I'm looking at buying a MHP with 8 units. 6 are park-owned. In addition to the original DMV titles, should I get a separate bill of sale for each unit? Would there be a tax benefit to doing that?
The units are quite old, but exceptionally well maintained. I will be replacing the oldest ones over the next 5 yrs. 5 of the six were manufactured between 1969-1971. The 6th was manufactured in 1996 and can be renovated.
@Mark Rairdon If you want to keep tax records for the homes, usually bill of sales are receipts when you purchase the homes individually. If the owner has records of the bill of sales for the homes, I would think that would be for their records. If you're purchasing the park with the units and want to separate them, you can if you want with separate bill of sales for the units you're buying. Hope that helps!
Thank you @Rachel H.
@Mark Rairdon I would recommend always separating the park from the POHs and other personal property by way of a bill of sale for tax purposes. A simple way to accomplish this is to add a Schedule A as the Bill of Sale to your PSA that addresses everything that comes with the park and assigns a value to it. Your accountant will LOVE YOU if you take the time to do this.
The following personal property shall be conveyed by Bill of Sale for the property known as __________________
Then list what is included in the sale (this can be done during your due diligence period, but to be signed at closing by both buyer and seller)
The mobile homes: Cavco 14x64 Model XXX, office equipment like the computer, printer, desks, file cabinets, landscaping equipment like: John Deere Serial/Model XXX, EZ Go Golf Cart Model XXX, landscaping tools and equipment, stoves, fridges, freezers, patio and dining hall furniture, etc. Assign a value to each and have the seller sign the bill of sale at closing so everyone agrees on the value of the items on the bill of sale.
You could take it to the next level and assign a value to the land improvements and buildings as well. On a larger park, I would recommend a formal cost segregation study for this, but an 8 unit park is too small for that to make sense, so you can also assign a value in the bill of sale to include:
Landscaping shrubbery & trees: 35 mature trees approx. 20’ tall each, pool equipment, roads: XXX square yards of asphalt paving, sidewalk and curbing, electrical pedestals, concrete pads, underground utilities for electric, sewer or septic, pool, clubhouse, etc.
Ask your accountant for guidance on this front, and if your accountant doesn't know what cost segregation and bonus depreciation is, consider replacing them with one who does. MHPs are one of the most tax efficient real estate assets and taking this step will allow you and your accountant to have an accurate assessment of value when depreciating at tax time.
All the best,
@Jack Martin Thank you as well. I wound up doing a bill of sale for each unit for a nominal amount.
@Mark Rairdon , as others have said it will help you track things for tax purposes but otherwise in my area only thing that matters is the title