Information and Guidance about the NRAS

[kvellimalai]

Hi,
I have been reading on the nes papers and the articles that government is giving much incentive to the NRAS (National Rental Affordability Scheme). Did anyone bought on this scheme? If yes can you share your experiences.
Also, Any idea where i can locate such properties (As i am told and read that not all properties are eligible on this scheme). I am planning my next IP in QLd as i have already 3 in NSW.

Regards
Velli

 

[Jasc]

I recently looked into the NRAS scheme here in Perth with a company called Niche Living, the properties are extremely small on a courtyard block in a complex of about 40 to 50, similiar to a retirment village.

The ones i saw here in Perth were well and truly over priced by about
60 - 80k IMHO and any CG you could potentially make had been lost in the purchase.

I think you could find some much better positive geared property around.

 

[kvellimalai]

Thanks Jasc.

 

[burstock]

There are articles in this months Property magazine that may be able to help.

 

[Thrawn]

Wouldn't this scheme be really ideal for studio style student accomodation ?

Usually costs $200k to purchase, $250/week rent.

With this scheme $200k to purchase, $210/week rent + an extra $167 a week from the govt. Basically the boost adds an extra $127 a week which is $66k over 10 years. No vacancies and a better tenant selection due to competitively lower rents.

Sounds like $66k LROG to me (Landlord Rental Owners Grant).

I think this has the serious potential to devalue existing properties. I'd be especially wary buying older properties .. especially cheaper ones as they'd most likely have to compete against new properties with a huge $60k odd advantage.

 

[Ogre]

I recently looked into the NRAS scheme here in Perth with a company called Niche Living, the properties are extremely small on a courtyard block in a complex of about 40 to 50, similiar to a retirment village.

The ones i saw here in Perth were well and truly over priced by about
60 - 80k IMHO and any CG you could potentially make had been lost in the purchase.

I think you could find some much better positive geared property around.

Same deal, I spoke to Niche and was looking into their development in Ballajura (for those not in Perth - is an older suburb of houses in the 20+ yr old range generally). They wanted I think 409 for a 3x1 on a tiny block or 429 for a 3x2 with a loft. In comparison spending about the same money (if not less) you could get a much larger 4x2 on at least a 450sqm block and just spend a little updating the kitchen etc.

It seemed any benefit you would have from it being positively geared is offset from the inflated prices for the place itself. Not sure what other developments you have in other states, but if there are similar sort of companies doing this just keep a close eye on prices in the same area.

 

[paramount]

I understood the homes would have an independent registered valuation which would ensure you are paying te correct price.

If we are comparing apples with apples and the purchase price is supported by a registered valuation then surely this is a great investment opportunity?

Where else do you get to purchase a home ( again making the assumption that one is purchasiong at market rate) and then receive $80,000 in tax free $$.

 

[mystery]

This all seems to be a bit Defence Housing-ish revisited...... pay premium/over market for the property and have no/little control over the tenants or the rent. I may be wrong, but I don't see to much upside.

I figure I'd rather sub-divide/dual occupancy some of my current properties, ... build new house/townhouses and rent at market, .... with depreciation and tax benefit's I would have cash flow neutral/positive properties from day one and not have to answer to a Govt body governing how I manage them or what I charge for rent.

After crunching the numbers I know which way I'll be going .... and here's a hint ... it's not with Kev.

Martin

 

[Ogre]

This all seems to be a bit Defence Housing-ish revisited...... pay premium/over market for the property and have no/little control over the tenants or the rent. I may be wrong, but I don't see to much upside.
Martin

From the information I got in here in Perth you still have the final say in who the tenant is, people who fall within the income bracket which these scheme is availble to need to apply just like any other rental, and it is up to the landlord to decide on the tenant and length of contract. Once the tenant starts earning over the bracket for applicable NRAS properties, they had a number of months (from memory 6) to find alternative accomodation.

 

[euro73]

There are a few things to understand with NRAS approved properties; there are some great advantages as well as some minor disadvantages.

Finance- there are very few lenders who treat them as acceptable security, so loan options are limited. That doesn't mean its impossible though. t just means your choices are more limited. This is simply because of the 10 year "leaseback" agreement under which the NRAS operates, which lenders view as effectively the same / similar to pooled management agreements attached to serviced apartments and holiday units etc. There are only a small number of lenders who will lend against them, and usually only to about 70% LVR at best. Thats not necessarily a problem if you have lots of equity elsewhere that you can draw on to make up the 30% plus costs. It would exclude many people without that equity though, so NRAS is best suited to investors with good equity and lower gearing. High gearing investors would be better off looking at other property types where lenders will still advance 90%LVR.

Rental Income and property management costs - the properties MUST be managed by a Govt nominated organisation in each state. Expect to pay approximately 10-12% property management costs though, and you cant choose to manage the property yourself or through a cheaper real estate agent. You receive 75% of market rental plus an annual tax free concession ( currently $8800 I believe).

The housing estate/ghetto effect- NRAS properties are built in the same estates as any other new stock, and cannot exceed more than 10% ratio in any development. This means that you can have ten identical houses on a street, and only one of them will be NRAS approved. This ensures there is no ghetto effect.

Bottom Line- Its impossible to speculate about capital gain, but at least holding costs can be determined more accurately, so lets compare a brand new 400K NRAS approved property located near a brand new 400K non NRAS approved property. (they could be the same floor plan on the same sized lot, on the same street)

NRAS rental income (assume 5.5% yield) - 22K x 75% - $16,500
NRAS cashback tax free $8800
NRAS management fees - $16500 x 12% - $1980 annually
Total INCOME $23,320 ( $8800 of which is tax free)

Non NRAS rental ( assuming 5.5% yield) - $22K
Non NRAS management fees - ( assuming 6.6% management fee) $1452
Total INCOME $20,548 all taxable

You decide if that's worth looking into or not.

 

[PaulBartova]

NRAS Information

Hey guys I know a lot of you are confused about NRAS through lack of information available but I have found this great site at www.nrasscheme.com.au
that will be able to answer all your questions and more

 

[paramount]

I agree with you euro 73

I think NRAS is generally misundertsood and due to the Govts rush to get it to the market it has not been marketed well.

In Tas you can buy a $250,000 home with market rent is $250 per week @80%= $200 pw plus NRAS $167 = $367 pw which is guaranteed for 10years. Thats a starting gross yield of 7.6% (the NRAS is indexed to increase).

I particulary like the following

Low entry level -makes my equity go further
Brand new - reduces maintenance
very high quality build, -increases their appeal to be tenanted
surrounded by other new homes in good locations- assists in providing capital growth

 

[euro73]

just an update. I've heard that NRAS has been in discussions with banks and mortgage insurers and has made some changes to some clauses in their COS to address the concerns of the banks and insurers- word is that within a few weeks, most lenders will start lending to 90% on these properties. I'm definitely going to start taking a much closer look. The yields are just too good to ignore- and these properties are being built by large national builders in the same locations as any of their other new estates. Finally, the target tenants are police officers, nurses etc. Ticks all the boxes now, I think.

 

[MJD]

what I 've found from NRAS properties is the price is 25-30K more than the same in the market for sale. not sure if any one see the same?
I am interested in NRAS too, but considering paying premium to builder one lump sum upfront . need to choose carefully

 

[euro73]

That would be tier 2 marketing and would be illegal. These properties are being sold in the same developments and estates as non NRAS properties o identical or similar specs and dimensions. If you look at the various websites that list the properties for sale, they are priced exactly the same as non NRAS property being offered by the same builders and developers.

 

[pully]

it will be interesting to see how this scheme pans out. it would appear builders/developers tendered for federal assistance to be part of NRAS.
can anyone disclose what form that assistance took? was it discounted land or other concessions related to the projects?

it would seem the purchasers will take the full risk of purchase. the property managers are not chosen by the landlord as is usual case. i wonder what their service fees will be?
it would not appeal to me to be unable to select a property manager of my choosing, to manage a valuable asset, that i am financially responsible for.

the tenants will be selected by the property managers. i wonder how they make their selection? again the risk is the landlords.

its a win for the govt to part finance these projects and an incentive for builder/developers and helps in the rental shortages.

but for landlords, i think it would need better sweeteners than the ones so far presented.

there is a govt website re NRAS too. just google. critical thinking required and close examination of all the details.
and of course expert advice will be important to decide what is best, not just information put forward by builder/developers that need to sell these products.
regards.

 

[kvellimalai]

thanks for the responses

Hi All,
thanks for the details.How do we know which builder/developer is providing NRAS homes. I tried to locate but couldn't find any in NSW particularly in Sydney area.

Velli

 

[accumulator]

I spent a lot of time researching NRAS properties and non-nras properties recently. I looked in depth at WA and Qld.

Three points I came up with:
I think one of the interesting points to consider is, if the property was not NRAS, would I buy in that estate or location?

The other thing I did was to approach the land estates directly to get land prices and canvas some local builders to get comparable building costs.

I researched homes on realestate.com.au and domain.com.au in the area.

To me, it seemed that I would not have chosen to build in those estates without being incentivised, I would have got a better deal (significantly) by building non-NRAS and resales in the area seemed under the purchase prices.

On a side note from one of the earlier posts:
Finance did not seem to be a problem talking to a couple of the major banks.

Just a few points to ponder when you go looking.

 

[ronnie]

NRAS would have to be the biggest property news in decades

Dear Members,

It seems there is a lot of misconception about the NRAS scheme.

I would just recommend that for all serious property investors out there, before forming any conclusions about NRAS, at least give it the benefit of the doubt and learn more about the facts.

Nicheliving is conducting workshops about the scheme and you can register to attend at nicheliving.com.au/nras


Niche is all about affordability and our product represents great value for owner occupiers that have been priced out of the market.

Starting from as little as $289,000 for a complete house and land package with everything included, Niche provides an opportunity for those buyers to enter the market.

For investors Niche is a low cost alternative that offers less hassle and is located in some of Perths highest performing researched suburbs not green fields.

Not to mention the retun on investment! Niche offers great returns and coupled with the NRAS beneifits of $8672 per annum it is a no brainer as far as I am concerned.

From a real-estate perspective larger lot size does not necessarily represent better gain, in fact recent statistics and property reports are showing that unit prices had increased at a higher level than houses and this trend is likely to continue with changing lifestyle requirements. A recent study has also predicted unit prices in Perth to grow to the highest level in Australia.

Our product is very well received and we have sold hundreds of properties.

In regards to finance, our buyers have not encountered any issues with NRAS, it is treated by the banks like any normal purchase.

You can also learn more about the attributes of Niche at Nicheliving.com.au.
Simply click on investor on the home page.

Niche is well thought, quailty house and land package that offers great return on investment and Perth's best value all round product.

Good luck with your property investment endevours, but please look into the NRAS scheme as it is a truly great incentive for astute investors.

Regards

Ronnie

 

[Nth Brisbanite]

Aztec Developments, Awesome1 Investment and Surat Basin Homes

In the current API, the above 3 organisations are marketing homes under the National Rental Affordability Scheme. They all claim that their NRAS properties will be cash flow positive for most investors. The article in the magazine was quite compelling especially the section on the government providing a non-taxable grant of up to $8600 per year.

Has anyone had any dealings with the above organisations? I'd welcome your feedback