1. What is chattel? Chattel is personal property inside an investment property. There are over 40 categories of chattel in a small condo alone. Examples of chattel include: countertops, cabinets, carpet, light fixtures, appliances, water heater, sprinkler systems, concrete & fencing, etc.
2. Why should I have chattel appraisals done on my rental properties? Educated investors know that depreciation is a benefit unique to real estate. A chattel appraisal will identify those items (usually about 10% of a property�s value) which depreciate at a faster rate. This can turn a negative cash flow property into a positive one. It can also significantly reduce your net taxable income and capital gains. A chattel appraisal contains detailed information about the contents both inside and outside the house and acts as independent verification of property and its value. Also having this information at hand in the unlikely event of an insurance loss can prove invaluable.
3. Why haven�t I heard of chattel appraisals before? Cost segregation has been a popular tax strategy for many years in commercial real estate. Until recently, there has not been a cost-effective way to offer a similar service to residential investors. Most investors who need our service don�t even know that it exists. It�s time to spread the word.
4. Does my investment property qualify for a chattel appraisal? You must meet these requirements set by the IRS: You must be the owner of the property, and it must be used for business or an income-producing activity.
5. How do I know what I can depreciate? Chattel is personal property that is reasonably expected to last more than 1 year. It must be something that wears out, decays, gets used up, or loses value from natural causes. We work from a specific list of chattel items recognized by the IRS.
6. What will I receive with my appraisal? Our appraisal generally takes about an hour on site. You�ll receive two copies of your cost segregation report (one with instructions for your CPA), a CD of digital photos of your chattel, an inventory list with quantity and descriptions of your chattel, and a list of serial & model numbers of all your appliances�useful with insurance companies.
7. How many years can I depreciate the personal property off my taxes? The IRS assumes a 5-year life span for most personal property, although many exterior items have a longer depreciation schedule. If you keep your investment property for five years, you will receive the maximum benefit from your chattel appraisal.
8. Can�t I just expense the retail value of the chattel? The IRS doesn�t make it that easy. The depreciation takes into account more than just the retail value of your property, and the rate of depreciation varies over each of the five years. Your accountant will know how to depreciate the items based on the information we provide you.
9. Can I do an appraisal myself? Yes, if you have the time, the resources, and you understand the IRS laws. You�ll leave yourself open to a greater chance of being audited, however. You hire us for the same reason you hire a professional real estate appraiser. We are an objective third party providing a thorough accounting of the value of your personal property.
10. What if I plan to sell the property in a year? If you intend to sell the property in less than a year, a chattel appraisal will not benefit you.
11. What about recapture tax? When you sell your property, you will pay recapture tax�but the tax is a fraction of what you received as a benefit. You�re still way ahead.
12. Do you offer a referral program? Yes. If you know other real estate investors who may benefit from this service or have access to a real estate network, we will pay you $25 for every chattel we perform based on your referral. The larger your network, the more you can make�just by recommending an awesome benefit to your friends.
13. What if I have more questions? Call Real Chattel Appraisers at 760-233-7746 or email us at info@realchattel.com
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