Episode Transcript
[00:00:00] Speaker A: Welcome to RV Park Boss, a podcast for RV park owners. I'm your host Jason Lafferty. This is a show where we dive dive deep on challenges and rewards of park ownership as long as some funny stories along the way. This podcast is sponsored by RV parkpros.com 78% of all RV parks are self managed mom and pop operations. So aside of location, strong marketing, guest experience and proactive management, those are the keys to success and profitability of any park. If you're still trying to do this all by yourself, there is better way. With RV Park Pros. We are a property management system that will help you maximize your occupancy and profits while optimizing your guest experience and retention, all without having to be involved in the day to day. And to learn more about how we can help streamline your park's operations, go to rvparkpros.com again that's RV parkpros.com today's RV park boss is Jeff Hyatt. He helps RV park owners maximize their tax deductions. The big beautiful bill enhances the benefit of the cost seg work that they can deliver. Welcome to this to the show. Jeff, how are we doing?
[00:01:01] Speaker B: Jason, thanks so much for having me on. I'm honored to be here and part of your, your crew here that you're, you're building with the RV Park Boss and we, you know, just love the space. And you're, I think you're down in Texas, so I love Texas.
Great state of Texas.
[00:01:21] Speaker B: I'm in another great state. I'm in the live free or die state myself. But we do work nationally, so I'm up in New Hampshire.
[00:01:28] Speaker A: Okay. Well, yeah, so it's good to see you again. I know we just met at the boardroom Mastermind. While we're in our hot seat, while everybody was judging us and telling us what to do with our businesses. But yeah, so I appreciate your time. So if you do nationally, do I think you mentioned something about this? Do you do like all larger studies have to be in person or is there, is there some that need to be in person or how does that work?
[00:01:53] Speaker B: Well, the tax code doesn't distinguish and the IRS specifically says for a cost seg to be viable, it has to be done by a qualified professional, meaning it has to be done live by a real person.
Now I'm not saying if somebody spent 80 grand on a house somewhere.
[00:02:15] Speaker B: That it's going to be, it's going to make sense financially to do a cost seg with a real scenario, but I'm also not saying that you can just wing one off of the Internet, little search engine thing that's out there because there are plenty of those. It's just if you're audited, it won't stand up. But that's kind of a few steps down the road. What the real scenario is.
[00:02:44] Speaker B: For people that own property, like your RV park owners, the, the mom and pops out there that you mentioned.
What they don't, many of them don't realize is they've got a partner they don't even think of. And that partner is the government who's taking 30 to 40 cents of every dollar they make. So they're losing a good chunk of their profit at the end of the year by having to pay income taxes.
[00:03:12] Speaker A: Yeah.
[00:03:13] Speaker B: And the tax code is sent, set up with incentives for them not to have to do that. They just have to understand and know about how this topic works.
For the most part, entrepreneur type people, their brains shut down with an ice cream headache as soon as you start talking to them about taxes. They go, that's a negative. Oh, I don't want to do that. Oh, it's painful. Well, everybody does. I did before I got into the space back in 99.
But the deal is if you understand it and you have somebody that can help guide you through it, which is what I do. I'm, I'm kind of a tax strategist for real estate owners.
Whether that real estate is an Airbnb or an RV park or a hotel or an office building or retail, whatever it is, there are lots of little nuances that the tax code provides benefits if people know about them. And oftentimes the mom and pops out there and even some of the bigger players, their accountants don't even realize these are things.
So what you're going to be faced with typically is.
[00:04:33] Speaker B: Your accountant, your, you know, for your RV park is going to be depreciating your building over either 27 and a half years or 39 years.
[00:04:42] Speaker A: And that's like a house rental or something like that.
[00:04:46] Speaker B: Yes. So you go, well, that's better than no write offs at all. It is, but, but like my dad used to say, it's better than a sharp stick in the eye, but not a lot.
So what you can do for the RV park community, you, you've got to. Because people go, well, we don't own the bill, we don't own the units, we just rent out spaces for people to use. Well, sometimes there's going to be.
[00:05:17] Speaker B: The overhang parking area where there's shade Provided the awning type things. There's going to be roads, there's going to be maybe septic hookups, maybe there's underground electric coming over to each unit. Maybe there's a community space where there's dog walking or there's a swimming pool or there's a community room where people could gather.
There's fences. Oftentimes there might be other outdoor amenities.
If there's a community room, there's a building for that then. And that's going to have some stuff in it that would go into a five year life versus 15 year. The beauty of, and you mentioned it in my lead in there, my little infomercial that you read, is that the big beautiful bill brings back 100% bonus. So anything that we can help your RV park owners pull out of the 27 and a half or 39 year and move into 5 and 15.
Anything. Any transaction in 25 would get a hundred percent bonus. Meaning if we move 100 grand of their purchase price into 5 year life, they get to take it immediately. That's an immediate write off of 100 grand against their income.
If we move 200 grand or 300 grand into 15 year life, they get to take that immediately as well.
Now that's if they purchased it in 25 and you might go, well then if they did this a few years ago, they bought the property a few years ago and they've been doing the straight line, as it's called ever since.
You might be thinking, oh, we're out of luck. I wish I'd known about it back then. Nope, you're not out of luck. You can step back in time and grab the depreciation you could have taken but haven't yet taken.
So you can go back to when you bought it in 2019 or, you know, 2015.
So typically cost segregation by qualified professionals makes sense if you're doing it for any property that you've bought or built or improved in the last 10 to 12 years.
So you could.
[00:07:41] Speaker A: That's a key point right there. 10 to 12 years is something to think about.
Is there a difference.
[00:07:50] Speaker A: On value of the cost if you purchased it say two years ago versus you built it yourself two years ago?
Or is it still just what the infrastructure is? Is what the infrastructure is?
[00:08:04] Speaker B: There's. Okay, I'm just thinking here, depending on how your accountant has you set up, whether it's 27 and a half or 39 years.
[00:08:15] Speaker B: There could be some benefits to.
[00:08:18] Speaker B: Some of the qualified improvement property on a building, on an existing building that they've renovated on ground up, new construction. There's probably not going to be much of a difference. In other words, it would be treated the same as a purchase at that point for the exterior stuff. So ultimately, probably not much difference.
They would get to take advantage of this either way.
[00:08:45] Speaker A: So if you. So if you bought a park two years ago, but it was built 10 years ago versus you built it yourself two years ago, it wouldn't have much bearing on the, the qualifying amount if it was the same infrastructure.
[00:08:59] Speaker B: Same infrastructure, same everything.
[00:09:02] Speaker B: The scenario is, what did you pay for it when you bought it 10 years ago or built it two years ago? The. The IRS doesn't care what the value is today. That's not the metric. They look at us real estate question.
[00:09:16] Speaker A: They said like, oh, that electrical infrastructure is 10 years old, so it can only equal this much. But that doesn't come into play in this.
[00:09:21] Speaker B: It doesn't sound like no, because you stepped in. You bought that property two years ago, let's say, or 10 years ago, whatever it was, the depreciation clock resets for you. Or you bought it or built it 10 years ago, you sold it a year ago, the buyer for you has a whole new reset depreciation clock. In other words, they get to grab that depreciation immediately.
[00:09:51] Speaker B: You know, for 39 or 27 and a half years, even though it's already 10 years old or 15 years old. The. Yeah, when, when the transaction goes down, it resets everybody's depreciation clock.
[00:10:06] Speaker A: That's good. Good points there. Oh, yeah.
[00:10:08] Speaker B: And, and the, the thing is, for instance, to put it in kind of real numbers, and if you remember from the boardroom conversation, some of the mentors said, jeff quit using percentages. Tell us real numbers. Okay, so let's talk real numbers. So for, for $1 million purchase, the, the amount that could be accelerated of the million dollars, we subbed out the dirt number there.
So let's say they paid 1.2. We had to allocate to 200,000 to land.
[00:10:44] Speaker B: We might be able to help them grab 150,000 to 250,000 of that million immediately. In other words, they would get an immediate tax deduction of 150,000 to 250,000, which would oftentimes wipe out a lot of their taxable income from that RV park.
And guess what? They're then, depending on their frame of reference and what they want to do with that money versus send it to D.C.
they get to use that money to go buy the next property. So maybe they're looking to expand in their market, and there's another RV park down the road that they wouldn't mind having.
Well, now they've got a nice chunk of money that was a deduction for them and it's going to save them their tax and they can go redeploy that versus sending it to D.C.
right.
[00:11:43] Speaker A: And it's gone.
[00:11:44] Speaker B: And it's gone. And who knows where they're spending the money on?
[00:11:48] Speaker A: Yeah, yeah. So, so let me ask you this then. If you got somebody says, hey, Jeff, I'm thinking about doing the cost seg on my park, but I don't know if I'm going to sell it in three years or five years or what. And so they're worried about the recapture. So in that kind of scenario, what do you kind of help them explain or do you, you know, put them to CPA or what? What do you say in that situation?
[00:12:07] Speaker B: Well, keep in mind, I've been doing this since 1999. So, Jason, at that point you were probably three years old. So I've been doing this a long time.
[00:12:17] Speaker A: Born in 87.
[00:12:18] Speaker B: 87, okay.
I was off a little bit, but not much.
But the bottom line is that always comes up like, what's the deal with recapture? And what we normally tell people is that if you are have just bought the property and you're only going to hold it for a year or two and I'm going to capitalize and there.
And you're not going to do a 1031, then the cost seg probably doesn't make sense because if you're not doing a 1031, if you're not doing a 1031, because if you're, if you're only going to own the property for a year or two, right. And you're not going to do a 1031, then probably the cost isn't going to look as good because like you said, you're going to have to give back the tax benefit in recapture. In other words, that's where the IRS says, hey, wait a second, pal, you took a big chunk of depreciation that you kind of, I'm going to say, didn't deserve because you didn't own it that long, but you took 5 years and 15 years worth immediately. Now you got to give it back. But if you said, if your listener, if your audience is like, yeah, I've got that small RV park in Topeka and I'm going to go buy a bigger one in Texas somewhere, well, now they're going to end up in a situation where they're going to do a 1031. So they're going to of defer the gain, the tax on the gain, but it also defers the recapture. So now they're carrying that gain and bam, they can stack up kind of like double the benefit because they pulled the tax deductions out of the first park in Topeka. Now they're going to the new place, they're buying a bigger one and they're able to take the tax benefit on that one as well.
[00:14:15] Speaker A: That's, that's wonderful. I didn't know about the 1031 side because I have a couple parks that I don't want to keep long term. So I was kind of putting the cost sake off to the side and mentally. But my plan was if I do sell them, I'm going to 1031. It I don't want to put a few hundred pay capital gains on a few hundred thousand and my whole purpose would be to get another bigger park anyway. So.
[00:14:36] Speaker B: Right.
[00:14:37] Speaker A: So yeah, well, 20, 26, capture whatever I need out of those and then if I sell them two years or three years later, they're going to be 1031 anyways.
[00:14:47] Speaker B: Well, keep in mind I wasn't saying that if you sold them in two or three years from doing the cost, I was saying one or two years of owning it. So if you've already owned the properties for a few years, Jason, you're, let's say three or four years in. Well, that means you're going to get to grab the deductions and regardless have less recapture bite to deal with because you're already through to two or three years and you're going to sell them in two or three years. That means your hold time is going to be five or six years. Life is good then.
[00:15:23] Speaker B: So, you know, it's all about you understanding a little bit more about the tax code without that ice cream headache. And that's what I try to be, is your guide on these things so that you don't have to use the brain power of a painful subject. You can let me handle that. And that's what we do. And we've done 27,000 of these studies.
[00:15:47] Speaker A: Yeah, that's, that's really good information. I didn't know those last couple pieces. That's cool.
And you know, for, for my side, it's like, you know, we don't know like the plan could be I want to hold this thing for five years. Real estate, a popular cycle is five years. But you know, if, if a shiny owner financed Bigger park with a whole lot of ops that come up and then I could sell mine. I mean, you know, I would dip out in two years if I could.
So what I'm just saying is that for me, I just feel like the more knowledge I have, the more moves I can make if I need to.
[00:16:16] Speaker B: Just whatever comes, it's all about being flexible.
[00:16:20] Speaker A: Changes, we gotta, I gotta constantly pivot, gotta constantly be making adjustments. You know, there's economic shifts, there's, you know, believing in the park that you do have. Do you think it's ever gonna get any better than, than what you have now? If it's not, then what are you doing? Like, figure out a way to get rid of it and then find a park that you really believe in that you can excel is kind of where my mind's at, so.
Right.
[00:16:39] Speaker B: And just keep, keep growing them. Good for you. That's a great way to go. And, and I think a lot of your audience is probably going to have the same thought process, you know, of, you know, using whatever tools are available.
[00:16:53] Speaker B: To make sure that you're fully maximizing the benefits. Because the tax code is either an incentive or a disincentive. So there's penalties if you do things that they don't want you to do and there's incentives if you do things that overall promote the economy. And there's the whole Big Beautiful bill is one of those tools that's an incentive for real estate ownership among other things in the Big beautiful bill. But the big ones are related to real estate in my world. And you know, the ability to take 100% of the 5 in the 15 year is really big for your community. Your, your.
[00:17:35] Speaker A: What was it, what was it before again?
[00:17:38] Speaker B: Well, it would either. So if you don't do anything, you're going to get 27 and a half or 39 year depreciation. With the cost seg, we might be able to pull out somewhere between 150 and 250,000 per million.
[00:17:54] Speaker B: So if it's a half a million dollar park, maybe it's going to be something 75 to 125, but that's still big money for deductions.
[00:18:05] Speaker B: And so you get to take it right away versus over 27 and a half or 39 years.
[00:18:12] Speaker A: Yeah, so.
[00:18:14] Speaker B: Oh, it can be huge. And it's such a. All things are relative. So your, your folks listening might go, oh well, I don't have a $2 million property. No, you've got maybe a half a million dollar property. It's still going to be of interest and benefit.
[00:18:32] Speaker A: Yeah, why not? Yeah.
[00:18:33] Speaker B: In fact, you don't have to amend your tax return to go back and grab it. It retroactively.
You can take it without amending and apply it to the current tax year. So if all of a sudden you've got some success and things are going great, and bam, you're looking at. You're staring down the barrels of a hefty tax bill, now all of a sudden you get to take this deduction and potentially wipe out that tax bill.
[00:19:00] Speaker A: Yeah. That's awesome. That's awesome. So. So from what you're saying is like a park's value, you see the.
The cost seg. I guess, value, if you will, 15 to 20% of what. What the park's worth, not including land. Is that kind of what you're saying?
[00:19:18] Speaker B: Kind of what I'm saying. Although it's not worth. Not the worth. Because us real estate people want to talk about worth as opposed to what they paid.
[00:19:25] Speaker A: Yeah, it's like a bank appraisal. They'll have the land value and then the improvement value.
[00:19:29] Speaker B: Right.
So.
Okay, so. But let me just be real clear, just so we don't have any miscommunication out there.
Your. Your person 8 years ago bought the property that they're looking at now and thinking, hey, it's worth. I paid 500 grand for it. It's worth 1.5 million now. Okay, well, for depreciation, the tax code does not care what it's worth today. It doesn't care that it's worth 1.5 mil. What they care about is what did Jason pay for it when he bought it eight years ago? And that was 500 grand.
So the number that we're going to be playing with in. In adjusting is the. The. The purchase price, and like you said, less the land allocation. And like you said, the appraisal will oftentimes put a valuation on the land versus the. The items that are the structures, the personal property or the.
[00:20:32] Speaker B: The. The building component.
[00:20:34] Speaker A: Yeah, I got you. That makes sense.
Yeah, because they don't. It doesn't have anything to do with the appraisal. It's not a bank. It's the irs. So they just care about what you have in it.
[00:20:43] Speaker B: Right. That's all they care about. They don't care about what it's worth. Yeah.
[00:20:47] Speaker A: That's good.
[00:20:48] Speaker B: Well, I've got a. A little QR code. If you don't mind, I'll share it. Is that okay?
[00:20:54] Speaker A: Yes, sir, of course.
[00:20:55] Speaker B: Okay, so I. I just. You're going to need to allow that to, to come across.
So I'll throw it on the screen. Can you see this all right now or. No, not yet, I think. Yeah, you just may need to.
[00:21:10] Speaker B: Let me know when.
Can you see it now?
[00:21:14] Speaker A: No, I clicked allow a minute ago.
[00:21:17] Speaker B: Oh, maybe I need to do. Oh, I, I think I need to do share. That's my fault.
[00:21:21] Speaker A: Zoom. They're always there. It is.
[00:21:23] Speaker B: Okay, so bam.
So if you can see that QR code, I'll send. See if I can't make it bigger.
[00:21:32] Speaker B: Maybe I can't.
Anyway, so ultimately.
[00:21:38] Speaker B: If they can click on that QR code, that will take them to, to our little questionnaire about what information we need to provide them a complimentary Jason Lafferty RV park boss estimate of tax benefit. So we'll provide that free of charge as well so they'll understand what the potential benefit of cost seg is. And then also we'll provide them a quick synopsis of. And I'm trying to move that over. So we've got a nice little kind of white paper, if you will, or, or summary of what they might be looking at and some details. It's very accountant because those are the people that I hang out with, are accounting type people.
So there's, there's a lot of words which I argue with all the time, but it will give your person, your audience, a nice understanding of what's in play for them. So if they use that good old QR code that I just had up there, wherever that one let me go back to message. So if they use this QR code, it will help them come right to our site and they can put their name in. We're not going to try and sell them anything.
I'll follow up and say, hey, thanks for sending it. Here's the information on the RV parks, blah, blah, blah. And you know, if they need any other information, then we're happy to help them out.
[00:23:08] Speaker A: Awesome. I appreciate you providing that. I scanned the QR code too, so we'll make sure that link's available.
[00:23:13] Speaker B: Thank you.
[00:23:15] Speaker B: My, my, my partners don't think this social media podcast stuff works, so it would really make me happy if you would go ahead and use that QR code. Tell your friends, whatever. Use the QR code for Hyatt. It'll absolutely get his CPA partners to believe in it a little more. That would be great.
[00:23:38] Speaker A: Awesome. Yes, sir. Well, I enjoyed it. A bunch of nuggets you threw in here. I learned some stuff.
So folks that are listening to this want to reach out to you. I see you got all your handles here, but if you want to tell them what's the best way to reach you, a website or social media, they have any questions, what would be a good way to do that? Sure.
[00:23:54] Speaker B: Any you want to give me a call, fine, text me, whatever. I'll give you the mobile number just verbally here, which you may be able to see in my background, I don't know. 508-878-4846 so that if you're writing this down, thonging in five, and I don't think people do that anymore. 508-878-7846 and then my email address, JDH, as in Jeffrey David Hyatt. So JDH at cost seg. S E G studies S-T-U--I-E-S.com and my Instagram thing handle I guess is at depreciation. Dr. So every Thursday is Thor's day. My dog Thor is a big old German shepherd. And back in Roman times, Thursday that we use that phrase used to be called Thor's day. So I have Thor, my dog. And so every Thursday is Thor's day. Although today, because it's the 15th, I made Wednesday Thor's day. So if you go to my Instagram page today.
[00:25:07] Speaker B: There'S a pretty cool video of Thor getting ready to get on a helicopter and deliver tax savings to our clients.
So it's kind of cool. So take a look at that if you get a chance.
[00:25:20] Speaker A: Yeah, I'll check it out for sure. Well, thanks again. I appreciate your time and folks listening. If you own at least one RV park and want to be a future episode of RV Park Boss, you can apply directly to RV parkboss.com Thanks again, Jeff. You have a have an awesome day. I appreciate you too.
[00:25:36] Speaker B: My pleasure, Jason. Thank you for having me on. I appreciate it.
[00:25:39] Speaker A: Yes, sir.
