If you own a mobile home park and plan to keep it for the next few years or longer and if you haven’t done cost segregation, you may want to take a look at it. Mobile home parks are profitable so even if this is a passive income stream for you, you likely owe taxes each year because of this investment. If you do cost segregation, you’ll be able to defer taxes for years most likely. I’d be happy to talk with you about it.
Tag: Real Estate Investments
Short-term rentals are great candidates for cost segregation. Whether your on the Airbnb, VRBO or some other short-term rental platform, these properties tend to do very well for their owners when it comes to utilizing this tax strategy.
Many of the short-term rentals that I see tend to be nicely finished on the inside and often will have decent land improvements like driveways, patios, outdoor kitchens, docks and extensive landscaping.
How might this work you ask? Let’s say you paid $800,000 for your property that you’ve converted into an Airbnb in 2023. We’ll say the land is $150,000. That leaves you with $650,000 as your basis. (BTW, this math works essentially the same if your Airbnb was 2x as much or 1/2 as much). Of that $650,000, let’s say we identify 20% as 5 year property and 5% as 15 year class life property. That means you can accelerate 25% of the $650,000 or $162,500. In 2023, you can take 80% of that as Bonus Depreciation so you could take a deduction of $130,000. If you made $150,000 in 2023 as your Airbnb income, you could knock that down by $130,000. If you’re at the 32% tax rate, that’s a savings of over $40,000 in income tax savings. A study like this might cost you between $3,500 – $4,000. That’s an expense to you so it nets down to $2,720. Your ROI is about 15:1 or 1,500%.
Owners should always consult with their tax professionals to see if this makes sense for you to do. Feel free to reach out if you’d like to discuss. I’m happy to run a no cost, no obligation analysis / estimate for you. Let’s connect on LinkedIn or find my on Twitter @costsegbuilding.