Part of our pillar guide: Mobile Home Park Investing: The Complete Guide →
Chapter 1
How I Got Here
I founded a tax company, Community Tax, and sold it to a SPAC in 2021. And for most of that time I was paying ordinary income tax on nearly every dollar I earned.
That is the trap a lot of high earners are in. Your income is large, it is almost all earned, and there is very little in your life that offsets it. I went looking for something more tax efficient.
Before I was a sponsor, I was somebody else's LP. I invested in numerous deals and funds, anchored funds, and spoke with dozens of sponsors across different asset classes. That is where I learned what the structures look like from the investor's side of the table — and it is how I ended up somewhere I did not expect.
Mobile home parks are not glamorous. Most people drive past them without a second look. But when I put the economics side by side with everything else I had invested in, nothing else gave me the same combination.
Chapter 2
The Three Things, Together
Plenty of investments give you one of these. Some give you two. What makes mobile home parks unusual is getting all three in the same asset.
Cash flow from day one
In a mobile home park, residents typically own their homes and rent the lot underneath. Moving a home is expensive, so residents tend to stay for years. That means low turnover, low operating cost per site, and rent that arrives every month. Many parks were run for decades by owner-operators who never raised rents to market, so there is often room to grow income responsibly.
How MHC Returns Work →Depreciation as heavy as any real estate asset class
Because the homes belong to the residents, what the operator owns is mostly infrastructure: roads, water and sewer lines, electrical pedestals, and site improvements. A cost segregation study commonly puts 40–60% or more of the depreciable basis into short-life categories, and under current law 100% bonus depreciation can apply to that portion in year one. For a passive investor, those losses can offset passive income.
MHC Bonus Depreciation Guide →A path to your capital back — while still owning the park
As income grows, the property becomes worth more, and a lender will lend more against it. A refinance a few years in can pay off the original loan and return a large share of the investors' original equity. Loan proceeds are generally not taxable when received. You have your money back, and you still own the park and its cash flow.
Why the Combination Matters
Cash flow without depreciation is taxed at your full rate. Depreciation without cash flow is a paper loss on an asset that is not paying you. And neither one returns your capital until you sell. Having all three means the investment pays you, shelters what it pays you, and gives you your money back without forcing a sale.
Chapter 3
A Worked Example: Buy, Improve, Refinance
Here is the cycle in round numbers. This is a simplified, hypothetical park — not a Dayan Capital deal and not a projection.
Year 0 — The Purchase
Year 1 — The Depreciation
In this example the year-one deduction is roughly equal to the equity invested.
Year 4 — The Refinance
About two-thirds of the original equity returned, before closing costs — and the investors still own 100% of the park.
* Hypothetical and illustrative only — not a projection, offer, or representation of any actual or expected result, and not a Dayan Capital investment. Ignores closing and refinance costs, fees, capital expenditures, distributions during the hold, and interest rate changes. Assumes a 6.5% interest rate on 30-year amortization, that the cap rate does not change, and that a lender will refinance at 65% of value with adequate debt service coverage. Depreciation allocations vary by property and require a cost segregation study; the use of losses depends on the passive activity, basis, and at-risk rules. Consult your own CPA or tax attorney.
Notice where the value came from. The cap rate did not change. The park became worth more because it earned more — rents that had sat below market moved closer to it, and empty lots got homes on them. That is operating work, not market timing.
Chapter 4
The Recycle: Why It Gets More Powerful Over Time
The refinance is not the end of the investment. It is the start of the next one.
Buy
Acquire a park with below-market rents or vacant lots, and take the depreciation.
Improve
Run it well. Fix what was deferred, bring rents toward market responsibly, fill lots.
Refinance
Borrow against the higher value and return capital — while keeping the park and its cash flow.
Redeploy
Put the returned capital into the next park, with a new round of depreciation. Then do it again.
Do that over ten, fifteen, twenty years and you end up owning a substantial portfolio that pays you a real dividend — which is very good passive income heading into retirement. Each cycle, the same dollars are put back to work rather than sitting in one property.
There is a diversification piece too. The stock market has run a long way, and I do not want all of my net worth tied to it. Lot rent from people who own their homes does not move with the S&P 500. And at the end of the road, holding real estate until death can mean your heirs receive a step-up in basis, which resets the deferred gain.
Chapter 5
What Can Go Wrong
Every one of the three advantages has a way to fail. Anyone who only tells you the upside is not telling you the whole story.
The refinance does not show up on schedule
If interest rates rise or values fall, a lender may lend less, or the refinance may need to wait. Capital comes back later, or less of it does. This is the most important risk in the whole model.
The infrastructure is worse than it looked
Old water and sewer lines, failing roads, and private utility systems can be expensive. Deferred maintenance is the most common way a park's numbers fall apart after closing.
Rent growth meets regulation or reputation
Some states and cities limit rent increases on manufactured housing lots. Even where they do not, raising rents too fast on residents who own their homes is wrong and it is bad business.
The depreciation does not help you
Losses from a passive investment generally offset passive income only. If you have no passive income, the losses carry forward. They are not lost, but they are not saving you tax this year either.
Execution
All of this depends on the operator actually doing the work. Choose the sponsor as carefully as you choose the park.
For the full list, see mobile home park risks. For how losses interact with your other income, see the passive loss rules.
Chapter 6
What I Check First
The full diligence process is in the mobile home park investing guide. These are the questions that decide whether a park is worth looking at at all.
Where are rents versus the market?
Below-market rent is the opportunity. Rent already at the top of the market leaves little room to grow income, and the refinance math depends on that growth.
What is the utility setup?
City water and sewer versus private wells and septic changes the risk profile entirely. Know who pays for what, and how old the lines are.
How many lots are empty, and why?
Vacant lots can be filled, but only if there is demand and a way to get homes onto them.
Who owns the homes?
Resident-owned homes are what make the model work. A park full of park-owned rentals is a different business with different costs.
Does the refinance work at higher rates?
Run the refinance at a rate meaningfully above today's. If the plan only works if rates fall, it is not a plan.
What has been deferred?
Roads, lines, trees, drainage. Price the catch-up before you price the upside.
FAQ
Frequently Asked Questions
Why invest in mobile home parks instead of apartments?
Because the operator usually owns the land and infrastructure, not the homes. Residents own their homes, which keeps operating costs and turnover low, and because the asset is mostly roads, utilities, and site improvements, a large share of the purchase price can qualify for accelerated depreciation. Combined with rents that are often below market and a refinance path to return of capital, the asset class offers cash flow, tax efficiency, and capital recycling at the same time.
Is cash from a refinance taxable?
Loan proceeds are generally not taxable income when received, because they are borrowed money that must be repaid. When a partnership distributes refinance proceeds to its investors, the distribution is generally tax-free to the extent of each investor's basis, and the new debt itself typically increases that basis. Distributions in excess of basis can be taxable, and the debt reduces what is left for investors at an eventual sale. The specifics depend on the partnership and on your own tax position.
How long does it take to get capital back from a mobile home park?
In my experience, three to six years depending on the deal. The timeline depends on how far below market the rents are at purchase, how many vacant lots can be filled, how quickly operating improvements show up in net operating income, and where interest rates and lender appetite are when the refinance happens. None of it is guaranteed, and a refinance can be delayed or smaller than planned.
How much depreciation does a mobile home park produce?
Cost segregation studies on manufactured housing communities commonly identify 40–60% or more of the depreciable basis as short-life assets such as roads, utilities, and site improvements. Under current law, 100% bonus depreciation can apply to qualifying property, so that portion may be deductible in year one. Whether an investor can use those losses depends on the passive activity, basis, and at-risk rules.
What are the risks of investing in mobile home parks?
The main ones are refinance risk if rates rise or values fall, deferred infrastructure problems like aging water and sewer lines, rent control and local regulation, reputational risk from aggressive rent increases, and sponsor execution. Mobile home parks are illiquid, and the outcomes described on this page are not guaranteed.
Continue Learning
How to Evaluate an MHC Deal
The full diligence process: documents to request, red flags, and how financing shapes the deal.
MHC Bonus Depreciation
Why parks have one of the most favorable depreciation profiles in real estate, with real dollar examples.
What Sponsors Charge
The full fee stack from someone who paid it as an LP first — and the questions to ask before you fund.
MHC Returns Explained
Cap rates, cash-on-cash, and where mobile home park returns actually come from.
Mobile Home Park Risks
Infrastructure, regulation, financing, and the other ways an MHC deal can go wrong.
Passive Loss Rules
Whether the depreciation can actually offset your income — the question every investor should ask first.