What Classifies as Personal Property?

“What’s mine is mine” may seem to define the idea of “property,” but it’s not as clear-cut as you may think. Land is the perfect example, as it’s legally owned by an individual and falls under the umbrella term of “property.” But what type of property? In the U.S., there are two main categories: personal property and real property.

So, what classifies as personal property? How is this category separate from real property? Why does the distinction even matter? The short answer: Modern laws distinguish between the two for clarity about asset classification. Certain rules apply to particular property items, so statutory definitions are critical to your legal rights.

Let’s dig deeper into the idea of personal property. We’ll help you determine how your assets correspond to present-day financing and loan services.

Personal Property Versus Real Property

In layman's terms, personal property is any movable property and goods. It includes tangible items subject to ownership, such as chattels and goods, and intangible items, such as money, stocks, and bonds. 

By contrast, real property is fixed and immovable. It includes physical land and the real estate built on it, as well as anything above and below that land—like oil reserves—and you have the right to acquire those assets. Real property includes certain intangible rights surrounding:

• Enjoyment of the property for lawful purposes
• Exclusion and access control over the property
• Possession or living on the property
• Disposition or transfer of the property to another party
• Control over modifications, renting, or legal decisions about the property

The Importance of Property Classification

Classifying real and personal property is significant for tax purposes. Some states have eliminated taxes on personal property, and recategorizing assets can also help you avoid unintended or double taxation. 

Real and personal property may also overlap. If chattels are attached to land—known as fixtures—they can become a part of real property. Jurisdictions and real-estate professionals use the MARIA test to classify fixtures associated with real property for tax purposes:

• Method of attachment: Items are permanently affixed to the property, such as by cement or screws.
• Adaptability: Items are adapted to specific purposes within the home to become essential to the property.
• Relationship of the parties: Items installed by homeowners are more likely to be considered fixtures compared to those installed by renters.
• Intention: Items meant to become a permanent or long-term addition to the home are considered fixtures.
• Agreement: Items identified in a specific way in the purchase and sale agreement take on that status. If the contract specifies something as a fixture, it remains one.

Personal Property as an Asset

Modern investors and borrowers view personal property as an asset. As such, personal property can be taken into consideration when you apply for financing or loan services in today’s real estate market. Banks and traditional financial institutions often offer certain options—making it harder for individuals to secure suitable borrowing options for their needs.

Personal Property in the Eyes of Private Lenders

Private lenders provide alternative solutions and offer flexible terms. Instead of focusing only on your credit history and financial position, lenders look to property collateral—often in the form of real property. Of course, private lender terms may allow you to use various property assets as collateral. If you own tangible or intangible items of value, you can use these assets as collateral to secure better terms and conditions.

Secure Private Money Lending with Flexible Terms

Is your property in question personal property or real property? Understanding the difference informs your rights—and can even impact your borrowing options.

Diversified types of properties require customized hard money loans. Turn to Val-Chris Investments for private lending services. Our experienced hard money lending team offers unique funding solutions for your financial requirements, secured against real property.

Browse our private residential, investment property, and commercial loan products to find the right fit. We provide experience that matters, offering high-quality service to our customers to meet the needs of borrowers, brokers, and investors alike. Get in touch to begin your loan application today.