Mark Kohler explains how to claim 100% depreciation on rental property using cost segregation and bonus depreciation. He walks through a strategy involving RVs or mobile homes placed in rental parks that can generate strong cash-on-cash returns while maximizing tax write-offs.
Chapters
Okay, Asia, here's how this works. Here's your revocable living trust. Here's your 1040. We're going to split your life into two. Your sole prop or your LLC or your S corpse. Over here, you're going to put your rentals over here. Now I do not care if you pay cash or have a mortgage, doesn't matter. But when your accountant takes your rental property, people, if you go buy a rental property, I'm going to give you a backup strategy. Asia, you're going to love it. Everybody this serious. I know it sounds weird, but it is. This is good. If you go buy a rental, the accountant has to split it into land and building. So if she goes out and buys this for 100 grand can cash. I don't care if you have $1 down and a $99,999 mortgage does not matter. We're going to split a certain amount into the building and a certain amount into the land. Typically, and it depends on the location around the country, CPAs, don't freak out. We're going to do an 80, 20. Let's just say 80 grand to the building, 20 grand to the land. There is no write off for the land ever. Sorry, Asia. No depreciation, no write off. What we do with the building though, we can depreciate it. Now you can immediately write off closing costs. Certain fees at closing can go immediately deductible. Some have to be added to the basis in the building, in the land. But it's more technical. But you have to generally write off the building over 27 and a half years. Now what some people do is they will do what's called a cost segregation. And a cost seg allows me to write off a number of things in the building, maybe $10,000 worth immediately. It's called a cost seg. Under the bonus depreciation of 179, I can cost seg. You might get an extra 10 grand. Those are immediate. Now the one strategy that I throw out that I think is serious and cool because it's real property. You have to do this depreciation thing and there's no bonus depreciation for the 80 grand where you could write it off all at once, only on the cost seg number. But you can do an RV or a mobile home because they're bull. It's an rv. It's not real property. It's a title. Now I can bonus depreciate the whole thing. I just was on a phone call with two of my clients down in Texas yesterday, they're buying four RVs for 200 grand. So here's our. This is ugly. So they bought four RVs for 50 grand each. 50k each. They're putting them into a rental park, a rental pool at an RV park. They've already got them booked for rent during the holidays. These are going to cash flow about 15 grand a year. Now that's a big deal. That's a 30% cash on cash ROI. And guess what? They can write them off 100% this year if they take delivery this year and available for rent at least one day, 100% write off. So they're getting a write off for 200 grand. And again, Asia, they could do it with cash, a mortgage, do not care. So RV rental or mobile home rental versus a real property rental treated differently. There you go. Thanks, Asia.
