Newbie depreciation question

Hey all! So, we are very new into MH investing and our question is as follows: we buy a 2MM MHP with land value of 700k, the property is literally dirt roads with some cement pads. How do we get that full 1.3MM depreciation here?? Sorry for the dumb question!

Hire a good accountant. They will guide you to determine what depreciable assets you have and how to best depreciate them.
Your roads, underground utilities, pedestals, light poles, etc are all depreciable assets. Do you have anything such as homes, buildings, garages, or office? Those depreciate as well.

I would guess you have more than dirt roads and cement pads. I would guess you have underground utility lines, overhead utility lines, utility poles, landscaping and shrubbery, mailboxes, lawnmowers and other equipment, mobile homes with carpets and appliances, and numerous other assets. These assets are very valuable and can be depreciated over different time periods. Seek a cost segregation expert.

Plus, do you know the value of a dirt road? I would imagine that bringing heavy equipment to create a dirt road is very expensive leading to a depreciable asset. I know from experience that a concrete pad can be worth $6,000 so if you have 100 of those, you have $600,000 in that asset alone.

I suggest you take a deeper look into that land value. $700K seems awfully high for a park with dirt roads.
Call a local realtor and ask for comps for VACANT land that has sold within a 20-mile radius. Try to get a good comparable. If you are using the County’s assessed value that will be inflated. I try to find something that has sold within the last 6 months and is most similar to my location for topography, size, etc.
I suggest you get a Broker’s opinion of the value of the land just in case the IRS wants to call into question your land values. I think your RAW Land value is probably closer to $200k or even less.

I take the Purchase Price of the park and subtract the land value. That gives me my total depreciable basis. I then take the insured value of all stick-built buildings and put that on a 27.5-year S/L schedule. (I use insured value just in Case the IRS wants to call into question my allocations).

I Lump EVERYTHING else under land improvements and write it all off under section 179 with the Bonus of 100% 1st-year depreciation. This is only good for 2022. In 2023 the bonus depreciation begins a phase-out.

I read a really good article (that I can no longer find) about MH depreciation. One of the BIG write-offs is Grading. From memory, you are able to write off Grading as a land improvement if you would have to regrade the property to change the use. Of course, you would have to regrade the whole property to change the use. If you wanted to put up an apartment building in the same location it would be a completely different site plan.

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Well states SDGuy! You hit the nail on the head.

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