Pricing & Profitability

Depreciation is a 'phantom' expense that does not come out of your pocket but significantly reduces taxable income. Residential rental buildings are depreciated over 27.5 years.

Only the interest portion of a mortgage payment is tax-deductible on Schedule E. Principal payments are not considered an expense as they go toward paying down the debt balance.

Land is not depreciable. A common rule of thumb is the 80/20 ratio: 80% of the purchase price is allocated to the building (depreciable) and 20% to the land (non-depreciable).

The IRS 2024 standard mileage rate for auto expenses is $0.675 per mile for travel related to managing or maintaining your rental property.

Hobbyists compete on price, which is a race to the bottom. Scalable operators provide a complete solution to an urgent problem (e.g., immediate housing for a displaced family), allowing them to use value-based pricing and command much higher rates.

Full-service management fees typically range between 20%, while remote or 'pre-check-in' management fees range from 10-15%.