Question on investing in motels - tax benefits

[Deepti Mikki]

Hi, Quick question on investing in motels. Does cost segregation and double depreciation apply to motel investing as well? I know for multifamily a general rule of thumb is roughly 35% of the purchase price can be depreciated. How is it in motel business? Does it make sense to do cost segregation study on a 32 unit motel? TIA

[Julio Gonzalez]

Hi @Deepti Mikki , Great questions! Cost segregation could be really beneficial for a motel, especially if you are planning to make any improvements. Motels have a significant amount of property that can be depreciated over much shorter useful lives such as five - fifteen years. This would include items such as the carpet, parking lot, landscaping, sidewalks, decorative lighting, cabinetry, etc. On average about 30% of the motel's total assets could be reclassified into shorter useful lives.