If a property is sold for $500,000 and the owner's improvements cost $100,000 with no depreciation, what is the value added by the improvements?

The value added by the improvements can be determined by analyzing the relationship between the sale price of the property and the cost of the improvements. In this scenario, the property sold for $500,000, and the owner invested $100,000 in improvements.

To assess the value added specifically by those improvements, one would generally consider that the value of the property after improvements should ideally reflect the cost of those improvements. However, it's important to note that the total sale price ($500,000) does not solely account for the improvements themselves. Therefore, subtracting the cost of the improvements ($100,000) from the sale price ($500,000) provides insight into the underlying value of the property before those improvements were made.

By doing this calculation:

Value of the property before improvements = Sale price - Cost of improvements

= $500,000 - $100,000

= $400,000

This means the improvements added a value of $100,000 to the original value of the property, but since the total sale price includes both the original value of the property and the added value from the improvements, the value attributed to the improvements in the context of how much the owner can now sell the property for is effectively seen as the difference