New 3 Unit Town Home Dev. with By-Right STR - huge bonus depreciation - 3.1 Mil

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New 3 Unit Town Home Dev. with By-Right STR - huge bonus depreciation - 3.1 Mil

Jessica Selway
Member since 2026 · 1 post · 0 votes

The Mariner on 87th is a full-gut renovation of an iconic Ocean City commercial building into three new luxury townhomes. This development is a "by right" short term rental capable property. Due to the amount of new construction completed on this property, it will generate a massive bonus depreciation schedule. In addition, the marine environment specific design and construction materials will ensure a maintenance free existence well into the future. Should the owner choose, any unit can be sold in the future with or without a STR capability. A purchase of the whole property gives the owner tremendous flexibility in their choice of exit. A purchase of the entire building contemplates a discount to the units selling piecemeal and is priced as such. The entire portfolio is priced at 3.1 Mil (a 3.7% discount to the individual listing prices).

8606 Coastal Hwy #1, Ocean City, MD 21842 | MLS #MDWO2038828 | Zillow

8606 Coastal Hwy #2, Ocean City, MD 21842 | MLS #MDWO2038830 | Zillow

8606 Coastal Hwy #3, Ocean City, MD 21842 | MLS #MDWO2038832 | Zillow

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  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · Sarasota, FL · Member since 2017 · 5k+ posts · 3k+ votes
    1mo

    Jessica, the new construction and STR component definitely make the tax side interesting, but I'd be careful about looking at the $3.1M purchase price and assuming the whole amount benefits from bonus depreciation.

    The first thing I’d want to see is the land allocation and a cost segregation study showing exactly what portion of the depreciable basis can potentially fall into shorter recovery periods. Under the current rules, 100% bonus depreciation can apply to qualifying property acquired and placed in service after January 19, 2025, but it doesn’t apply to land or automatically to the entire building.

    The STR angle is important too. If the average customer-use period is 7 days or less, the activity can fall outside the normal rental-activity definition for passive-loss purposes, but you still need to look at the material-participation rules to determine whether the losses are actually usable. At $3.1M, I'd model the property from three angles: investment return, actual depreciation benefit, and eventual exit tax consequences. The ability to sell the units individually adds another interesting layer because the tax outcome can change depending on how and when those dispositions occur.

    The depreciation opportunity could be significant, but I’d want to see the actual cost-seg numbers before calling it a “huge bonus depreciation” deal.

    Feel free to DM me, I’d be happy to send over a few resources that might be helpful.

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