paydown?
This is one step above the Debt Paydown Breakeven. At the Dep Breakeven rent, the property generates enough cash flow after vacancy and maintenance adjustments to cover all static expenses and other income offsets — but the investor must still rely on Cash Flow from Depreciation™ (the actual tax dollars saved by the depreciation deduction) to make the math work.
If your rent is between the Dep Breakeven and the Self-Managed Breakeven (NPM), you're in the 'depreciation-dependent' zone: the property loses money in pure cash terms, but the tax savings from depreciation are enough to push you to break-even when included in the analysis.
Discussion
Why is Dep Breakeven exactly DP Breakeven + Monthly Principal?
The only difference between DP Breakeven and Dep Breakeven is whether you count the monthly mortgage principal as a benefit. At the DP Breakeven, you count BOTH principal paydown and depreciation as offsets to your costs. At the Dep Breakeven, you only count depreciation — you're no longer giving yourself credit for the equity building happening through principal paydown.
So: Dep Breakeven = DP Breakeven + Monthly Principal
This makes sense: to make up for losing the 'credit' you were giving yourself for principal paydown, your rent needs to be higher by exactly that monthly principal amount.
What is Cash Flow from Depreciation™?
Cash Flow from Depreciation™ is the actual tax dollars saved by the depreciation deduction — calculated as annual depreciation × your effective income tax rate. It's not the depreciation amount itself; it's the real money you keep because of depreciation reducing your taxable income. A property with $10,000/year in depreciation and a 25% tax rate produces $2,500/year ($208/month) in Cash Flow from Depreciation™.
Zone location on the Cash Flow Power Meter™
The Dep Breakeven is between the DP Breakeven (absolute floor) and the NPM Breakeven (pure cash-flow positive, self-managed). Properties in this zone have negative traditional cash flow but break even or better when depreciation benefits are properly counted.
Related Calculations
Cash Flow from Depreciation™
2Additional effective cash flow generated by depreciation tax savings.
Debt Paydown Breakeven Rent
UThe minimum monthly rent at which this property breaks even when mortgage principal paydown and depr
Monthly Principal Payment
UPrincipal portion of the first month's mortgage payment.
Self-Managed Breakeven Rent
UThe minimum monthly rent at which this property generates positive cash flow when self-managed — n
Managed Breakeven Rent
UThe minimum monthly rent at which this property generates positive cash flow even with professional
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