The holding period of a separate element placed in service before the entire section 1250 property is finished starts on the first day of the month that the separate element is placed in service.The holding period for each separate improvement qualifying as a separate element starts on the day after the improvement is acquired or, for improvements constructed, reconstructed, or erected, the first day of the month that the improvement is placed in service.The holding period for each improvement not qualifying as a separate element takes the holding period of the basic property.

Al Williamson what part of sacramento is your air B and B rental in?

However, we are getting a good deal for Home 2 at its price and a will probably see good appreciation if the neighborhood improves.

That's part of the play you should look for in the small town or foreclosure market, properties with extensive recent improvements.  

I made zero improvements to the property. 

I lived in Bel Air about 39 years ago.

I'd also like to share that I currently work and manage an appliance company that does not just sell your well known brands like LG, Samsung, but also your premium brands, such as Miele, Viking, Thermador, Jenn Air, etc.

I have been seeing deals in Houston where the numbers are improving, so I would question current management.Mark

But those are full rehab numbers (new roof, new HVAC, kitchens, etc) so my % will improve with inflation in the near term as I've already absorbed the bulk of capex on those properties. 

Your options in your market are buy to flip, buy short term rental (Air B&B), wholesale, or buy for appreciation.