Improved Value???

Question

What does "Improved %" and "Improved Value" mean regarding real estate?

Harry M. · Answer

Hey Chris,
In tax assessment speak, the 'improvement' is the house itself, as opposed to the lot.
So, your 100k house with an improvement percent of 80% means that of the total value of 100k, the improvement (house) is worth 80k, with the lot being worth 20k.
The significance is that come tax time, you claim a deduction of about 3.6% (1/27.5) of the value of the house for depreciation, but not the land. Note that this doesn't have anything to do with whether the house actually depreciates or appreciates in value over that time. The kicker is that the deduction has to be repaid years later when the property is sold (called depreciation recapture).

Harry M. · Answer

Unless you want to pass it on to your potential buyers to help them with their number crunching. It doesn't make a huge difference, but it's enough to be worth punching into your spreadsheet if you are a buy and hold type seriously considering a property.

Chris T. · Answer

Ok, thanks everyone.

Harry, your feedback really answered my question.

I can pretty much delete that part of my list now because it means nothing to me as a wholesaler!  I don't think........

Bill Gulley · Answer

No, it's a land value of 20K and improvements of 80K.

Conventional financing, improvements should not exceed 80/85% of the total or land should not be more than 20/25% of total value, some leaway...

You find this in areas where you have 5 acres and a small home, like a farm house, where there is more value in the land than the dwelling.....hope that helps....

Chris T. · Answer

Thanks Jon,

I have a list that has:

Owner Name
Owner Mailing Address
Owner Property Address
Sq Ft 
Bdrms/Bth
Year Built
Current Assessed Value
Equity %
First and Second Mortgage Info
Homestead Y/N
Loan Type
Improved %
Improved Value
and a bunch of information about Last Sale and Prior Sale

Regarding depreciation, if a $100,000 house has an improvement % of 80 then would that mean that the house is worth $20k???? or what.....?

Jon Holdman · Answer

Hard to say without knowing the context.

The obvious one is depreciation.  You get to take depreciation on the value of improvements.  Those are the structures.  The land doesn't depreciation, so there's no depreciation deduction for the portion of the value that's in the land.  Pretty common to say the improvements are 80% of the value of the property.

Sometimes tax rates are different and the county assessor will give separate values for improvements vs. land.

Improved Value???

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