House purchased one year, fixed up and rented. Sold next year for more. Not sure if should allocate sale price in same ratio as originally or just keep the land value the same and add the additional sales price to the home asset (and the related depreciable assets).
There wasn't enough time for the land to appreciate much if any, and with the exception of yard work all the additional value captured in the sales price came from the improvements to the house (and the psychology of the effect of seeing them already done and done well).
Usually you just keep the same ratio as originally, but that's because there is an assumption that it is livable and all, so most of the appreciation has to do with the passage of time and real estate values in general. Any improvements are added and it makes sense to keep the same ratios in most cases. This doesn't seem to apply to when major fixer uppers are bought, fixed, and sold though.. Any rules of thumb for the allocations on those? Is there some area in TT H&B for that?
Thanks!
