Price Estimate in Seconds

Each replay uses a recreated ChatGPT interface so the placement can be read in its original conversational context. It is not a live or embedded chat.

1. ObservedJul 11, 2026Conversation3 turnsPlacementAfter turn 23 turns · After turn 2Replay chat
   Observed conversationJul 11, 2026 · interface recreation

   ChatGPTArchived view

   I recently closed on my first rental property—a duplex that needs a significant amount of work before I can get tenants in. I paid $300,000 for the property, plus about $15,000 in closing costs. I understand I need to depreciate the asset, but I know I can't depreciate the value of the land. How do I accurately determine the land-to-building value ratio to set up my depreciation schedule correctly?

   You're correct that only the building (and certain improvements), not the land, is depreciable. The key is establishing a reasonable and well-documented allocation of your purchase price (including certain acquisition costs) between land and the building.

   Here are the most common approaches, roughly in order of preference.

   1. Use the property tax assessment (most common)

   Many investors allocate the purchase price based on the local property tax assessment, which typically lists separate values for the land and improvements.

   For example:

   • County assessment:
     • Land: $90,000
     • Building: $210,000
     • Total: $300,000

   The allocation is:

   • Land: 30%
   • Building: 70%

   You would then apply those percentages to your actual tax basis.

   Suppose your total basis is:

   • Purchase price: $300,000
   • Capitalized closing costs: $15,000
   • Total basis: $315,000

   Allocation:

   • Land: $94,500 (30%)
   • Building: $220,500 (70%)

   Your initial depreciable basis would generally be $220,500, before considering any later capital improvements.

   This is a widely accepted method because it's objective and easy to support if questioned.

   ---

   2. Use the appraisal

   If your purchase appraisal separately identifies the value of the land and improvements, you can use those figures.

   This is often preferable if:

   • the tax assessment is outdated,
   • the assessed values are obviously distorted, or
   • the appraisal was prepared close to the purchase date.

   ---

   3. Obtain an independent appraisal

   If the property is unusual or the allocation could have a significant tax impact, hiring an appraiser to estimate separate land and building values provides strong support.

   ---

   4. Use another reasonable valuation method

   If none of the above are available, you can use another reasonable, consistently applied method based on market data. The important part is being able to substantiate the allocation.

   ---

   What about the $15,000 in closing costs?

   Many acquisition costs are capitalized and become part of the property's basis, including items such as:

   • title fees
   • legal fees related to the purchase
   • recording fees
   • owner's title insurance
   • transfer taxes

   Those capitalized costs are generally allocated between land and building using the same percentage allocation.

   Some closing costs are treated differently for tax purposes (for example, loan origination fees and certain financing costs), so it's worth separating purchase-related costs from financing-related costs when establishing basis.

   ---

   Renovations before renting

   This is another important consideration.

   If you're doing substantial work before placing the duplex into service:

   • Capital improvements (new roof, HVAC, plumbing replacement, remodeling, additions, etc.) are generally added to basis and depreciated.
   • Repairs made after the property is in service may be deductible, depending on the facts and applicable tax rules.
   • If the work is extensive before the property is ready for tenants, many expenditures that might otherwise be repairs can end up being capital improvements.

   The building generally begins depreciation when the property is placed in service—that is, when it's ready and available for rent—not simply when you purchased it.

   ---

   Recommended documentation

   Keep copies of:

   • the closing statement (settlement statement)
   • the county property tax assessment showing separate land and improvement values
   • the purchase appraisal (if available)
   • invoices for renovations
   • a spreadsheet showing how you calculated your land/building allocation

   Good documentation makes it much easier to support your depreciation schedule later.

   Because this is your first rental and you're planning significant renovations before renting it out, it's also worth having a tax professional review your initial basis and improvement classifications. Getting the setup right in the first year can prevent depreciation errors that are cumbersome to correct later.

   

   PPublicRecords.usAd

   Property Value & Tax Records By Address OnlineLocal County Property Records. Mortgage Info, Taxes, Liens, And More. See Value & Tax Data.

   Before the tenants move in, I am spending about $20,000 replacing the entire roof, and another $2,000 painting the interior and fixing a leaky faucet. What is the difference in how I must account for the $20,000 roof replacement versus the $2,000 in painting and minor plumbing repairs on my tax return?

   The key distinction is that the roof replacement is a capital improvement, while the painting and minor plumbing repairs may be deductible as repairs, depending on when the property is placed in service and the facts surrounding the work.

   Here's how each is generally treated:

   Expenditure	Typical tax treatment	Effect
   Entire roof replacement ($20,000)	Capitalized	Added to the building's basis and depreciated
   Interior painting and fixing a leaky faucet ($2,000)	Potentially deductible repair (if the property is already in service and the work doesn't improve or restore the property)	Deducted in the year incurred

   $20,000 roof replacement

   Replacing an entire roof is considered a capital improvement because it restores or replaces a major component of the building. It is not an ordinary repair.

   That means you generally:

   • add the $20,000 to the building's tax basis,
   • begin depreciating it when the property is placed in service (ready and available to rent), and
   • depreciate it over 27.5 years as residential rental real property.

   For example, if your original depreciable building basis was $220,500, after installing the new roof your depreciable basis would become:

   • Original building basis: $220,500
   • New roof: +20,000
   • Total depreciable basis: $240,500

   (The roof is generally treated as part of the building rather than depreciated separately.)

   $2,000 painting and faucet repair

   Painting walls and repairing a leaky faucet are generally considered routine maintenance or repairs because they maintain the property in ordinary operating condition rather than materially improve it.

   However, there's an important timing issue.

   If these costs are incurred after the property is placed in service, they are often currently deductible as repair expenses.

   If they are incurred before the property is placed in service as part of preparing the property for its initial rental use, the analysis becomes more nuanced. Under the IRS tangible property regulations, costs incurred as part of an overall improvement or rehabilitation project may need to be capitalized, even if the individual items (like painting) would otherwise qualify as repairs. For example, if the painting is done as part of the roof replacement or a broader renovation that materially improves the property, it may need to be added to basis rather than deducted immediately.

   In your situation

   Based on what you've described:

   • Roof replacement ($20,000): Capitalize and depreciate over 27.5 years.
   • Painting and faucet repair ($2,000): These could be currently deductible if they are standalone maintenance items and the property has already been placed in service. If they are part of the initial rehabilitation before the duplex is ready to rent, they may instead have to be capitalized.

   Because this is your first rental property and the work is occurring before tenants move in, it's worth carefully reviewing whether the painting and plumbing work is separate routine maintenance or part of the larger improvement project. That determination affects whether you receive an immediate deduction or recover the cost through depreciation over time.

   

   IInnagoAd

   Innago-Landlord Software.Manage rentals better for free. Start saving time & money today with Innago!

   I want to use a property management software that also has robust accounting features built-in, so I don't have to use a separate program just for my books. I specifically need something that allows me to easily track income and expenses on a per-unit basis, not just per-property. What are the best software options that fit this exact criteria?

   Since your priority is one platform that combines property management and full accounting, and you specifically want to track income and expenses at the individual unit level (not just by property), I'd focus on software that uses a true property → unit → tenant accounting structure.

   Here are the strongest options.

   1. Buildium (Best overall for small to midsize landlords)

   For someone with a duplex today who may add more rentals later, this is probably the strongest all-around choice.

   Why it fits your requirements:

   • Native double-entry accounting
   • Income and expenses tracked by property and individual unit
   • Bank reconciliation
   • Accounts payable
   • Vendor management
   • Rent collection automatically posts to the ledger
   • Security deposit accounting
   • Owner and tax reports
   • 1099 preparation

   For your duplex, each side can be set up as its own unit with separate ledgers and tenant histories, while still rolling up into property-level financial reports. Buildium is also designed to scale from a handful of units to thousands.

   Best for: Investors planning to grow beyond just one or two rentals.

   ---

   2. DoorLoop (Excellent accounting interface)

   DoorLoop has become popular because its accounting feels much closer to dedicated bookkeeping software than many landlord apps.

   Features include:

   • Unit-level income and expense tracking
   • Full general ledger
   • Chart of accounts
   • Bank reconciliation
   • Bill payment
   • Financial reporting
   • Maintenance management
   • Tenant portal

   It also supports customizable accounting structures while remaining relatively easy to learn.

   Best for: Self-managing landlords who care as much about accounting as operations.

   ---

   3. Rent Manager (Most powerful accounting)

   Rent Manager is known for having one of the deepest accounting systems in the property management space.

   It includes:

   • True double-entry accounting
   • Unit-level ledgers
   • Department/property/unit reporting
   • Budgeting
   • Work orders
   • Purchase orders
   • Extensive financial statements

   The trade-off is a steeper learning curve than Buildium or DoorLoop.

   Best for: Landlords expecting to own dozens of units.

   ---

   4. AppFolio Property Manager (Premium option)

   AppFolio's accounting is tightly integrated with leasing, maintenance, and rent collection.

   It offers:

   • Per-unit accounting
   • Automated rent posting
   • Vendor payments
   • Bank reconciliation
   • Detailed owner reporting
   • Excellent dashboards

   The downside is that AppFolio is generally aimed at larger portfolios and typically isn't cost-effective for someone with a single duplex.

   Best for: Professional property managers or larger portfolios.

   ---

   5. TenantCloud

   TenantCloud is more affordable while still including:

   • Income and expense tracking
   • Unit organization
   • Maintenance tracking
   • Rent collection
   • Basic accounting reports

   Its accounting is less comprehensive than Buildium or DoorLoop, but many small landlords find it sufficient.

   Best for: Budget-conscious owners with smaller portfolios.

   ---

   Based on your duplex example

   Suppose you own:

   • Property: 123 Main Street
     • Unit A
     • Unit B

   A strong system should let you record transactions like this:

   Transaction	Assigned to
   Rent from Unit A	Unit A
   Rent from Unit B	Unit B
   Faucet repair in Unit A	Unit A
   Painting common hallway	Property/Common Area
   Roof replacement	Property (capital improvement)

   That lets you answer questions such as:

   • Which unit is more profitable?
   • How much maintenance has Unit A required versus Unit B?
   • What is the net operating income for each unit?
   • What expenses are shared across the entire property?

   Not every landlord-oriented platform supports this level of detail, so it's worth confirming before you commit.

   My recommendation for your situation

   Since you've just purchased your first duplex and want to keep everything—leasing, rent collection, maintenance, and accounting—in one application without needing QuickBooks, I'd narrow it to:

   1. Buildium – Best balance of accounting depth, ease of use, and room to grow.
   2. DoorLoop – Best if you want a modern interface with particularly strong built-in accounting.
   3. Rent Manager – Best if you expect to build a much larger portfolio and are willing to invest more time learning the software.

   For a landlord starting with a duplex but planning to acquire additional rentals over the next few years, Buildium is the option I'd be most inclined to recommend because it provides robust accounting with unit-level tracking while remaining approachable for smaller portfolios.

   

   Simply BusinessAd

   Price Estimate in SecondsGet liability insurance quotes for small business owners.

   

   RRealPageAd

   Multifamily Revenue Management SoftwareAI Revenue Management introduces enhanced forecasting and optimization tools. Demo today.