Podcast Episode #8: The Tax Incentives to Mobile Home Park Ownership



There are a lot of terms related to taxes that confuse a lot of people. Those associated with owning a mobile home park (MHP) are no different. The biggest ones are cost segregation and depreciation recapture tax. In general, says cost segregation expert, Yonah Weiss, both terms relate to how you take tax deductions on your property. They’re how you manage the money in your own pocket and keep your cash flowing as easily as possible. To do this right, it’s always best to consult with an expert in real estate tax, but it’s also important, as an MHP owner, to understand the basics of the taxes you’re liable to pay as well as the deductions you’re able to make.


What cost segregation really is

It feels complicated, but Weiss sees cost segregation as a gift from the IRS to people buying property. It’s like, “depreciation on steroids,” and translates to a tax deduction that’s really beneficial for real estate investors. Essentially, what happens is, you buy a building or business property. Then, you can immediately write off the value, which is what you paid. The entire purchase is a write-off. This one-time win then plays out over a series of years designated by the IRS. It’s different for commercial and residential properties, and for certain items within those properties. Some items, like those related to infrastructure, may have a 15-year lifespan, but others, like improvements to flooring or the addition of blinds on all the windows, will have a five-year lifespan. The great thing is that you can combine all of these lifespans together, giving you a larger write off at the start of ownership, when you need it the most.


“Essentially, you get huge tax deductions, tax write-offs, just by virtue of the fact that you own an investment or a business real estate property,” says Weiss. Cost segregation helps you have a better bottom line at the end of the year, which means more cash in your pocket.


When you sell the property

When you buy a property, cost segregation lets you keep more cash liquid. You don’t pay until you sell. When you sell the property there is a tax, but it’s not paying back the depreciation. Depreciation recapture tax focuses on the gain you make when you sell depreciable capital property. It’s at this point you have income from the property that you must report. While selling may not be on your mind when you’re purchasing a MHP,  it’s something to think about even at this early stage from a tax point of view.


How to manage cost segregation benefits correctly

Getting your taxes done correctly, when there’s not a lot to keep track of, can be a challenge. Adding on ownership of a mobile home park creates a level of complexity when it comes to taxes that requires the help of someone with experience. Working with a cost segregation expert can make all the difference. Experts, like Weiss, “can really engineer everything that needs to be deducted and depreciated,” says Mobile Home Park Expert, Glenn Esterson. He recommends working with someone like Weiss even before you purchase a property. Their help can shed light on the very bottom line of a sale, giving you more information on whether it’s worth it to follow through or walk away.


To dive deeper into the possible tax incentives MHP ownership offers and learn more about how professionals can help you write off more, check out Glenn, Yonah and Jason Sirotin on the Mobile Home Park Expert Podcast.


Podcast Transcript

Jason Sirotin: Hey everybody, welcome to the Mobile Home Park Expert Podcast. I’m Jason Sirotin with Glenn Esterson as always. Glenn, how you doing?

Glenn Esterson: Wonderful as always my friend.

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