Where each rent dollar goes — year one
These layers build the year-one cash flow the -1.4% after-tax IRR above is solved from. Bars are sized against gross scheduled rent. The three tax-ledger lines — the principal add-back, depreciation, and taxable income — are marked: they change what you are taxed on, not what lands in the account, which is why the cash running total picks back up at pre-tax cash flow. Principal is added back because it is real money out but is never a deduction, so without it the rows above would not reach taxable income.
Gross Scheduled Rent+$45,600
every rent dollar the property is scheduled to collect in year one
Vacancy Loss−$3,192
months the unit sits empty or between tenants
Gross Effective Rent$42,408
the rent that actually lands in the account
Property Taxes−$5,000
the county bill, which the lender escrows either way
Insurance + HOA + Flood−$2,000
hazard insurance plus HOA dues and any flood policy
Property Management−$3,648
what a manager charges to run the unit, whether or not you hire one
Maintenance & Repairs−$3,648
the running cost of keeping the unit rentable
Net Operating Income (NOI)$28,112
what the property earns before the mortgage — the number a buyer prices off
Interest−$22,210
the lender's share of the payment; deductible
Principal−$3,238
the part of the payment that buys down the loan — cash out, equity in
Pre-Tax Cash Flow$2,664
what is left after the mortgage, before the IRS
Principal Add-Back (tax ledger, not cash)+$3,238
the principal you just paid comes back: it left the account, but the IRS does not let you deduct it, so the tax ledger has to put it back
Depreciation Deduction (tax ledger, not cash)−$11,848
depreciation shield (paper losses that offset taxable rent) — a deduction, not a payment
Taxable Income (tax ledger, not cash)−$5,946
the figure the IRS taxes, which is not the same as your cash flow
Federal Tax+$0
federal income tax on the rental, after passive-loss rules
State Tax+$0
state income tax at your state's rate
After-Tax Cash Flow$2,664
what you actually keep from year one
Tax breakdown — where the money goes
Each line is a component of the calculation, not a verdict on its own — the after-tax IRR above is the number that judges the deal. The difference between pre-tax and after-tax IRR is your total tax drag.
Depreciation deduction, whole hold — the total amount of building value you write off over the years you own it. This is the deduction, not the cash you save: your saving is roughly this figure times your tax rate.$61,303
Depreciation shield as % of NOI — annual depreciation deduction divided by net operating income43.6%
Effective tax rate (combined federal + state) — blended rate across all operating years0.0%
Total tax on exit — depreciation recapture + capital gains tax owed when you sell$8,475
§1250 recapture rate — the tax rate on depreciation you claimed (capped at 25%)25.0%
Long-term capital gains rate — applied to the remaining profit above your basis0.0%
NIIT (3.8% net investment income tax) — applies if MAGI exceeds $200K single / $250K jointNo
Year-by-year cash flow — before and after taxes
Pre-Tax = net operating income minus debt service. Dep. = depreciation deduction (reduces your taxable income each year). Tax Shield = value of dep. deduction (dep. × effective tax rate). Fed+St Tax = federal plus state tax owed. After-Tax = what you actually keep. Green = positive; red = negative cash flow that year.
| Yr | Pre-Tax | Dep. | Tax Shield | Fed+St Tax | After-Tax |
|---|
| 1 | $2,664 | $11,848 | $0 | $0 | $2,664 |
| 2 | $3,226 | $12,364 | $0 | $0 | $3,226 |
| 3 | $3,800 | $12,364 | $0 | $0 | $3,800 |
| 4 | $4,385 | $12,364 | $0 | $0 | $4,385 |
| 5 | $4,982 | $12,364 | $0 | $0 | $4,982 |