SHOW NOTES

Welcome back to the Passive Mobile Home Park Investing Podcast, hosted by Andrew Keel. In this episode of the Passive Mobile Home Park Investing Podcast our host Andrew Keel interviews the “king of cost segregation studies,” Mr. Yonah Weiss of Madison Specs and Weiss Advice. As the Business Director at Madison SPECS, Yonah has been instrumental in saving clients hundreds of millions of dollars through strategic tax planning. He’s a highly respected figure in the commercial real estate (CRE) world and host of the popular Weiss Advice podcast.

Together, Andrew Keel and Yonah Weiss explore the powerful impact of cost segregation through mobile home park investments. They dive into the intricacies of cost segregation studies, uncover common pitfalls, and track the evolution of bonus depreciation from 2020 to today. They also look ahead to what the future may hold for these essential tax-saving strategies.

Throughout the episode, you’ll discover how to maximize your returns by effectively leveraging cost segregation and bonus depreciation, understand the best timing for these strategies, and learn when they might NOT be the optimal choice. Additionally, the conversation covers key topics like capital expenditures and the importance of diversification when building a resilient mobile home park investment portfolio.

Don’t miss this chance to gain invaluable insights from Andrew Keel and Yonah Weiss that could transform your mobile home park investment approach.

***Andrew Keel and Keel Team Real Estate Investments (Keel Team, LLC) do not endorse any interviewee. This interview is for informational purposes only and should not be depended upon for investment purposes. ***

Andrew Keel is the owner of Keel Team, LLC, a Top 100 Owner of Manufactured Housing Communities with over 3,000 lots under management. His team currently manages over 40 manufactured housing communities across more than 10 states. His expertise is in turning around under-managed manufactured housing communities by utilizing proven systems to maximize occupancy while reducing operating costs. He specializes in bringing in homes to fill vacant lots, implementing utility bill back programs, and improving overall management and operating efficiencies, all of which significantly boost the asset value and net operating income of the communities. Check out KeelTeam.com to learn more!

Andrew has been featured on some of the Top Podcasts in the manufactured housing space, click here to listen to his most recent interviews: https://www.keelteam.com/podcast-links. To successfully implement his management strategy, Andrew’s team usually moves on location during the first several months of ownership. Find out more about Andrew’s story at AndrewKeel.com.

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Talking Points:

00:21 – Welcome to the Passive Mobile Home Park Investing Podcast

00:40 – Yonah Weiss’ background

04:15 – 2017 Trump tax law

05:30 – What is cost segregation?

08:15 – How mobile home park investors and owners can use cost segregation.

12:45 – When does it NOT make sense to order a cost segregation study?

16:21 – Bonus depreciation in 2024 versus 2020

19:45 – Capital expenditures

21:11 – Allocating goodwill to reduce the amount of property tax on your mobile home park investment

22:57 – Depreciation recapture

25:15 – Scenarios where depreciation recapture could backfire

29:45 – What mobile home park investors should look out for in the future in terms of depreciation and new tax laws

31:00 – Contacting Yonah Weiss

31:16 – The importance of diversifying with mobile home park investments

32:21 – Conclusion

SUBSCRIBE TO PASSIVE MOBILE HOME PARK INVESTING PODCAST YOUTUBE CHANNEL https://www.youtube.com/channel/UCy9uI3KGQmFgABsr9lUtRTQ

Links & Mentions from This Episode:

Yona Weiss, LinkedIn: https://www.linkedin.com/in/cost-segregation-yonah-weiss/

“How To Pay Zero Income Taxes (Legally) While Making 6-7 Figures”: https://themobilehomelawyer.com/podcast/ep-22-how-to-pay-zero-income-taxes-legally-while-making-6-7-figures/

Keel Team’s official website: https://www.keelteam.com/ 

Andrew Keel’s official website: https://www.andrewkeel.com/  

Andrew Keel LinkedIn: https://www.linkedin.com/in/andrewkeel 

Andrew Keel Facebook page: https://www.facebook.com/PassiveMHPinvestingPodcast

Andrew Keel Instagram page: https://www.instagram.com/passivemhpinvesting/

Twitter: @MHPinvestors

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TRANSCRIPT

Andrew: Welcome to the Passive Mobile Home Park Investing Podcast. This is your host, Andrew Keel. Today, we have a very special guest on the show, the king of cost segregation studies, Mr. Yonah Weiss. Yonah, welcome to the show. 

Yonah: Thank you very much, Andrew. Pleasure to be here. 

Andrew: A little background on Yonah. He’s a cost segregation expert and a commercial real estate tax consultant. If you’re in commercial real estate and on LinkedIn, you’ll likely know of Yona and his content as Business Director at Madison SPECS and as a national cost segregation leader. Yonah has assisted clients in saving hundreds of millions of dollars in taxes through cost segregation. Yonah also hosts his own podcast, the Weiss Advice Podcast, so excited to dive in here, Yonah. 

Yonah: Likewise. This is a lot of fun, obviously a topic that I’m very passionate about and enjoy talking about, so yeah, let’s give it a roll. 

Andrew: Awesome. Would you mind starting out by telling our listeners a little about your story and how you went from your background in teaching to Business Director at Madison SPECS and saving clients over hundreds of millions of dollars in taxes via cost segs. 

Yohan: I’ve been in real estate for close to 10 years now, but before that I was a teacher. That’s really my background and has always been my passion. I did that for about 15 years, but obviously at a certain point, the teaching salary, as everyone knows, is not so great. With a growing family, I decided to branch out and see what else was out there. Maybe get a second job or do something on the side. 

Real estate kept coming up in conversation among friends when I mentioned that I was looking for new opportunities, so I just tried it out. Just dip my feet in the water and started out doing some commercial mortgage brokering actually and then some hard money lending with a friend of mine. Then we did a couple of fixes and flips. I got my realtors license just to find deals and was doing some deals that way. 

Eventually, I was always open to opportunities. None of those things that I was doing, what I was really passionate about, was just learning everything there was to know about real estate and found it fascinating. The networking was incredible for sure. I ended up meeting tons of people. 

One of those people that I met an opportunity came up to work for this company, Madison Commercial Real Estate, Madison SPECS, which is the biggest national cost segregation company, which I didn’t know anything about at the time, by the way. Cost seg was not something that was on my radar. But surprisingly to me, neither was it on anyone else’s. 

When I found out about this cost seg company, this opportunity to join the business development, I reached out to all the people that I had met in the previous couple of years doing real estate. You just put a ping out there, an email, text, whatever. You heard about this thing cost seg? And literally over 95% of the people responded they never even heard of it. 

We’re talking about people who were in the real estate industry, whether they were owners or brokers or lenders or et cetera, and I was shocked by that. Now, there were a few people that were in the business for a long time—developers and people who were real estate owners—who knew what cost seg was. In fact, one of my mentors who I’d reached out to mentioned to me that we use Madison for all our cost seg. I was like, okay, that’s a good sign. Someone that I look up to. 

Andrew: Totally, and can I interrupt? What year was this? This person who approached you and was coming in, when was that? 

Yonah: This was around 2015–2016 or so, I think.

Andrew: Talk about timing. Right before the Trump tax law went into effect with the bonus depreciation. It just happened to come into play. Kudos for you, man. That’s amazing. 

Yonah: Exactly, and everything happens for a reason, I truly believe. And you’re absolutely right. The fact that the Trump tax bill that passed the Tax Cuts and Jobs Act, which was huge, introduced the 100% bonus depreciation, which really gave cost segregation a name on the map.

Andrew: It blew up. 

Yonah: Right before that, I got into the business, and it was my job to really just teach the subject. I found this was a perfect opportunity, and how there’s something everyone wants to do for good reason. I remember talking, I was on Joe Fairless. It was the best podcast right around that time, and back in 2017 it was this new law that just passed tells us all about it.

Andrew: Yeah, rocket launching. For those of us who maybe are not aware of cost segregation and cost segregation studies, can you give our listeners a brief explanation of what it is and why it’s still relevant in 2024 even as the bonus depreciation is sunsetting? 

Yonah: Just very simple layman’s terms, cost seg is a very complicated tax strategy. But to simplify it, all we need to know is that any time you buy a property, whether it’s residential or commercial, as long as it’s not your primary residence, any type of rental or business property, you can take a deduction called depreciation.

This is an income tax deduction. The IRS says because you bought this property, now you can literally write off the entire value of the property over a long period of time, albeit a little bit every single year. That’s called depreciation deduction. Again, it’s just a deduction. So the name depreciation, even though it sounds negative, it sounds like your property is going down in value, in fact it’s not and it’s just the name of a deduction as if it were going down in value. 

Therefore it’s based on your purchase price, and you get to start your 27½ years, that’s how much residential properties depreciate for according to the IRS, commercials over 39 years. Arbitrary numbers, but you get to start the day you buy the property, which means it’s totally dependent on you as the owner. And every time the property changes hands, that new depreciation schedule starts over. 

Now that’s a long time to wait to take all those deductions. A little bit every single year is about 2%–3% if you take the numbers. There’s something called cost segregation. This is where it comes in. As we segregate the cost, we’re going to break down the purchase price into different categories, and certain components can actually depreciate faster according to the IRS. 

Now it used to be called component depreciation, which makes a lot more sense than cost segregation, because we’re just saying there’s personal property. There’s furniture. There are fixtures. There’s carbonating and all these kinds of things that depreciate on a five year schedule. 

And then there are land improvements and we’ll talk a lot about this soon when we go into mobile home parks, but the land improvements are the concrete, pavement landscaping, roads, sidewalks, anything like that, fencing. Anything that’s outside that’s not the land because land itself doesn’t depreciate. That’s the one small amount we have to deduct from our purchase price to get our depreciation. 

These things, the land improvements, over a 15 year schedule, the personal property over a 5-year schedule are things that we can accelerate the depreciation of, and then take those deductions at a faster rate. Essentially it’s a cash flow mechanism that by allowing you to take bigger deductions during the earlier years of ownership, you can pay less taxes and be able to scale at a much faster rate. 

Andrew: How does all of this relate? Let’s circle it back to mobile home parks. How does it relate to a mobile home park investor? And why is cost segregation important to them? 

Yonah: An amazing thing about mobile home parks is that it’s a little bit different than most types of commercial properties because there’s very little structure involved. This structural component is a building, the walls, the roof, foundation, all that good stuff. The majority of the depreciation is always going to be in that, meaning that’s going to be over that 27½ year period.

However, with mobile home parks, there’s very little structure involved, especially if we’re talking about tenant-owned home parks where essentially you as the owner or investors are buying a park, you have the land, again which doesn’t depreciate, and then we have the land improvements. 

Essentially, that’s pretty much it. There is a small amount that is allocated to the infrastructure like plumbing, septic, electric, and mains. Those are all considered 27½ year depreciation. That’s the only thing that’s considered a structure. There’s no other structure on the property, Essentially the majority, sometimes 50%–70%, sometimes 80% of that purchase price can go towards cost segregation at 15-year land improvements. 

Andrew: Very cool. Can we go through the four components? You talked about land. Typically, in a mobile home park we’re buying in the Midwest, you can allocate the assessed value. Is that how you come up with the value for the land that cannot be depreciated? 

Then there are land improvements, which you talked about, like roads, fencing, utility lines, landscaping, pavement, and that’s all 15-year property. And there are buildings. Some mobile home parks have buildings like a clubhouse or maybe there are some other like storage buildings or something like that. 

Yonah: I’ve seen many mobile home parks where there’s a single family property. 

Andrew: Yeah, in the middle of it or out front, exactly. Then there’s the five-year property which would be the personal property, the park-owned homes, the carpet, the siding, flooring, appliances, things like that. Am I right? 

Yonah: Absolutely. Those are the things and all those categories you discuss are exactly right. The land, which we’re going to use in many cases, the tax assessor to figure out what the percentage of land to improvement is. There are other ways to find that out, including appraisal or things like that. 

Again, the majority is going to be the land improvements. At 15-year, you think about a mobile home park, you have the concrete pads under each home. You have the roads, you have landscaping, you have sidewalks, and even a playground. Playground equipment, all that is 15-year. Fencing, signage, any of that and all of that. Again, that’s going to be the majority of the value of the property. 

The five-year property, the personal property is only going to be, if you have an office or you have some furniture in there, or you have a single family, or you have some park owned homes, any of the interior that’s going to be nonstructural in those homes is going to be considered the five-year depreciation.

Andrew: In the cost segregation study, the report is basically evidence in case you get audited by the IRS. You follow their certain mandates and basically would show them hey, this is how we came up with these numbers and you have engineers and so forth that go out to the property and measure square footage and things like that. Is that a ballpark of how it goes down? 

Yonah: That’s exactly right. Think about it like an appraisal, but a very detailed one, in using the IRS is a handbook called the Conservation Audit Techniques Guide, and there’s something called the MACRS (Modified Adjusted Cost Recovery System). That system basically tells every single component that there possibly can be in any type of property and what the schedule is, if it’s a 5-year depreciation, if it’s a 15-year depreciation. There are some things that are on a 7 or 10. Those don’t apply to mobile home parks. Then what’s on the 27½. 

The engineer who’s a qualified engineer comes in to the property, takes a very detailed assessment—pictures, videos, measurements, et cetera—and then comes back and creates this very detailed report in that has a new depreciation schedule, which is that just shows you and your accountant how much you can deduct every single year for depreciation. This detailed report, which can be 80, 90, or 100 pages long is really for your records, like you said, if in case of God forbid, you’re ever audited, you can show you’re showing the work. 

Andrew: And I’m a huge fan of cost seg. We order one still on all of our properties. The carry forward that we get is huge. It’s been really big. I guess being that it’s August 2024, bonus depreciations are being phased out, I think it’s 60% this year and 40% next year. When does it not make sense, Yonah, to order a cost segregation study for our listeners? 

Yonah: There are some times when it doesn’t make sense. The first thing we are always going to look at, right, is the individual, you as a person. Getting a cost of creation study creates or increases these huge deductions to the early years. But if you can’t use those deductions, for example, you don’t have any income or you have enough deductions or expenses from other types of business or properties, et cetera, then getting these extra deductions that you can’t use in the current year is not very beneficial. That’s always the first thing to look at. 

The second thing in terms of the person is are you a real estate professional? There are specific rules regarding whether you are a real estate professional or not. Basically how depreciation works, it’s a deduction that can only be used against passive income. What the IRS defines as passive income is real estate rental property income. It doesn’t include stocks or bonds or anything like that, that’s not considered passive according to the IRS.

In order to use the depreciation, it only gets to be used against any investments or any real estate income that you have unless you or your spouse are considered a real estate professional. Now, this is where it makes a huge difference to someone who’s in the real estate game full-time because once you do that, you no longer have that limitation and you can use these deductions to offset any source of income that you have whatsoever.

Getting a cost seg done certainly helps to offset any income that you have from that property or from any other investments. But if you’re that real estate professional or your spouses, you can then take these huge amounts of deductions and not only wipe out any income tax liability you have from your rental properties, but then carry that over to other sources of income, whether it’s a W-2 or et cetera. That’s the biggest thing to look at when you’re talking about getting a cost seg. 

Andrew: And that’s huge, the real estate professional status. My old neighbors, I was talking to them the other day, and their whole retirement plan is that they’re both high income earners, but the husband works at a big home builder. The whole plan was that she’s going to retire from her W-2 job and they have some rental properties and the number of hours, she’ll start to meet that requirement when it comes to things like property management and sales. She’s doing some sales.

Her whole retirement plan is she’s going to go into real estate professional status and their income is actually going to go up when she retires because of the tax savings. It’s a really important designation that you should research. Do you happen to know what the exact definition is of the number of hours that are required? 

Yonah: It’s two requirements. First of all, you have to do the majority of your working hours during that year and it is something that’s looked at on a year-by-year basis. The majority has to be spent in the real estate trade or business. You have to be spending more than 50% of your time. By the way, if you have a W-2, a full-time job, you cannot simultaneously also be considered a real estate professional simply because the IRS cannot consider someone working more than 40 hours a week. Just go out.

The second qualification is a minimum of 750 hours a year. That means you can’t just retire and still get that status. You need to actually be working materially participating in some real estate business, which the IRS also clearly defines what that is. There are certain things that do apply, certain things that don’t apply. 

Andrew: Awesome. Earlier today I was relistening to an episode you did with Ferd Niemann, my buddy, the MHP lawyer podcast, and there was great info on that. Back in 2020 is when you recorded that. Back in the COVID days and we had a 100% bonus depreciation. But now in 2024, we get the 60% bonus, which is still amazing. But you mentioned that there was like a 10x benefit during that recording. Is it still a 10x benefit or is it a 6x benefit? 

Yonah: It’s not as great as it was because the way that the bonus depreciation worked with 100% is that any amount of the accelerated deductions—remember, we talked about the 5-year, the 15-year property—you could have taken that with a 100% bonus which applied from 2018 through the end of 2022, 100% of those deductions up front. That’s a huge, huge amount. 

If you just do this simple math, let’s say you buy a property for a million dollars, we’re taking up 20% for land and we’re left with $800,000. Then comes along cost seg saying I’m taking 50%. For mobile loan parks, it could be up to 80%, but just let’s keep it simple. 50% of that I’m taking as bonus depreciation. That’s $400,000 on a million dollar purchase, a $400,000 first year deduction.

That’s crazy. Now think about that. If you bought a million dollar property and we put 20% down. You’re getting literally double the amount of deductions in the first year. It’s a huge return. I don’t know about the 10x. Maybe that was a little bit exaggerating or maybe using some of the numbers.

Andrew: Ferd gave an example. You said he bought a park for $1.3 million and he wrote off $800,000 which is $200,000 in tax savings after spending $4000 for the cost seg study. And he only owned it for 10 days of that year. He said he bought the property December 21st of that year. I think it was 2019. Then because of the 100% bonus depreciation, he was able to take all of that benefit in that year and it saved him a ton. That’s huge. 

Yonah: Absolutely. Yeah, it is huge. Now, as you mentioned, the bonus depreciation, when it came into law, had a phase out component to it, which means that in 2023, if you bought a property, it was 80%. For 2024 by property this year, it’s a 60% bonus, which means you can only take 60% of those accelerated deductions.

Now, even though at the time of this recording, in August of 2024, we still have people getting their taxes for 2023 on extension done. The extension deadline for corporations is September 15th. For individuals it is October 15th. There are still plenty of people getting this done for the 2023 taxes.

It is a huge benefit. Again, the bonus depreciation percentage amount goes when the property was purchased. Even if you brought a property in 2022 and haven’t yet done a cost seg study—maybe you just filed a straight line, just regular depreciation—you can this this year take your tax returns and do a cost seg without having to amend your previous year’s taxes and still claim the 100% bonus because the property was purchased in 2022. 

Andrew: Tell me about this, right? What about capital expenditures? You bought the property in 2022 and since then you’ve invested $500,000 or $1 million into the property and improvements. Can’t you count those as well into the cost segregation, not just the purchase price, but the additional CapEx spend?

Yonah: Absolutely. Any money that’s spent in capital improvements is depreciated, which means you can add that later to your depreciation schedule. The difference is when you buy a property, that’s when it’s placed in service, or whenever you do place it in service, that’s when the depreciation is going to begin based on that.

Now, when you add more money in, that money, those improvements are going to have a new depreciation schedule because it’s going to begin only when that asset is placed in service. Let’s say a few months in or six months in, or a year or two in, you decide to pave the roads or whatever. You spent $50,000 on paving the roads. That $50,000 can now be depreciated with new land improvements and now you can do bonus depreciation on that as well. 

Andrew: That’s awesome. Let’s talk goodwill, because this is something in that episode that I instantly changed in our contracts. When I listened to your episode with Ferd back in 2020, we were taking 30% of the purchase price in goodwill and that was recommended by our attorney. But let’s talk about your feedback on goodwill and has that changed at all since 2020 with the new depreciation schedule here in 2024.

Yonah: Goodwill is something that’s very common when you’re dealing with a business acquisition. Simply put, when you’re dealing with mobile home parks, it’s very common to allocate a certain component to goodwill. The reason why a lot of people do that—again, we talked about that on that episode, if anyone wants to check that as well—is that—

Andrew: Sorry. I will put that in the show notes, that is the link to that one because that’s a solid one. 

Yonah: One of the main reasons why people do that is to reduce the amount of property tax, essentially, because you don’t say you buy property for $1 million. You allocate 50% of that to goodwill. That means your purchase price of the property is really only $500,000. Now, when it comes to the tax assessment, it’s only going to be based on the $500,000 instead of the $1 million. That’s a good thing. 

The goodwill can be depreciated, however, it doesn’t apply to bonus depreciation. And the goodwill is depreciated on a 15 year schedule, but it’s not eligible for the bonus depreciation. Therefore, it’s something just to make that calculation and say, yes, it’s a way to do that, to reduce potential property taxes. However, you’re going to reduce the amount that you can claim as depreciation for bonus depreciation. 

Andrew: You’d look at it on a property by property basis, but you would still say hey, I guess it’s an individual basis, but you would look at allocating as little as possible to goodwill so that you can maximize the bonus depreciation, even though it’s only 60% now?

Yonah: Yeah. 

Andrew: Okay. A lot of people have a lack of understanding about depreciation recapture. You mind touching on that and how it impacts your bottom line upon disposition? 

Yonah: Anytime you buy a property, obviously you’re getting the benefit of using the depreciation. But whenever you sell a property, you’re going to be subject to a tax similar to capital gain tax, and it’s called depreciation recapture tax. 

Now, one thing to just make very clear is that recapture does not mean you’re giving it back. A lot of people misunderstand this and just explain it wrong. Misnomer is really the word I’m looking for. Taking recapture does not mean they’re actually taking it back. It just means it’s the name of a tax that you’re going to be taxed on the amount of depreciation taken.

Similar to the capital gain, you buy property for $1 million, you sell it for $2 million, that $1 million of gain you’re going to be taxed on that amount, typically 20% or 25%, et cetera. Similarly, any amount of depreciation taken is going to be taxed upon sale. 

You took $100,00 depreciation. You’re going to be taxed on that amount and it’s actually a blended tax rate. There are certain things that are on your ordinary income tax rate level. There are certain components of it that are on a capital gain max at 25%. There’s actually a third blend of which applies to the 15-year land improvements, which is a combination of the two. 

It’s a pretty complicated tax to come up with. The one thing that is really clear is that it’s always going to be less than the amount of tax you would have paid had you not done the cost seg and just paid income tax of whatever your ordinary income tax rate is. Meaning there’s always going to be a spread and arbitrage between the tax rate later on the recapture which is going to be less than what your income tax rate. 

There are a couple of things really important to note about recapture tax. Being subject to tax does not mean you have to pay the tax. There’s a very big difference. That’s really one of the big benefits of cost seg is that it’s a tax strategy. It’s exactly like we started out the episode talking about this complicated tax strategy. The fact is, you can use depreciation or you can use deductions to offset other sorts of taxes. That’s one big thing to remember.

The second thing is there are ways to either defer or eliminate that recapture tax as well, so being subject to a tax does not mean you have to pay it. Again, there are ways to defer it. There are ways to reduce it or eliminate it entirely. One very common way is through the 1031 exchange, which defers that amount. 

Another very common one, which is also new with the Tax Cuts and Jobs Act, is called Opportunity Zones, a little bit less commonly known, but an amazing strategy to not only defer capital gain tax from stocks, bonds, or sales of a business, but also to defer and essentially eliminate recapture tax from the sale of real estate as well. 

There are a lot of opportunities. Yes, it’s something you have to be aware of. It’s something you have to consider in terms of the sale. You’re going to be hit with this tax on the sale, but combine it with other strategies, combine it with buying other properties, et cetera, and you should be good. 

Andrew: Very cool. Lots of golden nuggets there. Thank you for that. I knew that I had this podcast recording coming, and this morning I got an email from a CPA that I follow. The subject line was cost seg studies can backfire, two examples how. 

The first one was selling a property at a loss and he was saying how a lot of short-term rental investors have gotten into COVID when people were setting up Airbnbs and things like that, and they would buy these properties, and then now they’re selling them because they haven’t had the occupancy they planned on.

They’re selling them at a loss and basically were talking about that their adjusted basis is now lower because they took the bonus depreciation. Since they sold at a loss, they would have a higher taxable gain than otherwise. Maybe you can touch on that. Then the other one, I guess we could just touch on that piece first. Have you seen that happening? Is that a misnomer or is that something?

Yonah: I got that email also. I know exactly what you’re talking about, and it is very calm. You have to go with your tax advisor. There are certain situations where it is going to benefit you and there are certain situations where cost seg is not going to benefit you.

You mentioned that you do it on every park that you buy and a lot of people do, but you have to make sure that it sits with your business plan, with your business model. If you have investors, you have to make sure it fits well with them, et cetera. There were a lot of people doing things and now. They’re stuck. You have to sort it out. 

Andrew: The other example was selling a couple of years after buying. If you’re flipping a property or adding a lot of value and then you’re going to sell it, would the benefit outweigh the cost of the study? Are there any other scenarios that you could maybe think of where it could backfire? 

Yonah: There are some. One of the main things you have to be aware of is if it fits your business plan. Selling a property very shortly after, let’s say a year or two after buying it, you’re going to be subject to that recapture tax very much sooner. Therefore the benefit of that arbitrage or the benefit of the time value of money, which is using your money to reinvest during that time period is going to be less. However, there are certain occasions where even selling it over a short period of time may be beneficial for you. But I’ve seen it backfire. I’ve seen people do it. 

One thing we always like to do when we engage with the client is we provide a free upfront feasibility analysis, like an estimate of sorts, so you can see ahead of time how much it’s going to cost, what are our potential tax benefits going to be, what it’s going to look like the span over the next couple of years, and you can make a much more educated decision and see obviously, you’re not going to do the cost seg if it doesn’t make sense financially. You’re not going to pay $5000 to get a cost seg study done to get only $5000 back in deductions which is going to be $30,000 or whatever. Less money in the after tax benefit than the actual deduction.

Andrew: Exactly. What should commercial real estate investors expect going forward into the rest of this year and 2025 in regards to bonus depreciation? Again, I got an email from another CPA that said that it was on the docket and they passed through the house. Now it was sitting in the Senate. Do you have any updates on that?

Yonah: Yeah, there was. Like you mentioned earlier, the 100% bonus depreciation that was passed back in 2017 started to phase out, 2023 and 2024, and it’s going to continue to phase out by 20%. There was a bill that was passed in the house that would reinstitute with a 100% bonus depreciation for both 2023 and 2024, and going forward as well. 

It failed in the Senate. There was a vote on it and totally failed. However, some people have heard from reliable sources that it is something, obviously, that was brought back. It is something that is going to come back as well. Meaning, the fact that it was put into a bill, obviously there are political reasons the politicians put certain things in bills and pass them or don’t pass them. I’m not going to get into that, but if there is a change in administration, then it is very likely that it will come back. 

Andrew: Got you. Very cool. Yonah, how can our listeners get a hold of you if they’d like to learn more about cost seg studies or just tax strategy in general? 

Yonah: The best place is on LinkedIn. I’m very active. You can also go to yonahweiss.com, but I am very active on pretty much all the social platforms. LinkedIn is the best place to find me. 

Andrew: Awesome. Last question. What’s one last bit of important advice you would give an interested passive mobile home park investor before we sign off? 

Yonah: As a passive mobile home park investor myself, I think this advice speaks to me as well as it does to anyone else out there listening. Probably the most important advice is to diversify. It’s been said many many times, not just with different sponsors, but different locations, different types of assets as well. 

Mobile home parks are amazing. I’m invested in them as well as other assets as well. But I think it’s just something important. You never want to put all your eggs in one basket, whether it’s through different sponsors, diversifying through different locations markets, that’s a great diversification as well, or different asset classes. Diversification is key. You want to make sure that not all your eggs are in one basket. 

Andrew: Very cool. Well, thank you so much for coming on the show, Yonah. 

Yonah: My pleasure, Andrew. Thanks so much for having me. 

Andrew: That’s it for today, folks. Reminder, please leave a review if you got value out of this show. Thank you so much for tuning in.