Someone will tell you that you can write off 100% of a park model RV in year one. That is true. It is also the smallest variable in the decision, and if you let it drive your build method you will optimize a rounding error and lose the deal.
This is the framework I use when deciding whether to put park model RVs or stick-built cabins on a piece of dirt. Three gates that settle it in about ten minutes, then an honest accounting of what the bonus depreciation advantage is actually worth once you run it all the way through the sale.
First: prefab is not the decision
Almost every unit going onto micro resorts today is built in a factory. Prefab is the norm, not the differentiator. The decision is which building code the factory built your unit to, and that gets locked in before the unit ships.
There are three separate certifications, and they are not interchangeable:
| Type | Built to | How it lands on site | Tax treatment |
|---|---|---|---|
| Modular | The same building code as stick-built (IBC / IRC). Carries a state insignia. | Set on a slab or foundation. Building permit pulled, certificate of occupancy issued. | 39-year building. Identical to stick-built. The factory just built it faster. |
| Manufactured home | Federal HUD code. Permanent chassis, HUD label and data plate. | Can be titled as a vehicle or converted to real property depending on how it is attached. | Depends on the facts. The murky middle. Get it classified in writing. |
| Park model RV | The RV standard, ANSI A119.5. Carries an RVIA or RVIC seal. 400 sq ft max living area. | Keeps its axles. Titled with the DMV. Sited in an RV park, not permitted as a building. | 5-year personal property. Eligible for 100% bonus depreciation. |
You cannot convert one into the other
The seal is the manufacturer's certification that the unit was built to that standard, on the line, to that code. You cannot bolt axles onto a modular cabin afterward and turn it into a park model. There is no retrofit and no election. Before anything else, ask your manufacturer one question: is this ANSI A119.5 with an RVIA seal, or state modular with an insignia? That single answer collapses most of this decision.
And note what comes attached to the park model answer. The moment you say park model you have also said 400 square feet, and you have said RV park instead of hotel. Unit size sets your nightly rate ceiling, and your nightly rate ceiling sets which guest you can serve. Couples, not families. That is not a problem you solve with better finishes.
The three gates
Run these in order. Any "no" removes park model from the table before you look at a single tax number. In my experience most deals die at Gate 1 or Gate 2, and taxes never get a vote.
Zoning
Will the county permit an RV park or campground on this parcel? Park models are almost never permitted as a hotel. Different zoning, different septic math, and sometimes a cap on how long a guest can stay. If the answer is no, you are building stick-built. Stop here.
Product
Can you hit your target nightly rate inside 400 square feet? If the comparable properties in your market are two-bedroom cabins at $400 a night, a park model cannot reach that. If you are selling a $250 couples getaway, it can. You cannot out-design a size cap.
Debt
Will your lender count the units in the appraised value of the property? If the units are not real property, a commercial real estate lender may lend only against the land and the site work. That does not kill the deal, but it means a materially bigger equity check. Re-underwrite it. Do not assume.
The financing trade: easier to get, worse to live with
You will hear that park models are easier to finance because banks like collateral they can repossess. That is true, and it is only half the sentence.
Chattel rhymes with cattle and comes from the same root word. It means movable property. A chattel loan is secured by the unit itself and its title, the way a car loan or an equipment loan works. Approval is genuinely faster and easier: no appraisal fight, and if you stop paying, the lender hauls the unit away and resells it into a real secondary market.
You pay for that convenience. Here is the same $1,000,000 of units financed both ways, using representative terms:
| On $1,000,000 of units | Stick-built (commercial mortgage) | Park model (chattel loan) | Difference |
|---|---|---|---|
| Loan amount | $700,000 (70% LTC) | $600,000 (60% LTC) | $100,000 less debt |
| Cash you must bring | $300,000 | $400,000 | $100,000 more cash |
| Interest rate | 7.5% | 9.5% | 2 points worse |
| Payback period | 25 years | 15 years | 10 years shorter |
| Annual payment | $62,072 | $75,184 | $13,112 more per year |
| Total cash out by year 10 | $920,720 | $1,151,840 | $231,120 more |
Same units, same money borrowed. The park model path costs $100,000 more up front and $231,120 more in total cash by year ten. Easier to get approved is not the same thing as cheaper.
It also splits your capital stack. Your commercial lender finances the land, site work and lodge. A separate chattel lender finances the units. Two lenders, two liens, two closings, and the commercial lender may exclude the units from appraised value entirely, so your leverage across the whole project drops even though both loans got approved.
Now the tax question everyone leads with
Two numbers get mixed up constantly, and untangling them is most of the work.
100% bonus depreciation is the size of the deduction. You write off the whole cost in year one. 37% is your marginal tax rate, which is what each dollar of that deduction is worth to you. A $10,000 write-off saves you $3,700 of tax. You are not taxed $3,700. You avoid paying it.
Both paths get bonus depreciation
This surprises people. The difference is only how much of the project qualifies, and to see that you have to split the project into pieces.
The tool that does this is a cost segregation study. An engineer walks the project and splits the one big number you spent into buckets based on how fast each piece is allowed to be written off. The building is stuck at 39 years and nothing changes that. But the pads, utility runs, roads, decks, landscaping and furniture are not the building. Those come out at 15 years or less, and anything 20 years or under is bonus eligible.
Here is a twelve-key project run both ways. Park model units at $150,000 each, stick-built units at $260,000 each. Both include $600,000 of site work, a $400,000 lodge and bath house, and furniture. Land is excluded because land is never depreciated.
| What it is | Written off over | Park model | Stick-built | Bonus eligible? |
|---|---|---|---|---|
| The units | 5 years vs 39 years | $1,800,000 | $3,120,000 | Park model only |
| Site work | 15 years | $600,000 | $600,000 | Both |
| Furniture | 7 years | $120,000 | $180,000 | Both |
| Lodge and bath house | 39 years | $400,000 | $400,000 | Neither |
| Written off in year one | 86% | 18% | ||
| Year one tax avoided (37% rate) | $934,456 | $306,689 | $627,767 apart |
Read that honestly
Stick-built is not a tax desert. It writes off roughly a fifth of the project in year one, and the only way you get that is by paying for the cost segregation study, which typically runs a few thousand dollars against a six-figure first-year benefit. The park model advantage is real, but it is 86 against 18, not 100 against zero. And those are two projects that cost very different amounts to build in the first place.
Bonus depreciation is not a bigger write-off. It is a faster one.
This is the part nobody puts on a slide. Over the life of the asset, both paths deduct exactly the same total amount. Every dollar you spend gets written off eventually, either way. The park model takes an 86% jump in year one and then grinds slowly through its remaining lodge. The stick-built takes a 19% jump and then grinds through its buildings at about 2.1% a year. Thirty-nine years out, both lines sit at 100%.
The entire park model tax pitch lives in the gap between those two curves, and that gap closes to nothing.
Then you sell, and some of it comes back
Depreciation is the government letting you claim your property lost value. That claim lowered your taxable income, so you paid less tax. When you sell, the government looks at your gain and says: you told us this lost value, and it did not. That deduction was too generous, so we are taxing it now. That is recapture. Nobody is paid back. A benefit you already took is reversed.
Here is where it lands differently, and it is the most overlooked number in this entire decision:
| You deducted at | You pay it back at | Net | |
|---|---|---|---|
| Park model | 37% | 37% | Zero. A wash. |
| Stick-built | 37% | 25% | You keep 12 points, permanently. |
The park model washes. The building makes a permanent 12-point spread between the rate you deducted at and the rate you settle at. So relative to the building, the park model gives up 12 points on every dollar of depreciation. That is a genuine, structural disadvantage that nobody mentions when they are selling you units.
Recapture is not a penalty for accelerating
You do not owe recapture because you took depreciation fast. You owe it on every dollar of depreciation you ever took, whether you claimed it in one year or spread it across thirty-nine. The stick-built owner still owes recapture. They just owe far less of it, because they had claimed far less by the time they sold, and because their rate is capped at 25% instead of 37%. Nobody escapes it. You only choose how much you set up and at what rate you settle it.
So what is the tax break actually worth?
To answer honestly you have to hold everything else still. Same nightly rate, same cost per unit, same financing, same exit, same residual value. Change one thing only: whether the units are treated as 5-year personal property or as a 39-year building. Then compare the after-tax internal rate of return.
| Hold period | Park model tax treatment | Building tax treatment | Advantage |
|---|---|---|---|
| 3 years | 34.01% | 33.63% | +37 bps |
| 5 years | 23.20% | 22.68% | +52 bps |
| 7 years | 18.99% | 18.32% | +67 bps |
| 10 years | 16.19% | 15.29% | +90 bps |
| 15 years | 14.27% | 13.18% | +108 bps |
The entire tax advantage is worth 37 to 108 basis points. At a seven-year hold, about 67.
For scale: when you put the real-world differences back in (nightly rate, cost per unit, financing terms), the same model shows stick-built winning by roughly 448 basis points at that same seven-year hold. The product decision is about seven times more important than the tax decision.
Bonus depreciation on park models is real, and it is worth under one percent of IRR. It is not big enough to justify choosing the lesser asset.
One more honest note. In that isolated test, the stick-built units were assigned the same resale value as the park models so that only the tax differed. In real life a park model is genuinely worth less after ten years, because it genuinely wears out faster. You do pay less recapture on it, but only because you are selling it for less. That is not a tax win. That is the tax code telling the truth about your asset.
When a park model is actually the right call
None of these reasons are the tax break. If you choose park models, choose them for one of these.
1. Your market caps out around $200 a night
If a larger unit cannot earn back its cost, do not build a larger unit. This is the cleanest case for park models and it has nothing to do with taxes.
2. You need revenue now and cannot fund a full phase
This is not simply that park models are cheaper, though they are. It is that the decision is divisible. A $150,000 unit at 60% financing is roughly $60,000 of equity to get one more key earning. Stick-built, you commit to the whole phase, the whole construction loan and the whole equity check before a single guest checks in.
People ask why you cannot just take another construction loan for each stick-built phase. You can, but construction loans are underwritten per project, not per unit. No lender writes a $260,000 construction loan. Each one needs plans, permits, a GC contract, a draw schedule, inspections and a guarantee, takes sixty to a hundred and twenty days, and then needs a refinance into permanent debt. A chattel loan is equipment financing: days to weeks, one unit at a time.
3. The permit timeline would cost you a season
The heaviest hitter on this list. A park model resort is typically permitted as an RV park, not a commercial building. Site plan approval plus a commercial building permit commonly runs six to eighteen months. An RV park or campground permit often runs two to four months. Prefab already buys you most of the construction speed, so this is the one timing advantage a modular cabin on a slab cannot give back. Timelines vary enormously by county, so verify yours.
4. You are on a short ground lease
This one is entirely about years remaining, and there is a trap inside it. A building on leased land still depreciates over 39 years even if your lease only runs 25. You cannot speed it up to match your term. You reach the end of the lease still carrying undepreciated basis, hand the building to the landowner, and take a loss you did not plan for. Movable units go on a trailer and leave with you.
| Lease term remaining | What it means |
|---|---|
| Under 30 years | Park models genuinely make sense. You never finish depreciating a building you are going to lose, and the reversion is a real cost you must underwrite. |
| 30 to 50 years | The gray zone. Close enough to the 39-year depreciation life that it turns on your actual hold period and exit plan. Model it, do not assume it. |
| 50 years or more | The lease argument disappears entirely. You fully depreciate the building, operate it for generations, and reversion sits beyond any realistic hold. Underwrite it as if you owned the land. |
Which means if you are negotiating a ground lease, negotiate the term first. The difference between 30 years and 99 years is not a detail you clean up later. It decides what you are allowed to build, how you finance it, and how you depreciate it.
The decision rule
This tells you what is on the table, not what to pick. Where both are options, the rest of the deal decides.
| If this is true | Your options |
|---|---|
| County will not permit an RV park | Stick-built only |
| Target nightly rate does not fit in 400 sq ft | Stick-built only |
| Your market supports more than $200 a night | Stick-built only |
| Lender will not count units in appraised value | Still both, but re-underwrite park model with more equity |
| Your market caps out around $200 a night | Either one. Park model is now on the table. |
| You cannot fund the full phase and need revenue now | Park model is a strong option |
| Permit timeline costs you a season you cannot afford | Park model is a strong option |
| Ground lease with under 30 years remaining | Park model is a strong option |
| You need a lodge, bath house or restaurant anyway | Hybrid or stick-built. Build the common building permanent either way. |
The one line to remember
Park model is a capital constraint solution, not a tax strategy. If you choose it, choose it because you cannot fund or permit the alternative. Do not let a 67 basis point tax break talk you into an asset that costs you 448.
Frequently asked questions
Can you put a prefab cabin on wheels and make it a park model?
No. The classification is a certification label applied at the factory, on the line, to a specific code. A park model RV carries an RVIA or RVIC seal certifying ANSI A119.5. A modular cabin carries a state insignia certifying the IBC or IRC building code. You cannot add axles afterward and earn the seal, and there is no election that converts one into the other.
Do stick-built cabins qualify for bonus depreciation?
The cabin itself does not. A building is 39-year real property and is never bonus eligible, regardless of who built it or whether it was assembled in a factory. But the project around it does qualify. A cost segregation study reclassifies site work, pads, utility runs, roads, decks and furniture into 15-year and 7-year property, which is bonus eligible. On a typical build that is roughly 18 to 20 percent of project cost written off in year one.
Is a park model a good tax strategy?
It is a real but small one. Holding every other variable constant, the tax treatment is worth roughly 37 to 108 basis points of after-tax IRR depending on hold period. The differences in nightly rate, unit cost and financing between the two build methods routinely swamp that by seven to one. Choose the build method on product and capital, then let the tax treatment fall where it falls.
What is the 400 square foot limit on park models?
ANSI A119.5, the standard park model RVs are built to, caps living area at 400 square feet. That is what keeps the unit classified as a recreational vehicle rather than a dwelling. It is also the real constraint on the strategy, because unit size sets your achievable nightly rate.
Do I need a cost segregation study either way?
Yes, on any project of size. It is the only mechanism that pulls site work, utility runs, decks and furniture out of the 39-year bucket and into bonus eligible classes. It typically costs a few thousand dollars against a six-figure first-year benefit, and it is the single highest-return piece of tax work available on a development.
Further reading
- Micro Resort Financing: Loan Options and Structures
- What Is a Micro Resort? The Complete Guide for Investors
- Micro Resort Investing: The Complete Guide
- How to Buy a Micro Resort: Step-by-Step Guide
This article is an underwriting framework, not tax advice. Classification of any specific unit depends on facts about how it is built, certified and attached to the ground. Get a written opinion from your CPA or a cost segregation firm before you commit basis on a real deal.