Chattel & House valuation-How soon?

[cesami20]

I have a question. I'll appreciate if you could share your thoughts and experience.

I was wondering whether it is worth to have a CHATTEL & HOUSE valuation before I have tenants moved in. I bought in August. It was very tidy property painted throughout inside and with new carpet.

Chattel valuation might be useful however I am not sure about house valuation is I did not do much. I will not be looking into buying another house until I have enough equity which will take at least a year for me. So house valuation may not be necessary at this stage but I also think it might good idea to have it done now while it still looks nice with no tenant, easily accessible etc. I also hope that house value will increase so valuation after 7-8 months will be better than now. Thanks!

[Rosco]

Hi,

I'll discuss the chattel valuation part.

Only use www.valuit.co.nz as they are the only firm who know what they are doing for chattel valuations.

If there is large value chattels when you purchased the property, then it would be worth while. I look at the 5 major chattels, carpet, curtain, dishwasher, stove, heat pump. If these are good quality and you think worth around $5k all up, then long term you will get $5,000 of depreciation and if on 33% tax rate, will save $1600 approx in tax. A valuation costs around $400 to $500.

A chattels valuation also would give you depreciation on smaller items like decks, fences, driveways, paths, mirros, tv aerials and any other chattels that aren't classified as building. These depreciate at lower %'s, but can still add up to a bit over 5-10 years.

If you have replaced all the chattels, then you can just use your cost values.

Give Valuit a ring, as they are great to discuss this with.

Ross

[cesami20]

Thank you for your quick response. There is a heat pump which is just 1 yr old, carpet is new, curtains are old, an old model stove but still in very good condition. No dishwasher. I think our heat pump and carpet will be over 5k at least. So, might be a good idea to have a chattel valuation.

[Tjc]

I'd say it would more than likely be worth doing, just had one done a month or so ago on a 80s 4 bed 1.5 bath that was pretty worn on most things and it came back at 27k for the chattels value, granted a large portion of this was on the decking and fences as it has pretty substantial of both but I was very surprised on how quickly things added up even if the item was abit worn like carpet etc

[ripeka]

in what I hope is a semi-related question- depreciation gets claimed for chattels as an expense for owning a rental (and deducted from personal income tax paid in my circumstance) but do I understand correctly that when a property is sold, all previously claimed depreciation has to be paid back to IRD? and if so, why would you bother claiming it? it's something I have never understood well and any enlightenment would be appreciated.

[primal]

When I bought my investment property, my accountant told me to valuation before tenant moves in.
In terms of tax you will benefit in long run.
Talk to you your accountant.

[Bobsyouruncle]

when a property is sold, all previously claimed depreciation has to be paid back to IRD? and if so, why would you bother claiming it?

There are a number of factors that can minimise or eliminate this, you need to talk to your accountant. And of course many of us own till we die so depreciation recovery will never happen!

[Rosco]

in what I hope is a semi-related question- depreciation gets claimed for chattels as an expense for owning a rental (and deducted from personal income tax paid in my circumstance) but do I understand correctly that when a property is sold, all previously claimed depreciation has to be paid back to IRD? and if so, why would you bother claiming it? it's something I have never understood well and any enlightenment would be appreciated.

Hi Ripeka,

Depreciation recovery is really around building depreciation which stopped 1/4/11. Say you purchased the building for $500k, depreciated down to $450k, then sold later for $1 million. You would have to recover the $50k depreciation previously claimed and paid tax on this
- But building depreciation was still an interest free loan , so why not? If you have kept for 50 years, then you can utilise the tax saved for a long time!
- Also if the building reduced in value, then there is no recovery. So your house might be sold to a developer who will demolish it, for example.

Since building depreciation has stopped, we are just talking about chattel depreciation. Chattels do actually wear out and reduce in value. So when you sell there is likely to be little or no recovery! So it can be extremely worth while and a huge deduction missed if you haven't done it!

Ross

[cesami20]

Thank you Ross!