Tax benefits of MHP vs MF

Real Estate Investor · Orlando, FL · Member since 2016 · 185 posts · 53 votes

Hi there,

I currently own 2 multi-family buildings and will be 1031-ing them for a larger property in the near future. I'm considering buying a few mobile-home parks (ideally parks with zero park-owned homes) and have a question for the group regarding taxes.

Having only owned multi-family buildings, I am reasonably versed in the tax advantages. But what about mobile-home parks? Are MHP's as good as multi-family apartment buildings in terms of taxes? It seems like mobile-home parks wouldn't have the same tax benefits as MF, especially given that I don't want to own any of the homes.

I would love to hear your experience.

Thanks!

Robert.

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Natalie KolodijBusiness Member
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Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
6y
They're better than MF in my opinion.
In a MHP you pay for 2 things (if no park owned homes): Land and Land improvements. (driveways, pipes, septic, ect)
Land improvements qualify for bonus depreciation since their life is under 20 years.
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Yonah WeissPro Member
Cost Segregation Expert and Investor · Lakewood, NJ · Member since 2017 · 1k+ posts · 1k+ votes
6y
@Robert Lindsley like @Natalie Kolodij mentioned that the land improvements depreciate on a 15 year schedule which qualify for bonus depreciation. But to answer your question, the tax benefits are usually much more for MHPs. Those land improvements (especially when there are no POHs) allocated properly through a cost seg can often be anywhere between 50-75% of the basis. When using bonus depreciation, that translates as huge tax benefits.
You mention that you are exchanging through a 1031. It's important to note that since our gain is subtracted from the new purchase price to determine your updated basis. If you're not adding significant capital to the upleg (new) property, the basis will be significantly lower.
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