Estimate the appraisal, Cost Accounting

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The Smiths decided to convert Ron's home into a furnished rental house. After several minor repairs (touching up the paint, replacing screens, pressure-washing), the property was advertised for rent in the classified section of the local newspaper on March 1, 2011. The repairs cost $720 and the newspaper ad was $360. Based on reconstructed records and appraisal estimates, information about the property is as follows:

 

Original Cost

FMV 1/8/11

House

$40,000

$220,000

Land

10,000

50,000

Furniture and Appliances

21,000

14,000

Ron's former residence was rented almost immediately, with occupancy commencing April 1, 2011, under the following terms: one-year lease; $2,400 per month; first and last month's rent in advance; $2,000 damage deposit; and lawn care, but not utilities, included. The tenant complied with all terms except that the December rent payment was not made until January 1, 2012. Expenses in connection with the property were as follows: Property taxes, $2,600; repairs $320; lawn maintenance $540; insurance, $1,800 and street paving assessment $2,100. The property is located at 549 Columbus Street, Stafford, VA 22554.


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