Posted by Tony Colella on March 14, 2011 at 22:25:17:
Can anyone point me to David’s phone number or email it to me please?
Thanks,
Tony
Componentizing Mobile Home Depreciation - Posted by Bill T
Posted by Bill T on February 21, 2011 at 24:04:08:
I currently own a small strip mall which I had to purchase 2 years ago with all cash. I have been looking for another strip and again can not find financing. Then I noticed several small mobile home parks that were offering owner financing, which piqued my interest. Valuation has been difficult but I am deferring to Ray Alcorn’s position. However, I have hit a snag with estimating the depreciation. Without this I can’t estimate cash on cash. I was hoping you experienced owners could help.
How do you break down a mobile home park for aggressive componentization? How accurate is this?
Assume 30 homes, all park owned, $350,000 price. 20% down = $70,000
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5-year depreciable: stoves, refrigs, dishwashers, furnaces, air conditioners, blinds, garbage disposal, exhaust fans, fans, mirrors, light fixtures, plumbing fixtures, carpets, furniture, countertops & cabinets. Also tires, suspension and any vehicle related components. ?? skirts, windows, decks, roofing.
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Establish what % of a typical mobile home this may represent. Let’s say 35%.
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Calculate the estimated value of all of the homes. How about $8000 * 30 = $240,000.
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Multiply * percent of 5-year dep: 240,000 * 35% = $84,000.
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15-year depreciable: fences, landscaping, paving(includes sidewalks & curbs), parking lots, shrubbery, water pipes, sewage system. Let’s say $30,000.
Summary of comparison:
Non-componentized: $240,000 over 27.5 years @33% bracket = $2,880.00 return for 27.5 years.
Componentized: $84,000 @ 5yrs = $5,544.00 for 5 years
$156,000 @ 27.5 years = $1,872 for 27.5 years and $30,000 @ 15 years = $660 per year for 15 years.
So tax wise I would save $8,076 a year for 5 years or
$40,400. This represents 56% of my down payment.
Is this all correct? Thanks.
Re: Componentizing Mobile Home Depreciation - Posted by Keith (OH)
Posted by Keith (OH) on February 24, 2011 at 18:44:38:
This is pretty deep tax talk so you really need to run it by a tax expert, I am not one but I will tell you the 2 things that I see that might be a problem;
1st, you should confirm that you can actually split out the cost of the 5-year depreciable items and use that method right after the purchase of the property. Since those items were included in the purchase of the property I believe they would be included in your basis for the 27.5 year rental unit depreciation. Had you purchased those items AFTER or seperate from the purchase of the property then of course that 5 year method would be allowed on those items.
2nd, I think you would be red flagging yourself if you purchase a park for $350,000 and decide the homes are worth $240,000 of that purchase price. Especially if they are park owned. Unless you have some way of proving it, book value, etc… typically park owned homes don’t have that much value, or should I say they are not given that much value when we are estimating the value of a park.
Just something to chew on,
Keith
Re: Componentizing Mobile Home Depreciation - Posted by Dale
Posted by Dale on March 14, 2011 at 21:31:59:
Your overall total seems to exceed the $350K purchase price. When you purchase a certain percentage goes for the land and this amount in not depreciable. For the homes I believe you might want to check with David Protiva out of Atlanta, GA. He is a CPA who is more aggressive on his depreciation - he counts the mobile homes as personal property like a stove or fridge and deducts these over either a 5 or 7 year time frame. Recheck your numbers with a CPA before proceeding further!
Re: Componentizing Mobile Home Depreciation - Posted by Dale
Posted by Dale on March 19, 2011 at 15:28:01:
It was not David Protiva that had the agressive approach to depreciation of Mobile Homes - it was John Hyre who stated it could be depreciated over a 5-year period as “personal property”. Sorry for any confusion.