Overview
This is an opportunity to purchase a BoxHouse and reduce your taxable income by $350,000 with an income-producing home located in the oil-rich Permian Basin.
Due to its unique designation, BoxHouse qualifies for a one-year, 100% deduction as defined under the Internal Revenue Code, section 179. For tax years beginning in 2024, the maximum expense deduction is $1,220,000. (Larger amounts can be deducted under IRC 168k)
About the BoxHouse
Measuring 19 feet by 20 feet, or approximately 380 square feet, the BoxHouse is designed to provide privacy and comfort by including a full kitchen, bathroom, bedroom, dining & living area.
Constructed with a steel frame and walls, the BoxHouse is designed to endure significantly longer than conventional stick-built houses due to its reduced susceptibility to severe weather conditions, mold, rot, etc.
The BoxHouse is unique as it doesn’t require an expensive foundation. They simply sit on 16 adjustable feet on either concrete blocks or helical piers (ground screws).
Let's Take a Look at the Location of the Homes
Why West Texas?
Housing has been a major challenge for oil companies to secure in rural areas. The typical living situation for an oil field worker includes numerous employees sharing small confined spaces referred to as “Man Camps.” Companies in West Texas are seeing the value in providing premium housing for their employees, where the alternative is an unappealing “man camp” that struggles to recruit and retain valuable employees. As evidenced by the photos below, West Texas companies have been able to utilize the BoxHouse to set themselves apart from others by providing far more appealing living accommodations.
Target Demographic: Permain Basin Oil Workers
- In 2023, Forbes reported that the Permian Basin accounted for nearly 43% of the total oil production in the United States.
- Most workers elect to leave their families at home in the surrounding metro areas in Texas, New Mexico, & Oklahoma.
- While the industry desperately needs more workers, few are willing to relocate full time to the sparsely populated rural areas in which the drilling takes place.
- Typical oil field shifts can range anywhere from 5 days on / 2 days off to 6 months on / 6 months off.
- Permian Lodging, which operates one of the biggest workforce housing complexes in the basin, reports all 1,200 units at a 90-acre lot outside Midland, Texas, are occupied.
Significant Job Growth
According to recent data from the Texas Workforce Commission, the Texas oil and natural gas industry, specifically in the upstream sector, saw remarkable job growth in March. The sector added 4,500 jobs, marking the highest monthly increase since June 2011. As of March, over 195,500 individuals were employed in the upstream sector alone.
Texas Oil & Gas Association president Todd Staples attributes this significant job growth to the industry’s commitment to maintaining its status as a key player in the American energy landscape. The industry’s contributions not only foster economic growth within Texas communities but also enhance energy security for the United States and provide stability for global trading partners.
Comparable Hotel & Man Camps In the Area
As compared to
BoxHouse $95/Night
Subject Property
- 19′ x 20′ BoxHouse
- 380 SF of Living Space
- Steel Frame and Walls
- 18k BTU Mini Split
- Front Load Washer
- Heat Pump Ventless Dryer
- On-Demand Water Heater
- Finished Shower, Toilet, and Vanity
180+ reviews (4.8 of 5)
Let's Take a Look at the Process
Financing Terms for the BoxHouse
- Purchase Price: $350,000
- Down Payment: $150,000
- Note Balance: $200,000
- Note Rate: 0%
- Note Term: 30 Years
- Payment Deferral: 5 Years
- Monthly Note Payment: $555
Let's Take a Look at the Numbers
Key Assumptions (year 1-5)
- Total Cash Outlay: $150,000
- ADR: $95
- Occupancy: 75%
- Utility/Amenities: ($450)
- Deprecation in 2024: $350,000
- Tax Savings in 2024 (assuming 37% federal tax bracket): $129,500
Assumed Return
NOT Including Tax Savings
- Monthly Income: $2,167
(assuming 25% vacancy)
- Utility/Amenities: ($450)
- Monthly Revenue: $1,717
- Annualized Interest Return: 13.7%
Assumed Return
Including Tax Savings
- Monthly Income: $2,167
(assuming 25% vacancy)
- Utility/Amenities: ($450)
- Monthly Revenue: $1,717
- Depreciation in 2024: $350,000
- Tax Savings: $129,500
(assuming 37% tax bracket)
- Total Cash Out of Pocket: $20,500
(after tax savings)
- First Year Income: $20,606
- Annualized Interest Return: 100%
Let’s Take a Deeper Dive Into IRS Section 168(k) & 179
Section 179
In 2024, Section 179 allows businesses to write off 100% of the cost of qualifying assets in the year they are placed into service up to $1,220,000. While real estate does not qualify, IRS rulings have determined that movable structures, such as portable homes delivered on wheels and used to produce income, are considered personal property and not real estate. This classification makes BoxHouses eligible for Section 179 deductions.
Section 168(k) – Bonus Depreciation:
In 2024, businesses can deduct 68% of the asset’s cost in the first year, with the remaining 32% spread over the following four years. Movable structures like BoxHouse units, which are delivered on wheels and can be transported, are classified as personal property under Section 168(k), making them eligible for this bonus depreciation.
https://www.irs.gov/newsroom/additional-first-year-depreciation-deduction-bonus-faq