Apartments

The apartment complex was purchased for $11,750,000. The total land area of the site was 5.5 acres, and our analysis indicated that 12%, or $1,410,000, should be allocated to the value of the land. Our study would then segregate the remaining improvement basis of $10,340,000 into appropriate depreciation classes. During our site visit to the property we identified many site improvements which qualified for accelerated depreciation, including both concrete and asphalt paving, flagpoles, metal fencing with automated entrance gates and control systems, covered parking areas, a swimming pool with built-in cabana and outdoor kitchen, as well as an extensive storm water management system with detention ponds. During our walkthrough of the interior we discovered additional short-life depreciable assets: The leasing office included carpeting, decorative molding and millwork, as well as a clubhouse area with a business center, kitchen appliances, built-in drink service bar, and a pool table. The apartment units included carpeting and laminate wood flooring, kitchen appliances, decorative pendant light fixtures over the bar, washer and dryer connections, window coverings, and built-in coaxial and data ports. As a result of the study the $10,340,000 was segregated into the following depreciation classes:

5- year: $1,875,232
7- year: $72,334
15- year: $1,386,384
27.5- year: $7,006,050
TOTAL: $10,340,000

With 100% Bonus Depreciation the net first year depreciation was $3,506,369, with a first year tax savings of $1,297,356 and a payback ratio of 288:1.