This guide breaks down the true distinctions and how to manage each model correctly.

What Are Tenant-Owned Homes (TOHs)?

A tenant-owned home is a mobile or manufactured home owned by the resident while the park provides the land, utilities, infrastructure, and community services. The resident owns the unit, and the park rents the lot beneath it.

Operational Characteristics of TOHs

• Residents maintain their own homes
• The park maintains only the infrastructure
• Lower ongoing maintenance and repair costs
• Lower CapEx obligations
• Rent is typically lot rent only
• Depreciation is limited to land improvements and infrastructure
• Tenant turnover is generally lower due to the cost of moving to a new home

Tax and Accounting Treatment of TOHs

• The home itself is not depreciated by the park
• Revenue is classified as lot rent
• Infrastructure improvements (pads, utilities, roads) are depreciable
• The park benefits from lower expenses and simpler financials

TOH-heavy parks typically produce stable NOI with lower operational risk.

What Are Park-Owned Homes (POHs)?

Park-owned homes are owned by the community and rented to residents like standard housing units. This model requires significantly more involvement and significantly more accounting accuracy.

Operational Characteristics of POHs

• Park handles home maintenance, repairs, and turnover
• Higher CapEx and ongoing repairs
• Rent includes both home rent and lot rent
• More frequent tenant turnover
• More complex bookkeeping

Tax and Accounting Treatment of POHs

POHs fall into one of three categories depending on their legal and operational structure.

1. POHs Treated as Rental Property (Most Common)

If the park rents out the home directly:

• The home depreciates over 27.5 years as a residential rental property
• Repairs are deductible expenses
• Improvements are capitalized and depreciated
• Appliances and certain components may qualify for 5-year depreciation

This is the traditional model and the most common classification.

2. POHs Treated as Personal Property (State-Dependent)

Some states classify manufactured homes as personal property even when rented.

• Homes may depreciate over 15 years
• Certain components may qualify for 5-year depreciation
• Cost segregation can accelerate deductions even further

Classification depends on state law, title status, and how the home is used.

3. POHs Treated as Inventory (Rent-to-Own or Contract-for-Title)

If a home is being sold via:

• Rent-to-own
• Installment sale
• Lease-option
• Contract-for-title agreements

It may be considered inventory.

Key consequences:

• No depreciation is allowed
• Income may be split between principal and interest
• Expenses may be capitalized into the cost of goods sold
• Repossessions require careful accounting treatment

Misclassifying inventory as depreciable property is one of the most common IRS issues The MHP Accountant® encounters.

Maintenance Differences Between TOHs and POHs

TOH Maintenance

• Residents maintain the home
• Park handles only infrastructure
• Expenses remain low
• Fewer repair deductions
• Less CapEx planning required

POH Maintenance

• Park manages plumbing, electrical, HVAC, roofing, flooring, and appliances
• Repairs are deductible
• CapEx must be capitalized
• More depreciation opportunities
• More detailed bookkeeping is needed

POHs create larger deductions but require significantly more tracking and systemization.

Impact on Financial Statements

TOH Communities Usually Show

• High NOI stability
• Low maintenance and repair costs
• Limited depreciation
• Predictable operating expenses
• Lower turnover

POH Communities Usually Show

• Higher maintenance and repair costs
• More volatile expenses
• Significantly higher depreciation
• Mixed income classifications
• More complex rent rolls

Lenders often prefer TOH communities, but POH-heavy parks offer powerful tax sheltering.

How Depreciation Differs Between TOHs and POHs

TOHs

• No depreciation on the home itself
• Pads, infrastructure, utilities, and improvements qualify for 15-year depreciation
• Limited 5-year personal property assets

POHs

• 27.5-year or 15-year depreciation, depending on classification
• Appliances often qualify for 5-year depreciation
• Higher maintenance deductions
• Strong cost segregation benefits

This is one reason POH-heavy communities can dramatically reduce taxable income when structured properly.

Cost Segregation Benefits: TOH vs. POH

TOH-heavy parks:

• Limited benefit because the park owns fewer assets

POH-heavy parks:

• Materially higher benefit
• More 5-, 7-, and 15-year components
• Stronger bonus depreciation opportunities
• Greater ability to shelter income

Even parks with mixed TOH and POH models can realize substantial tax advantages.

Rent Roll Requirements

The MHP Accountant® often restructures rent rolls because inaccurate reporting is a major IRS red flag.

TOH Rent Roll Must Include

• Lot rent only
• Utility billing is clearly separated
• No home rent

POH Rent Roll Must Include

• Home rent and lot rent are separated
• Repairs tracked per home
• CapEx tracked per home
• RTO contracts are separately identified

A clean rent roll protects the operator during an audit and strengthens financial reporting for lenders.

IRS Considerations

High-risk issues include:

• Depreciating RTO homes
• Treating inventory as rental property
• Misclassifying title status
• Not separating home rent from lot rent
• Inconsistent capitalization policies
• Inaccurate land allocation

IRS Publication 946 provides the official MACRS guidelines:
https://www.irs.gov/publications/p946

Accurate classification of TOHs and POHs significantly reduces audit risk.

Conclusion

Tenant-owned and park-owned homes may look similar, but for tax purposes, they are fundamentally different assets. How you classify them affects depreciation, repairs, basis tracking, rent rolls, passive losses, audit exposure, and long-term financial performance.

If your books mix POHs and TOHs—or you’re unsure how your homes are recorded—now is the time to correct it.

Need Expert Help with POH and TOH Classification?

If you want a professional review of your POHs, TOHs, rent rolls, depreciation schedules, or RTO contract accounting:

Contact The MHP Accountant®
https://themhpaccountant.com/contact/

Disclaimer

This article is for educational purposes only and does not constitute tax, legal, or financial advice. Always consult with a qualified professional about your specific situation.

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