Cost Segregation · Brief · Intro level
Cost segregation for mobile home parks
A mobile home park is almost all land improvements: pads, utility distribution, roads, and amenities routinely put 50–80% of depreciable basis in the 15-year class. Why the percentages are the highest in real estate — and why the land split matters most.
A mobile home park owner rents dirt, plumbing, and pavement — the residents own the homes. That makes the park the mirror image of ordinary real estate for depreciation: there is barely any building, and nearly every depreciable dollar is already a 15-year land improvement. A cost segregation study on a park commonly places 50–80% of depreciable basis in the 15-year class, the highest short-life share in real estate.
Why the percentages run so high
In an apartment building, the structure absorbs 70–80% of basis at 27.5 years. In a park, the "structure" is a small office and maybe a clubhouse; everything else the owner paid for is site work. Under MACRS (Pub 946), land improvements — assets added to land with a determinable life — recover over 15 years, and the Cost Segregation Audit Techniques Guide frames how they are distinguished from nondepreciable land preparation.
Illustrative allocation of a $6M park acquisition (total price, including land):
| Component | Treatment | Share of price |
|---|---|---|
| Raw land | Not depreciable | 45% |
| Concrete pads, streets, driveways, walkways | 15-year land improvement | 20% |
| Water/sewer distribution, electrical pedestals, gas lines | 15-year land improvement | 15% |
| Fencing, signage, landscaping, playground, pool | 15-year land improvement | 6% |
| Office/clubhouse structures | 39-year (or 27.5) | 6% |
| Park-owned homes rented to tenants | 27.5-year residential | 8% |
Illustrative only. Of the depreciable basis here, about two-thirds sits at 15 years — and 15-year property takes 100% bonus depreciation when acquired after January 19, 2025, so a large fraction of the whole deal can deduct in year one.
The pieces worth knowing
- Utility distribution. Park-owned water and sewer laterals, lift stations, and electrical pedestals are land improvements — but utility company-owned infrastructure is not in the owner's basis at all. Confirm ownership at the meter.
- Park-owned homes. Homes the park rents out are residential rental property, separate from the site; their appliances and carpet segregate like any multifamily unit.
- General grading. Original clearing and rough grading merge with the land and never depreciate; the engineered surfaces and systems on top do. Older parks with sparse records need the study to draw this line credibly.
The trap: the land allocation is the whole ballgame
Because land is such a large share of a park deal — often the majority in strong markets — an aggressive land split inflates every downstream number, and it is the first thing an examiner tests. Parks trade on income, not replacement cost, which tempts buyers to back into a low land value from the improvements up. Anchor the allocation in an appraisal or assessment data instead. A defensible 45% land allocation with clean 15-year detail beats an indefensible 25% that unravels the study on exam. The classification framework behind all of this is in asset classes and recovery periods.
Frequently asked questions
- How much of a mobile home park can cost segregation reclassify?
- Often 50% to 80% of depreciable basis — the highest share of any real estate class. A park's depreciable assets are mostly 15-year land improvements already: concrete pads, roads, water and sewer distribution, electrical pedestals, fencing, and amenities. There is very little building, so very little basis is stuck at 27.5 or 39 years. The tradeoff is that raw land is usually a large share of the purchase price.
- What recovery period applies to a mobile home park's utilities and pads?
- Fifteen years. Site utility distribution owned by the park — water and sewer laterals, electrical pedestals and distribution, gas lines — along with pads, streets, driveways, and fencing are land improvements under MACRS. Park-owned homes rented to tenants are separate: they are depreciable as residential rental property, or faster where treated as personal property.
- Is a cost segregation study worth it for a mobile home park?
- Frequently, even at modest size, because the reclassified share is so high — but the study is really a land-versus-improvements valuation. Since land can be half the purchase price, the defensibility of the land allocation determines the result, and the 15-year property identified is bonus-eligible for acquisitions after January 19, 2025.