Quote from @Mitch Seiffert: @James HamlingThis is super helpful, thank you! 

I'm happy to help!

To be fair, they needed a tad more work, but you get what I'm saying.

and so much more. 

You’re not helping  

Building on existing land helps eliminate the issue of land scarcity, which is a significant challenge due to California’s high real estate prices.

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The perceived value may be more, because you know an STR was run there and making money, but a lender wont value it more.While I agree a lender probably won’t value it more, an investor interested in running it as a STR will pay more.  

Keep in mind the more you write off the less money you will show as you net.If you have (2) full years and depending on how the accountant files your taxes you will have a schedule C more than likely or another schedule that shows profit and loss.

Your realtor should be the first source of guidance.For anyone here to provide you some guidance, you have to be more specific on the ask.There are always many things to consider when planning for different strategies.