NRAS dead?

[euro73]

NRAS payments have now been finalised for more than 80% of investors. They are very late and it's undeniably been a massive heartache for all involved - NRAS consortiums and investors, but when a new Govt steps in and is intent on *******ising everything and anything done by the previous Govt, it becomes about politics, not NRAS. So yes, the new mob have c**ked it up , but whats surprising about that? What havent they c**ked up?

It's unhelpful though when half baked experts take a one size fits all approach to NRAS. First came the rubbish about " all NRAS is overpriced" which has nothing to do with NRAS and everything to do with the antiquated project marketing industry who sell most the available NRAS stock - cos its all brand new- and their grossly inflated commissions. But I ( and others) disprove this every day.

Then came " you're stick for 10 years" another falsehood. " the properties are ghetto's" - more rubbish "in clusters of 100 or more" more rubbish "tenanted by junkies and dead beats" more rubbish "in remote locations" more rubbish and on and on and on it went.

The NRAS has been running since 08/09. One year- the 13/14 year, has seen delays. Three things caused it - none of them the fault of NRAS, all of them the faulty of a Government where the adults are supposedly now in charge...

1. The new Government ordered a full review of NRAS by the Australian National Audit Office, which led to some real pettiness..
2. Every NRAS consortium was forced to resubmit all of their 13/14 compliance paperwork, with new valuations. Why? Because the new Govt decided that things like Lot #'s were now unacceptable, and had to be replaced with street #'s. They decided that rental valuations that weren't dated ( included photo's with the same date stamps) exactly the same day as the date of activation of the NRAS on their FOFMS system, had to be re- done as well. Never mind that ANAO didnt actually request these things , and never mind that the legislation actually allows for 91 days ( 13 weeks) difference between valuation dates and activation dates... but there was some ambiguity about how the wording of the act could be interpreted and this new Govt decided to play politics with a Rudd initiative and took the most pedantic approach it could... and forced everyone to jump through hoops.
3. Now dont shake your heads too hard, but in the middle of all this, right as they had forced consortiums to go back and do all the compliance work again, Govt also decided to switch software platforms and transferred all compliance across from FOFMS ( which had worked flawlessly since 08/09) to a new platform called NRAS PORTAL ( which was buggy and untested) resulting in further delays as consortiums had to re-register, re-train and then deal with constant software errors.. The portal is so unreliable it has forced another software change to AUSKEY effective from April this year, to make sure the 14/15 processing isnt delayed by further technical issues.


It's hard to conclude this has been anything other than an Orwellian political exercise , just to try and beat down an initiative introduced by a former Government. The irony is, right now is when they need more affordable accommodation. Right now is when they need the construction work associated with new stock delivery. They could be playing this very differently, expanding NRAS and pitching it as a re-jigged, tightened, effective, targeted policy that will help transition the economy to growth. Shake head now.

 

[MTR]

Good on those who have managed to make it work for them.

But as I said not an investment I would touch, even though it has been running for years, investors are not lining up that's for sure



Did a little snooping, found this block very interesting

FEBRUARY 10, 2015, 6:10 AM
I have had a significant dealings with the NRAS scheme as a property manager. I have read a lot of the comments and agree with some and strongly disagree with several ill informed comments however I am not here to defend the NRAS scheme far from it.
Firstly I took great care in selecting tenants for the NRAS properties to make sure the landlords had the very best tenant possible who was eligible under the scheme. The scheme is designed to benefit families with children not single adults living together. I do live in an area where living is very affordable and the average wage is quite low compared to the national level but I was still able to find very good tenants and pride myself on this fact and yes I did have police officers, nurses & working professionals as tenants.
The item I would like you to look at is the monopolisation of NRAS properties under management from a specific NRAS provider in the eastern states and the specific qualification required to be an NRAS approved leasing/managing agent and the disadvantage this is having on landlords and tenants alike.

I think this would make for a very interesting investigation.


Todd
FEBRUARY 16, 2015, 4:23 AM
Hi Derek,

What in specific are you looking for? What things have you noticed that look dodgy or not right?

Cheers Todd

Reply

Derek
MARCH 25, 2015, 4:18 AM
1. Inability for landlords to chose their own agent.
2. Company nominating themselves as the ?NRAS approved agent? that is NRAs approved?
2. Incentives not paid or lengthy delays in payment.
3. Charges applied for ?sworn valuations? conducted by companies own people, not qualified.
4. Charges applied against the incentive ie 7%
5. Inflated property prices

 

[Biz]

NRAS payments have now been finalised for more than 80% of investors. They are very late and it's undeniably been a massive heartache for all involved - NRAS consortiums and investors, but when a new Govt steps in and is intent on *******ising everything and anything done by the previous Govt, it becomes about politics, not NRAS. So yes, the new mob have c**ked it up , but whats surprising about that? What havent they c**ked up?

Angry much? The new government are just cleaning up the mess and hubris of the previous mob. Frankly I hope they scrap the "scheme" altogether. The market can and will regulate itself without tax payer funded pats on the bum like NRAS. Like the first home owner saver accounts It really has no place in the grand scheme of things..

 

[OKFFW]

Is it true with the nras payment delay and how long? Any nras owners can comment?

They have been delayed. Mine for the 2013/2014 financial year have just arrived. The audit process should be all finished now though, so therefore next financial year there shouldn't be any delay.(of course time will tell though)

 

[MTR]

They have been delayed. Mine for the 2013/2014 financial year have just arrived. The audit process should be all finished now though, so therefore next financial year there shouldn't be any delay.(of course time will tell though)

Are you happy in general with what you purchased and is it what you expected to achieve this investment??

Also, wondering how do people not pay too much for this product? Read a number of articles where people paying way over market value.

Cheers
MTR

 

[OKFFW]

Are you happy in general with what you purchased and is it what you expected to achieve this investment??

Generally we are very happy with our purchases.

We have purchased in what we believe to be growth areas but the NRAS has ensured that we are not reliant on growth for our 10 year financial plan to work out. If all goes well and we see conservative rental increases in line with inflation we will have our $2.9mil portfolio(including PPoR) paid off in 10-12 years max. Any growth on top of that will be gravy. 2 out of 3 of our NRAS properties have seen respectable if not fantastic growth over the last 3 years we have owned them.

I do admit we bought in Gladstone in very late 2013 believing the slump had run its course and things had stabilized. We believed we would not see values and rents drop too much more and we were wrong. That's on us though and not on the NRAS. Also, because of the NRAS incentives on that property, even with the rental slump that property is putting approximately $13k per annum in our pocket tax free so it's still not a bad investment from a cash flow point of view. From a capital base point of view we would be taking a nasty hit from it if we had to sell right now. Again though, that is our fault and has nothing to do with the NRAS.

Also, wondering how do people not pay too much for this product? Read a number of articles where people paying way over market value.

Cheers
MTR

Proper DD will negate much of the risk.

NRAS, being new property, does suffer from the same problem any other new property suffers from. Hidden and high commissions and marketing costs. Plus of course you are going to pay the "new property" premium. You just have to find the right deals in which you cut out most if not all the marketing and commission and are left with the new property premium alone. Do that and you are paying what is, for a new property anyway, pretty much fair market value.

Personally I think NRAS suits a specific type of investor. Generally someone who wants a solid bread and butter, set and forget, long term investment that will help set them up for retirement or some other future goal. If you want to manufacture growth, buy under market value and refinance, do developments or anything like that then NRAS is not for you. For my wife and I, with our financial plan, our skills and experience and our risk profile, it is pretty much the perfect vehicle.

 

[Redom]

Personally I think NRAS suits a specific type of investor. Generally someone who wants a solid bread and butter, set and forget, long term investment that will help set them up for retirement or some other future goal. If you want to manufacture growth, buy under market value and refinance, do developments or anything like that then NRAS is not for you. For my wife and I, with our financial plan, our skills and experience and our risk profile, it is pretty much the perfect vehicle.

Very well said OKFFW. It suits a particular strategy and when utilised well as part of a well honed investment plan, can be a very powerful way to achieve cash flow/pay down non deductible debt.

 

[euro73]

I hope you're paying down non deductible debt first

 

[euro73]

Are you happy in general with what you purchased and is it what you expected to achieve this investment??

Also, wondering how do people not pay too much for this product? Read a number of articles where people paying way over market value.

Cheers
MTR

Because the majority of it is being sold by the same groups who sell all the other heavily overpriced stock across the land - 8% + GST marketers. Which is fine if the developer is absorbing it - I have no issue with people making money. But if a marketer wants 40K or 50K + GST, it needs to be worn by the developer, not the buyer. Provided that happens, I dont care if the comms are 100K + GST. What matters is the end purchase price, relative to market and supported by bank valuations.

So, as other commentators have reinforced, there are readily available NRAS projects available at market value - but they wont be found using the top 4 or 5 google search results.

let me share a story - Just 3-4 weeks ago I was approached and asked to sell 20 x NRAS approved townhouses in Lismore, NSW. Off The Plan. Due for completion mid 2016 . Now, some readers may be familiar with this...and may even have received emails (not from me or my company) promoting those same 20 townhouses.

developer was asking 320K. He was offering some pretty generous commissions. Now... Low 300K NRAS is about as sweet as it gets - incredible cash flow for very little investment cost... so why did I pass on the opportunity? Simple - 3 bank valuations from 3 different valuers ( Opteon, Taylor Byrne and HTW) on 3 different examples within the development told me that 200-240K was the"range" . I went back to the developer and recommended a reduced price. Instead, he went to one of the online NRAS marketers. And what did the other organisation sell them for? 320K. So now, 20 poor unsuspecting clients had better hope the Lismore market jumps quite a bit over the next 15 months or they're in for quite a nasty shortfall. Just a classic example of what you have questioned MTR. Developers jacking up prices because of NRAS, and marketers happily selling it without any consideration of the end valuation. But also a perfect example of why my clients dont have valuation problems - I only take on the ones where the numbers stack up. 300 + NRAS properties later and 1 shortfall ever - and for 11K from memory....

So it can be done, and done well, in great locations - Zillmere, Alderley, Windsor ( Qld) , Nundah, Brunswick, Ringwood, Elanora Heights, Gregory Hills, Rose Hill, Castle Hill, Wentworthville, Baulkham Hills, Canterbury, Enfield, Orange, Goulburn , Fairy Meadow just to name a few

 

[OKFFW]

I hope you're paying down non deductible debt first

Since moving to Dubbo, we have no non-deductible debt and the government pays almost all my rent. Living the dream!(well except for the Dubbo part of course hehehe)

 

[euro73]

You have a lovely zoo

 

[OKFFW]

You have a lovely zoo

That we do and we have enjoyed many a picnic lunch there over the last year or so.

 

[MTR]

Personally I think NRAS suits a specific type of investor. Generally someone who wants a solid bread and butter, set and forget, long term investment that will help set them up for retirement or some other future goal. If you want to manufacture growth, buy under market value and refinance, do developments or anything like that then NRAS is not for you. For my wife and I, with our financial plan, our skills and experience and our risk profile, it is pretty much the perfect vehicle.

Well if its working for you that is good.

Shame about Gladstone. Timing thing.

Your comments it the nail on the head, not a strategy for active investor, just wont work.

How hard is it to sell this product? If you set and forget that's fine, but if you had to sell then what, your market is limited?? Any thoughts on this.

MTR

 

[Colin Rice]

How hard is it to sell this product? If you set and forget that's fine, but if you had to sell then what, your market is limited?? Any thoughts on this.

MTR

NRAS can be removed with a written notice period, not sure how long but from memory a month or two.

Providing you did not overpay and bought in a location that didnt suffer a capital loss (99% of Oz) then you should be fine.

Alternatively you can sell it with the NRAS to be transferred to the new buyer which is what most do from what I can gather.

So if you have a good agent on yourside I reckon it would be straightforward in a decent market.

 

[euro73]

Correct. The dwelling itself is what the tax eligibility sits against, and provided the dwelling meets the criteria required by the NRAS - 20% discount + eligible tenant , the dwellings owner receives the $$$. So if the dwelling is sold to another investor with part of the 10 year total eligibility remaining, that new owner can elect to use the remaining term or not use it. Should they wish to use it, they need to make the dwelling meet the NRAS eligibility requirements . ie they need to continue with the 20% discount and rent it to an eligible tenant. But the dwelling can also be withdrawn from NRAS and used as a "vanilla" investment property, or as a PPOR . In fact- it doesnt need to be sold for that to be the case- any current NRAS owner can do that without selling, should they choose to.

The simplest way to view it is this; if there were any restrictions whatsoever on selling NRAS approved dwellings to anyone, without prejudice or restriction , in the event of a worst case scenario - ie mortgagee in possession ; banks and mortgage insurers simply wouldn't accept them as security. or if they did, LVR's would be 60% or 70%. But seeing as Westpac, STG, RAMS, BankSA, Bank of Melbourne, ME Bank, Macquarie Bank , Wide Bay, Adelaide Bank, FirstMac and Resimac all lend to 90% + LMI, and NAB, ANZ and CBA to 80% - any fears about whether they can be sold or re-sold should be well and truly put to rest.

Again; there is fact, and there is fiction about NRAS - generally peddled by those with little or no working knowledge of the thing. 7 years since launch, with the majority of banks ( including all the majors) onboard and mortgage insurers onboard, I think its well and truly time people accept the naysayers are wrong and the NRAS is a valid investment strategy. The ONLY thing the critics ever got right is the criticism about many of the sellers gouging the prices - but that has always been the way with the 8% ers, is easily avoidable and isnt related to the NRAS itself, it is related entirely to the sales model being employed. Avoid that and the numbers are compelling

 

[bazwami]

NRAS cals

Would you purchase the investment property without an NRAS incentive?????

If not then don't buy it. If yes then go for it.

NRAS is a gamble a bit like playing the lottery, good luck.

 

[erwinsie]

--edit-- found more suitable thread to post. apologies