A Perk of Investing in RV Parks

[Julio Gonzalez]

Are you an investor in an RV Park? RV Parks have been booming since COVID in 2020. Studies have shown that as many as three out of every five travelers are considering an RV trip for their next adventure. If you are an investor, are you maximizing your returns? Unfortunately, a good portion of profits have to be paid to the government for taxes. However, there is a tax deferral strategy that could accelerate your depreciation, keeping more money in your pocket today, known as cost segregation.

A Cost Segregation study is an IRS approved federal income tax tool that increases near term cash flow by utilizing shorter recovery periods for depreciation to accelerate return on investment. For newly constructed, purchased or renovated properties and also retroactive generally over the last 10 years, building components are properly classified into individual units of property and accurate recovery periods for computing depreciation deductions. The study identifies with forensic engineering detail the immediate Bonus Depreciation 5, 7 and 15-year personal property class lives qualifying portions of a building that are normally buried in 27.5 year residential or 39 year commercial categories.

Without a cost segregation study, an RV park would be depreciated over 27.5 years utilizing straight-line depreciation. However, a cost segregation study will reclassify property into its appropriate useful life. Here are some examples of RV Park assets that can be reclassified:

• Computers and office equipment
• Outdoor lighting
• Paving and roads
• Laundry equipment
• Maintenance equipment
• Swimming pools
• Fences and gates
• Landscaping elements
• Utility systems

In a recent case study of an RV Park in Fort Wayne, Indiana, a cost segregation study allowed the owner to accelerate over 97% of the basis resulting in over $36M in accelerated depreciation. This allowed them to grow their RV park portfolio even further.

In determining how to select a cost segregation company to work with, here is an article that may help.