Nras #2

[newbyinvestor]

I'm comfortable with the financing side of things and the basics of the deal itself.....
I'm not comfortable with the price they want for a NRAS house in Rockhampton....
The salesman bangs on about the high quality build and special door handles etc to justify the $30,000 extra over what I can buy one without the scheme elsewhere.
Then there is the 10% management fee which is calculated on the market rent of the property!
I've told the guy who said he doesn't have room to negotiate to ring me when he does..I'm not surprised this scheme hasn't achieved half of what was originally intended.

 

[albertwt]

I'm comfortable with the financing side of things and the basics of the deal itself.....
I'm not comfortable with the price they want for a NRAS house in Rockhampton....
The salesman bangs on about the high quality build and special door handles etc to justify the $30,000 extra over what I can buy one without the scheme elsewhere.
Then there is the 10% management fee which is calculated on the market rent of the property!
I've told the guy who said he doesn't have room to negotiate to ring me when he does..I'm not surprised this scheme hasn't achieved half of what was originally intended.

Yes I agree with you, it seems that the agent knows that we're getting some incentives, that's why they jack up their price.

 

[euro73]

euro73, I'm sure you've answered this before but do Firstmac deal with mortgage brokers?

I've got a MB looking at some options for us but Firstmac has not been mentioned and yet you feel it's the way to go (which I'd agree with)?

Any updates on finance for NRAS? Another concern is that so many are off-the-plan and it's not good for banks to change their mind at the last minute (again I'm sure you've discussed this elsewhere).

Big thanks again to euro for help so freely given. x

They don't pay commissions to brokers for NRAS deals, so that would probably be why your broker hasn't mentioned them to you. All their other loans are available with standard commissions through brokers but NRAS is not. Its a direct retail product,so you should contact them directly via their website for NRAS finance. There's a link on there to their NRAS product. They have a team of NRAS "experts" who will help you with an application, if thats what you want to do.

If you want a broker to do the loans for you, depending on the NRAS consortium involved, there are other NRAS funding options such as Westpac, St George, Rams, The Rock (limited options) and a few other very limited options....so I'm not suggesting Firstmac is the only option. Its just that a broker wont be paid a commission for doing an NRAS loan with Firstmac.
.
They are the best for borrowing capacity though, by quite a distance, and for Off The Plan they are fantastic- they are the only lender who will do an Off The Plan approval for NRAS, and it's good for 18 months, so the issues around a lender "changing their mind" are taken out of the equation. You have to give them another property though (non NRAS), to be able to take advantage of that policy. It doesn't have to be cross collateralised, they just want the additional security because they're taking all the risk by offering unconditional finance on the Off The Plan purchase for up to 18 months before its been built.

Nothing stopping your broker contacting them I guess, so long as they understand they wont be paid a commission on the NRAS deal if you buy Off The Plan. They would be paid normal commission on the non NRAS deal which you'd be required to refinance to Firstmac as part of any Off The Plan deal, though.

Hope this helps...

 

[euro73]

I'm comfortable with the financing side of things and the basics of the deal itself.....
I'm not comfortable with the price they want for a NRAS house in Rockhampton....
The salesman bangs on about the high quality build and special door handles etc to justify the $30,000 extra over what I can buy one without the scheme elsewhere.
Then there is the 10% management fee which is calculated on the market rent of the property!
I've told the guy who said he doesn't have room to negotiate to ring me when he does..I'm not surprised this scheme hasn't achieved half of what was originally intended.

Its not quite that simple guys. And its definitely not an NRAS problem per se.

On the subject of pricing/valuations - You'll find that valuers hit almost all new development stock pretty hard, whether it has an NRAS allocation or not, because ;
Property Marketers often demand very big commissions (25-30K plus) to sell any new development stock for developers (This is not peculiar to NRAS by the way. This has been the case for years and years, whether the stock has an NRAS allocation attached or not) Valuers dont like the size of the marketing fees and will always take it into account, especially when real estate agents usually charge around 3% to sell a property. On a 350K sale, that could mean a 15-20K difference in commissions.

Valuers will also be ultra conservative with valuations on brand new development stock because it hasnt been re-sold and hasn't established a true re-sale market value yet.

Valuers will also be ultra conservative because it's rare that other brand new (or very near to brand new) stock is available within the same area to use as comparison sales.

In other words, they will be looking to protect their backsides and strip a little value out for what they perceive to be excessive marketing commissions. This is why you will regularly see valuations coming in around 25-30K under contract price when you buy anything ( NRAS or not) through a property marketer. Not always of course- but usually.
But that doesnt mean the property is worth 25-30K less than the contract price. Probably about 15-20K of the difference can be accounted for by the marketing fee perception, but the other 10-15K is just valuers being exceedingly cautious because its new stock.
So if you can get a valuation that comes in around 10-15K under contract price, you can reasonably argue that you are getting fair value. You will rarely if ever get any valuer to value on contract price for new development stock sold by a marketer anywhere, anytime. You definitely shouldnt be proceeding where the val is 30K under, though. That's excessive, for sure.
There are several developments with NRAS allocations where valuations are coming in within a 10K-15K variation of the contract price, so Rockhampton isnt indicative of all the stock or developers within the scheme.

On the subject of the property management fees being 10% of market rental rather than the usual 6-7% for "regular" investment property; its important to understand that under the NRAS, property managers undertake a significant amount of extra compliance and reporting than would be required of a "regular" investment property. They are required to audit tenants incomes to ensure they remain eligible NRAS tenants. They are required to provide significant additional reporting to the relevant state and federal departments to validate the properties compliance, the tenants compliance etc etc. Might not sound like a lot, but it does involve additional work and that means higher property management fees.

Hope this helps...

 

[newbyinvestor]

Its not quite that simple guys. And its definitely not an NRAS problem per se.

It is in Rockhampton

On the subject of pricing/valuations - You'll find that valuers hit almost all new development stock pretty hard, whether it has an NRAS allocation or not, because ;
Property Marketers often demand very big commissions (25-30K plus) to sell any new development stock for developers (This is not peculiar to NRAS by the way. This has been the case for years and years, whether the stock has an NRAS allocation attached or not) Valuers dont like the size of the marketing fees and will always take it into account, especially when real estate agents usually charge around 3% to sell a property. On a 350K sale, that could mean a 15-20K difference in commissions.


The bottom line is if I pay $30,000 over what I can purchase as good if not better property elsewhere 3 years of the $9600 benefit goes up in thin air

Valuers will also be ultra conservative with valuations on brand new development stock because it hasnt been re-sold and hasn't established a true re-sale market value yet.

Valuers will also be ultra conservative because it's rare that other brand new (or very near to brand new) stock is available within the same area to use as comparison sales.

In other words, they will be looking to protect their backsides and strip a little value out for what they perceive to be excessive marketing commissions. This is why you will regularly see valuations coming in around 25-30K under contract price when you buy anything ( NRAS or not) through a property marketer. Not always of course- but usually.
But that doesnt mean the property is worth 25-30K less than the contract price. Probably about 15-20K of the difference can be accounted for by the marketing fee perception, but the other 10-15K is just valuers being exceedingly cautious because its new stock.
So if you can get a valuation that comes in around 10-15K under contract price, you can reasonably argue that you are getting fair value. You will rarely if ever get any valuer to value on contract price for new development stock sold by a marketer anywhere, anytime. You definitely shouldnt be proceeding where the val is 30K under, though. That's excessive, for sure.
There are several developments with NRAS allocations where valuations are coming in within a 10K-15K variation of the contract price, so Rockhampton isnt indicative of all the stock or developers within the scheme.

Which location in your opinion offers investors the best deal?

On the subject of the property management fees being 10% of market rental rather than the usual 6-7% for "regular" investment property; its important to understand that under the NRAS, property managers undertake a significant amount of extra compliance and reporting than would be required of a "regular" investment property. They are required to audit tenants incomes to ensure they remain eligible NRAS tenants. They are required to provide significant additional reporting to the relevant state and federal departments to validate the properties compliance, the tenants compliance etc etc. Might not sound like a lot, but it does involve additional work and that means higher property management fees.

Hope this helps...

Telling me what a tough job it is for the PM's is touching however at the end of the day I'm not running a charity.

 

[euro73]

Telling me what a tough job it is for the PM's is touching however at the end of the day I'm not running a charity.

I appreciate that you feel a patronising response is appropriate, but no one's suggesting you do or should run a charity. I'm pretty knowledgeable on the topic of the NRAS, I've invested considerable effort in presenting what I hope is balanced, unbiased and factual information on the scheme, the finance and some of the ways it is sold, and I'm just continuing to do so, because some of your recent posts weren't balanced or fully qualified, and this is a forum for discussion and debate.
They aren't running charities either to be fair, and they have additional responsibilities as NRAS property managers. That is why they charge a higher than usual management percentage. I dont work for free and Im sure you dont - unless you've started up that charity you referred to
In any event, you are entitled to be put off by things about the scheme you may not like. That's absolutely your prerogative. It's anyone's prerogative. Like any investment- all anyone can do is look at the numbers and see how a side by side comparison stacks up. It would be pretty surprising if someone wasn't well ahead with an NRAS property if they compared it to an identical non NRAS property though, but the scheme isn't a silver bullet for investors- there will be developers and marketers and properties that dont whet the appetite, for sure.
Just want to ensure all the facts are presented in an unbiased way.

 

[newbyinvestor]

I appreciate that you feel a patronising response is appropriate, but no one's suggesting you do or should run a charity. I'm pretty knowledgeable on the topic of the NRAS, I've invested considerable effort in presenting what I hope is balanced, unbiased and factual information on the scheme, the finance and some of the ways it is sold, and I'm just continuing to do so, because some of your recent posts weren't balanced or fully qualified, and this is a forum for discussion and debate.
They aren't running charities either to be fair, and they have additional responsibilities as NRAS property managers. That is why they charge a higher than usual management percentage. I dont work for free and Im sure you dont - unless you've started up that charity you referred to
In any event, you are entitled to be put off by things about the scheme you may not like. That's absolutely your prerogative. It's anyone's prerogative. Like any investment- all anyone can do is look at the numbers and see how a side by side comparison stacks up. It would be pretty surprising if someone wasn't well ahead with an NRAS property if they compared it to an identical non NRAS property though, but the scheme isn't a silver bullet for investors- there will be developers and marketers and properties that dont whet the appetite, for sure.
Just want to ensure all the facts are presented in an unbiased way.

The irony is Euro that I,m still interested in the NRAS , however I have a shortlist.
1: I will buy a house for the right money, not pay some marketing group $25 or $30,000 over the odds just because I get a tax break out of the deal.
2: PM's charging 10% of market rent is out of control given investors sacrifice 20 or 25% or market rent to begin with, not to mention that PM's I have spoken to have mentioned managing new houses to pre qualified tenants is nothing compared to working in Mt Druitt or Cabramatta.
3: The property is financed at a competitive interest rate etc

BTW, I've just received an email 8.8% and no fees....... later

 

[euro73]

The irony is Euro that I,m still interested in the NRAS , however I have a shortlist.
1: I will buy a house for the right money, not pay some marketing group $25 or $30,000 over the odds just because I get a tax break out of the deal.
2: PM's charging 10% of market rent is out of control given investors sacrifice 20 or 25% or market rent to begin with, not to mention that PM's I have spoken to have mentioned managing new houses to pre qualified tenants is nothing compared to working in Mt Druitt or Cabramatta.
3: The property is financed at a competitive interest rate etc

BTW, I've just received an email 8.8% and no fees....... later

1. I agree that 25-30K above Contract price is unreasonable. I think I said as much in my post (and several previous posts) so not sure why you are implying otherwise?
2. PM's are appointed by the relevant NRAS consortium with whom you enter into a Head Lease, MIS or NEJV agreement, which you have to enter into in order to enter the property into the scheme and receive the federal and state components of the incentive. Some consortiums allow you to select from a "menu" of PM's, so you have some choice. If you can negotiate 8% plus GST that's fantastic - Please let us know which consortium/PM was agreeable to 8% plus GST- if they have good stock that's valuing within 10-15K of contract price, they'll see a lot of extra enquiries I'm sure.
3. NRAS finance is available from around 7.10-7.45%, all well below Standard Variable Rates.

 

[newbyinvestor]

1. I agree that 25-30K above Contract price is unreasonable. I think I said as much in my post (and several previous posts) so not sure why you are implying otherwise?
2. PM's are appointed by the relevant NRAS consortium with whom you enter into a Head Lease, MIS or NEJV agreement, which you have to enter into in order to enter the property into the scheme and receive the federal and state components of the incentive. Some consortiums allow you to select from a "menu" of PM's, so you have some choice. If you can negotiate 8% plus GST that's fantastic - Please let us know which consortium/PM was agreeable to 8% plus GST- if they have good stock that's valuing within 10-15K of contract price, they'll see a lot of extra enquiries I'm sure.
3. NRAS finance is available from around 7.10-7.45%, all well below Standard Variable Rates.

Euro, my posts aren't personally directed at you and I realise you are a walking library on the NRAS so theres no need to get your nose out of joint.

 

[euro73]

Euro, my posts aren't personally directed at you and I realise you are a walking library on the NRAS so theres no need to get your nose out of joint.

Still in place If anything Ive written seemed otherwise, I think its been misconstrued. Im all about the facts- nothing more and nothing less.

Can we get back to talking NRAS? That's a much more interesting subject. Where were you able to negotiate 8% plus GST for the management?

 

[Bradsdad]

They don't pay commissions to brokers for NRAS deals, so that would probably be why your broker hasn't mentioned them to you. All their other loans are available with standard commissions through brokers but NRAS is not. Its a direct retail product,so you should contact them directly via their website for NRAS finance. There's a link on there to their NRAS product. They have a team of NRAS "experts" who will help you with an application, if thats what you want to do.

If you want a broker to do the loans for you, depending on the NRAS consortium involved, there are other NRAS funding options such as Westpac, St George, Rams, The Rock (limited options) and a few other very limited options....so I'm not suggesting Firstmac is the only option. Its just that a broker wont be paid a commission for doing an NRAS loan with Firstmac.
.
They are the best for borrowing capacity though, by quite a distance, and for Off The Plan they are fantastic- they are the only lender who will do an Off The Plan approval for NRAS, and it's good for 18 months, so the issues around a lender "changing their mind" are taken out of the equation. You have to give them another property though (non NRAS), to be able to take advantage of that policy. It doesn't have to be cross collateralised, they just want the additional security because they're taking all the risk by offering unconditional finance on the Off The Plan purchase for up to 18 months before its been built.

Nothing stopping your broker contacting them I guess, so long as they understand they wont be paid a commission on the NRAS deal if you buy Off The Plan. They would be paid normal commission on the non NRAS deal which you'd be required to refinance to Firstmac as part of any Off The Plan deal, though.

Hope this helps...

Hmmmm just bumped into this thread.

Maybe the broker may not have mentioned them at the time of your post as he was waiting in the type of scheme involved.
Maybe not all brokers worry about the commission side of things but look after their clients to the best of their ability.
It's disappointing to read posts from lenders that put down the broker network.

 

[euro73]

Hmmmm just bumped into this thread.

Maybe the broker may not have mentioned them at the time of your post as he was waiting in the type of scheme involved.
Maybe not all brokers worry about the commission side of things but look after their clients to the best of their ability.
It's disappointing to read posts from lenders that put down the broker network.

Can you point out where a lender put down the broker network in my post, Bradsdad?
Firstly I dont represent or promote one NRAS lender over another. You'll see I've written extensively on NRAS, NRAS consortiums, NRAS lenders and their niches, over quite a period on these forums. I try to present qualified, balanced information. I think what I wrote on the post in question was very balanced.
If Casserole dish wants a FirstMac NRAS loan, as she suggested she does, I advised her to go to them directly. I dont think it's reasonable that I suggest she asks her broker to perform the loan submission work for free. I went on to say that if she wants a broker to do the loan there were several other options... I know thats what I wrote, because thats what it says here...

"If you want a broker to do the loans for you, depending on the NRAS consortium involved, there are other NRAS funding options such as Westpac, St George, Rams, The Rock (limited options) and a few other very limited options....so I'm not suggesting Firstmac is the only option"

 

[Casserole Dish]

Just to add to this story... the MB I mentioned has unfortunately not been in contact with me recently. I discovered some funny pricing inconsistencies with some NRAS properties being advertised and have inadvertantly opened a big can of worms there (and now his website is down). I don't think he did anything wrong with it all but he's stuck in the mess while it gets sorted.

I just want to clarify that it wasn't a MB from this forum! I only went to this other guy as he advertised himself as a NRAS expert and he is in Brisbane (where the NRAS properties I'm looking at are) and I was directed to him by the group selling the properties.

 

[Bradsdad]

Can you point out where a lender put down the broker network in my post, Bradsdad?
Firstly I dont represent or promote one NRAS lender over another. You'll see I've written extensively on NRAS, NRAS consortiums, NRAS lenders and their niches, over quite a period on these forums. I try to present qualified, balanced information. I think what I wrote on the post in question was very balanced.
If Casserole dish wants a FirstMac NRAS loan, as she suggested she does, I advised her to go to them directly. I dont think it's reasonable that I suggest she asks her broker to perform the loan submission work for free. I went on to say that if she wants a broker to do the loan there were several other options... I know thats what I wrote, because thats what it says here...

"If you want a broker to do the loans for you, depending on the NRAS consortium involved, there are other NRAS funding options such as Westpac, St George, Rams, The Rock (limited options) and a few other very limited options....so I'm not suggesting Firstmac is the only option"

Do you work for one though?

 

[euro73]

I have worked as a broker and for lenders. Ive also worked with property marketers. What I do for a living isn't particularly relevant to any of the posts I contribute though. If I was here to represent a lender or a marketer or an NRAS consortium I'd be doing a pretty poor job, seeing as I discuss them all.

 

[newbyinvestor]

I have worked as a broker and for lenders. Ive also worked with property marketers. What I do for a living isn't particularly relevant to any of the posts I contribute though. If I was here to represent a lender or a marketer or an NRAS consortium I'd be doing a pretty poor job, seeing as I discuss them all.

Euro, I don't question your knowledge regarding the NRAS and it's a good thing that people are willing to share their knowledge however at the end of the day whether you agree or not it's a very fair question to ask where this opinion is coming from..

 

[euro73]

Euro, I don't question your knowledge regarding the NRAS and it's a good thing that people are willing to share their knowledge however at the end of the day whether you agree or not it's a very fair question to ask where this opinion is coming from..

Really? Because I'm advocating who, what, where? I'm selling what? I'm generating leads or income, how? I'm being paid by someone to achieve what outcome? I'm charging what fee for the commentary and information I provide?
The opinions I express on here are mine I don't think its anyone's business what I do for a living, what car I drive or what I eat for breakfast- unless I'm advocating something in particular. Then it would be a fair question.

 

[truong]

There have been only a few posters on SS as knowledgeable, accurate and unbiased on any subject as euro73 has been on the subject of NRAS. Thank you euro, I’ve learned and benefited a lot from you. I, for one, look forward to reading more of your posts.

 

[newbyinvestor]

Really? Because I'm advocating who, what, where? I'm selling what? I'm generating leads or income, how? I'm being paid by someone to achieve what outcome? I'm charging what fee for the commentary and information I provide?
The opinions I express on here are mine I don't think its anyone's business what I do for a living, what car I drive or what I eat for breakfast- unless I'm advocating something in particular. Then it would be a fair question.

Exactly Euro, the opinions you express are opinion,(even though you see yourself as Jesus and we should believe everything you have to say because you say so).
Fact is Euro that people of different backgrounds,employed in different parts of an industry sometimes see things from a different angle and IMHO it doesn't hurt to see where that angle is coming from.
For example you as a finance person might think the only relevant facts are numbers but a builder might see past numbers and think that even though the numbers look good the property isn't any bargain at all.

 

[Bradsdad]

Really? Because I'm advocating who, what, where? I'm selling what? I'm generating leads or income, how? I'm being paid by someone to achieve what outcome? I'm charging what fee for the commentary and information I provide?
The opinions I express on here are mine I don't think its anyone's business what I do for a living, what car I drive or what I eat for breakfast- unless I'm advocating something in particular. Then it would be a fair question.

I only asked as in your post #215 you asked a question. As an employee of a lender I see it as the "lender" putting down the broker network (or at least most) whether your signature or ID show your employer or not.
In post #206 you mentioned "probably". Maybe a better word would have been maybe as to me, "probably" infers most likely. It is true that we make our living off commissions but for many of us our clients come first.


Anyway, I'm not sure why you are hiding the facts of your employer as I strongly suspect it's nothing to be embarrassed by. Actually, I'm surprised and a little disappointed you weren't honest enough to admit who it was and as to why you didn't. Your posts in my opinion have been very informative and, in the main, unbiased.