The Tax Advantage of Mobile Home Communities: Why Passive Investors Often Receive 3–4x More Tax Value Than Multifamily
Sophisticated passive investors are often attracted to mobile home communities as investments because they provide stable and predictable income as well as significant tax savings through passive losses.
A large, national CPA firm, Keiter, notes that “these communities present not only a resilient asset class but also a range of compelling tax advantages.” In this article we’ll talk about why mobile home communities provide better tax benefits than other passive investments like multifamily.
To help better understand why there is such a large variation between the tax benefits in these two asset classes, it helps to have a general understanding of a few terms that are relevant to all commercial asset classes:
Cost Segregation Study – A tool that real estate investors use to accelerate the tax related benefits of depreciation. The study is generally performed by an engineer, and the process breaks the components of the property into three main categories: land, building, and land improvements. The land component cannot be depreciated. The building component can be depreciated over 39 years for commercial or 27.5 years for residential. The land improvement components can be depreciated over 5, 7 or 15 years, and this creates the main benefit of performing a cost segregation study.
Bonus Depreciation – Allows investors to take the 5, 7, or 15 year depreciation components in the first year they are put into service versus having to wait the 5, 7, or 15 years. 100% Bonus depreciation was originally put in place by the Tax Cuts and Jobs Act of 2017, and it was initially scheduled to phase out by the end of 2026. Fortunately, new legislation rolled out in 2025 which brought 100% bonus depreciation back permanently.
Mobile home parks are mostly land improvements, not buildings.
Now that we have a basic understanding of the two items that make bonus depreciation possible, we’ll want to dig into what differentiates mobile home communities from multifamily investments with the strategies listed above. The difference between the two asset classes is how much is allocated towards each of the three categories: land, building, and land improvements.
The land component is the same for both mobile home communities and multifamily, and it usually falls in a range of 10-30% of the purchase price. If the property is located in the city center, it will generally be closer to 30% of the acquisition’s price, and if the property is located in a rural area, it will generally be closer to 10% of the acquisition price.
The building component is where we start to see a large variation between these two asset classes. It’s not surprising that the largest component of a multifamily property is the building component, and it can make up as much as 60% of the purchase price. On the other hand, the building component of a mobile home community can be as little as 5-10% depending on size and quantity of common area buildings like clubhouses or storage sheds.
The remaining value that is left over after you consider the land component and the building component is the land improvements which starts to help you understand where the tax benefits favor mobile home communities. A standard apartment will have about 20% allocated to land improvements (100%-20% for land and 60% for building), and a standard mobile home community will have about 70% allocated to land improvements (100%-20% for land and 10% for building). In fact, according to Forbes, in some situations, mobile home communities can have as much as 80% of their purchase price depreciated in the first year.
In the scenario above, only 20% of the purchase price of the multifamily acquisition is eligible for bonus depreciation, whereas, 70% of the purchase price of the mobile home community is eligible for bonus depreciation.
Actual 52TEN example from 2025
Now, let’s look at an actual acquisition that 52TEN purchased in 2025. We purchased a 138-lot mobile home community for approximately $11.5M in one of our target MSAs. Shortly after closing, we engaged our preferred vendor for cost segregation studies, Madison SPECS, and they were able to provide an estimate that first year accelerated tax depreciation would be more than $7M with 100% bonus depreciation. We agreed to move forward with the study, and the Madison SPECS team got to work.
Within a few weeks, we had our initial cost segregation study back from the team, and after a few minor adjustments to account for some park level nuances, we had our final report. Here are the results from the study:
Land Allocation $1,732,182
Personal Property (5 year) $199,186
Land Improvements (15 year) $7,375,084
Building Costs $2,241,426
Total Project Costs $11,547,878
In the example above, we raised about $4.8M from LP investors so our investors will receive over 150% in passive losses in 2025. For passive investors that have other passive income, these passive losses can significantly reduce their tax liability.
This is just one reason why sophisticated, passive investors are very eager to invest in mobile home communities.
If this asset had been a multifamily community or even an office complex, self storage facility or one of many other asset classes in real estate, the LP investors could expect to get as little as 25-40% in passive losses.
While investors should never “let the tax dog wag the tail,” the tax implications of any investment should be considered and weighed in your investment decision. Investing in mobile home communities provides:
- Stable and predictable cash flow
- Significant tax benefits
- Solves for the ever growing affordable housing issue in the US
At 52TEN, we focus on providing mobile home community investments that are designed to combine durable, income-producing assets with a disciplined operating strategy while providing the best experience for our investors. This results in investments that provide year one cash flow and significant tax benefits combined with transparent reporting for our investors.
This content is the perspective of the author and is not intended to be relied upon as a forecast, recommendation or investment advice, and is not an offer or solicitation to buy any securities or to adopt any investment strategy. The information and opinions contained in this content are derived from experience, historic data, and other sources deemed to be reliable, are as of the date of this content, and may change as subsequent conditions vary.