Mobile Home Parks are Very Tax Efficient
Updated: Jul 28, 2020
Welcome back to the Passive Mobile Home Park Investing Podcast. Hosted by Andrew Keel.
Today’s episode is all about the 8th reason why you should invest in mobile home parks, and this is because mobile home parks are a very tax efficient investment vehicle. I’ll briefly go over the depreciation of mobile home parks and how that can be beneficial to investors like you and me. I’ll also cover a specific change to tax law, and why accelerated depreciation on mobile home parks is basically another stimulus check from the government.
Would you like the pre-investment checklist that I use to review mobile home park deals before I invest in them? We are offering this as a free gift if you go to iTunes and leave a five-star review. To get the pre-investment checklist, leave us a five-star review on iTunes and then send us an email at PassiveMHPinvesting@gmail.com. In the email, please tell us who you are, what screen name you used to leave that review, and we’ll send the pre-investment checklist, directly to your inbox.
00:19 - Welcome to the Passive Mobile Home Park Investing Podcast
00:34 - Mobile home parks are a known tax shelter
00:45 - Depreciation
01:45 - Speak to your tax advisor
02:20 - Changes in tax law
03:30 - Accelerated depreciation on mobile home parks
03:55 - Pre-investment checklist
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Welcome to The Passive Mobile Home Park Investing Podcast with your host, Andrew Keel. This is the podcast where you can get the education you need to invest 100% passively in a highly profitable niche of mobile home parks.
Welcome to The Passive Mobile Home Park Investing Podcast. I’m your host, Andrew Keel. Today, we’re going to discuss the eighth reason why you should invest in mobile home parks. A dollar saved is a dollar earned, right? Reason number eight is that mobile home parks are a known tax shelter due to the accelerated depreciation that they provide.
Mobile home parks can provide, on average, around a 17-year depreciation schedule, and one can roughly depreciate 50%-75% of the purchase price. Compare this with apartments that depreciate over 27.5 years and commercial properties that depreciate over 39 years and you gain a significant amount of additional sheltered earnings.
Imagine a $1 million purchase price, and in the Midwest, where we own about 25% of the purchase price, will be the value of the land, which is not depreciated. Usually, the other 75% or $750,000 is depreciated either year one via bonus depreciation or over the approximate 17-year depreciation schedule. That’s about $44,000 per year in imaginary expenses that you get to add to your end of year financials.
I’m not an accountant and you should definitely speak to your tax advisor about this in-depth, but all improvements to the land are depreciated differently, and in mobile home parks there are several. From the utility infrastructure to the roads, fencing, and even signage. A cost segregation study should be done to assist with accelerating the tax lives of certain property for proper depreciation deductions.
Recent tax law changes under the Tax Cuts and Jobs Act of 2017 have given a boost to cost segregation bonus depreciation was increased from 50% to 100% on certain qualifying assets. Real estate investors will receive immediate expensing of certain 5-, 7-, and 15-year property. When the infrastructure is fully depreciated, the basis can simply be transferred to another asset via a 1031 exchange. Or when the property is sold, capital gains and depreciation recapture taxes would be owed but at a much lower rate than many investors' marginal tax brackets.
We will be interviewing experienced real estate investor and CPA, Noah Rosenfarb, on a future episode and diving in deeper to bonus depreciation and how it benefits passive investors. Make sure to subscribe to our show, so you don’t miss that awesome interview. Accelerated depreciation on mobile home parks is basically another stimulus check from the government. You should take advantage of it.
That’s it for today’s episode. Thanks for tuning in Join us next week to discuss the stigma surrounding mobile home parks and why it benefits those willing to dive in.
Would you like the pre-investment checklist that I personally used to review mobile home park deals before I invest in them? We are offering this as a free gift to those of you who go to iTunes and leave our podcast a five-star review. To get the pre-investment checklist, leave us a five-star review on iTunes and then send us an email to email@example.com. In the email, please tell us who you are and what screen name you used to leave that review, and we will send out the pre-investment checklist directly to your inbox. It's that easy. Once again that email address is firstname.lastname@example.org. Thanks again for tuning in.