How to track house basis while keeping market value as asset?

bbethke

I have seen advice from Quicken support to treat capital improvements to a house as a transfer to the house asset account so that the house asset is the basis. But I've also seen advice from Quicken support to use an "Update Balance" at least every year to show the change in market value. Of course, this would ignore all the capital improvements then and the house asset would no longer be the basis, but instead the current market value. Does Quicken support have any advice how to track basis on a house as well as have the correct current market value of a house as an asset account?

Sherlock

If you want Quicken Support's advice, I suggest you contact Quicken Support: https://www.quicken.com/support/quicken-support-options

In my opinion, there is no conflict in using transfers to an asset to track the cost basis of the asset and using Update Balance to track current market value of the asset.

J_Mike

My inclination would be to combine both methods.

Adding the actual costs of improvements will tend to over inflate the book value. Example - I read an article that indicated a typical kitchen upgrade increases the market value of a home by about 70% of the improvement costs. Thus, if you spend $50M upgrading the kitchen, you might expect the market value of the home to increase by $35M. I think they are saying that the old kitchen had some value.

The article also pointed out that some "improvements/additions" may not increase the market value. An example of this might be a neighbor I had who spent many $'s building  an underground rifle range that extended from the basement beneath the back yard. Did the market value of the home increase by the $'s spent? Probably not even close - to the general market. The owner is going to need to find a "very special interest" buyer to recover some of his costs.

In general, I would add the improvement costs and then periodically adjust the total value to reflect estimated market value. I make the adjustments using a transfer tp/from (pos/neg) the account itself - i.e., no income/expense and no cash flow involved with the adjustments.

bbethke

Thank you for your input. However, market value typically increases much more by inflation than with improvement costs. It appears Quicken has no way to do both. And if you enter your improvement costs as a transfer to your house asset as Quicken support has mentioned, then it will actually lower the house value rather than increase it by the improvement cost. So it appears that in order to keep a valid Net Worth the only option is to adjust the initial house cost by inserting "balance adjustments" once or twice a year. As for the basis, Quicken just can't do this. So the best way will be to create an Excel spreadsheet outside of Quicken showing the house cost plus valid settlement costs as the initial basis. And then in Quicken create a category for "Capital Improvements" and every year enter that category total in your basis Excel spreadsheet to add to the basis each year.

Rocket J Squirrel

I agree there's no elegant way to track both basis and value. I consider market value to be a myth and don't try to track it in Quicken. IMHO, it's more important to track basis. If I want to view someone's estimated "value", I can visit any number of real estate websites.