They make a huge difference. Depreciation in a low land-value area gives you an extra (tax bracket * house value / 27.5) per year. For a 200K house that's easily 2900/y extra return, more if you split out internal components of the house - an extra 1.45% return, when your cap rate might be only a bit higher than 4%! Even when it's fully depreciated, you never actually take the hit from the lowered basis on sale if you keep doing 1031 exchanges.