NRAS Properties Over Priced

[Happydays]

Hello..

I am sorry if this has already been a post but i haven't found anything...
I have been looking at a few properties with NRAS being well over priced compared to nearby similar non NRAS properties..

Just wondering if other people have discovered prices being jacked up because of NRAS on the property..

Thanks...

 

[Belu]

i know of some in a great spot in Bendigo - i think they are $350k for 2 story 3 bedders which is well on market.

 

[Rolf Latham]

My primary exposure has been in QLd , and vals have been tough,

from 15 k to 70 k light ...............

My experience of this is that much of the mark up is due to extra marketing costs from various groups.

ta

rolf

 

[Happydays]

Coomera

I also have been looking in QLD

A few properties in Coomera. Went to have a look at one property that looked great.

Townhouse, 2 story, 3 bedroom, 1 garage with NRAS+10k Gov Boost for $385K

But 200m down the road found

Townhouse, 2 story, 3 bedroom, 2 garage, entrance from front and rear of property. New property but no NRAS for $345

Both properties similar floor size and similar fittings and fixtures.

I can't understand where the this extra 40K has come from... My thoughts were NRAS is a government incentive and should mean you are paying any more for the property.

Im thinking someone is putting extra sugar on the property because of the NRAS

 

[Belu]

sorry should note these are in flora hill so $350k is market there.

 

[Aaron Sice]

just pays to be wary.

tarring all NRAS properties with the same brush is a foolish idea.

some developers will gouge because they paid too much for the land.

the valuations on purchase will tell you if you are or aren't.

 

[JWR]

Are there any for under $200k?

Where do we find these houses? Is there a website?

The ones I have seen in Ipswich/Gladstone and some other parts of QLD have been way overpriced (but they have been OTP - even with the $10k building grants and even $10k matching grant by the developer.)

 

[Andrew_A]

Are there any for under $200k?

Where do we find these houses? Is there a website?

The ones I have seen in Ipswich/Gladstone and some other parts of QLD have been way overpriced (but they have been OTP - even with the $10k building grants and even $10k matching grant by the developer.)

Yes definitely some around <200k and <10k Brisbane CBD. Plenty that are not good value regardless of the cashflow, as Aaron said be wary though don't bunch them all in the same category.

One good way to search is using realestateinvestar using 'NRAS' as the search term if that's your focus

 

[christos]

My primary exposure has been in QLd , and vals have been tough,

from 15 k to 70 k light ...............

My experience of this is that much of the mark up is due to extra marketing costs from various groups.

ta

rolf

Had a bank valuation on NRAS property came back yesterday 75K under sale price (225K val on 299K sale in Ipswich QLD - 2 br duplex) on a property have been trying to buy for the last 3 months. Thats 25% out.

Broker and I fell off our respective chairs in shock. Was expecting some variation but not that much so yes something going on with over pricing going on and poor market conditions. Developer has not come back yet to explain this difference.

Thankfully have a subject to finance clause that will be exercising and will go look elsewhere - at least my finance was approved - it was just conditional on the valutaion of the property.

Shame though as a lot of time/effort went into it and missed out on QLD builder bonus but better to walk away than be in $ mess.

With regard to NRAS, still think they are viable but for now will probably just purchase normal properties elsewhere or one outside QLD at a later time

 

[Rolf Latham]

Broker and I fell off our respective chairs in shock.

I wouldnt

When you have been around for a while there are things you know................and you dont waste your and the borrowers time and CRAA file with "mud on the wall" deals.

All NRAS deals need to have upfront vals ( before app) if being brokered through our biz.

ta
rolf

 

[Paul Thewlis]

I know a lot about this as we are both selling and financing NRAS property from various Approved Participants and developers across the country.

Not all NRAS property is the same. Like the general market place some vendors will try to over price their properties. Once you decide NRAS is the right strategy for you (and obviously I think it's a good one for many people interested in a buy-and-hold strategy) then you still have to look at whether the price and location is right - and everyone has different opinions on this.

However just a couple of points to consider on the price of NRAS properties.
1. Most/many NRAS properties are being sold side-by-side with equivalent non-NRAS properties so price comparison is possible.
2. NRAS properties are fully turnkey ready for tenants to move in. This includes landscaping which in my experience is far more expensive the many people expect. So be sure when you are thinking they are over priced that you looking at equivalent specs for the property.
3. Duplexes (whether they are NRAS or non-NRAS) are hard to get good valuations on and especially in new areas. The issue is the valuers need to find comparible sales which can be hard to find. We had a recent valuation done for a new duplex to be constructed where the valuer used comparible sales of properties built 20 years ago!! This is on top of the fact that property valuations on all types of property are coming in low across the country.

There are lot of recent entrants into NRAS sales over the last few months now that NRAS has matured a little. We've been working with NRAS for two years so we pretty much know the NRAS landscape. Because we arrange the finance as well as sell the property then we're not going to waste our time and money trying to sell over-priced property that we can't get financed.

Regards
Paul

 

[christos]

I know a lot about this as we are both selling and financing NRAS property from various Approved Participants and developers across the country.

Not all NRAS property is the same. Like the general market place some vendors will try to over price their properties. Once you decide NRAS is the right strategy for you (and obviously I think it's a good one for many people interested in a buy-and-hold strategy) then you still have to look at whether the price and location is right - and everyone has different opinions on this.

However just a couple of points to consider on the price of NRAS properties.
1. Most/many NRAS properties are being sold side-by-side with equivalent non-NRAS properties so price comparison is possible.
2. NRAS properties are fully turnkey ready for tenants to move in. This includes landscaping which in my experience is far more expensive the many people expect. So be sure when you are thinking they are over priced that you looking at equivalent specs for the property.
3. Duplexes (whether they are NRAS or non-NRAS) are hard to get good valuations on and especially in new areas. The issue is the valuers need to find comparible sales which can be hard to find. We had a recent valuation done for a new duplex to be constructed where the valuer used comparible sales of properties built 20 years ago!! This is on top of the fact that property valuations on all types of property are coming in low across the country.

There are lot of recent entrants into NRAS sales over the last few months now that NRAS has matured a little. We've been working with NRAS for two years so we pretty much know the NRAS landscape. Because we arrange the finance as well as sell the property then we're not going to waste our time and money trying to sell over-priced property that we can't get financed.

Regards
Paul

Yes agree - will still plan to invest in one but perhaps not a duplex next time. Interestingly the developer came back the next day with a finance offering and valuation alot closer to the sale price but the gap I had to come up with was still too much

 

[Aaron_C]

I wouldn't put my money anywhere which relies solely on a government subsidy. People rort the government all the time in Healthcare etc but they usually wake up to it and close the gap. It has to make sense without the subsidy.

 

[Peter_Tersteeg]

I wouldn't put my money anywhere which relies solely on a government subsidy. People rort the government all the time in Healthcare etc but they usually wake up to it and close the gap. It has to make sense without the subsidy.

I couldn't agree more! There's a lot of talk about abolishing negative gearing. If that were to happen, I very much doubt the NRAS subsidy would continue. The recent budget has reduced the amount of middle class welfare available. NRAS subsidies may well follow.

If if makes financial sence as a stand alone investment, that's great, but this post has already demonstrated that developers are consistantly over pricing these properties because they relise investors are blindly chasing cashflow.

 

[Angel]

If the govt were to change the rules in the future, could an NRAS owner simply cut ties witht the head lease, and up the rent to market rent. Wouldn't this compensate for any loss of govt subsidies? Would this threat spook the govt?

 

[Rolf Latham]

If the govt were to change the rules in the future, could an NRAS owner simply cut ties witht the head lease, and up the rent to market rent. Wouldn't this compensate for any loss of govt subsidies? Would this threat spook the govt?

dont think gov in general would think that far ahead

ta
rolf

 

[Peter_Tersteeg]

If the govt were to change the rules in the future, could an NRAS owner simply cut ties witht the head lease, and up the rent to market rent. Wouldn't this compensate for any loss of govt subsidies? Would this threat spook the govt?

If the rules did change in the future, and you could put the rent up, you've got to ask yourself now, would the deal still stack up in those circumstances?

Let's face it. Most properties are negative geared at market rent, even in larger regional areas. Add to this that you might be paying more than fair market value for these properties, you could end up with an over priced, negative geared property, when your original strategy was to purchase a positive geared property.

The whole point of NARS is the government is asking you to provide housing well below market rent to low income earners, then they're compensating you very nicely for doing it.

When I look at a regular property, I run my figures based on the value and the rental income. I don't factor in the gearing benefits when buying, it's just the cream on top. The same applies to the NARS properties.

 

[Aaron_C]

If the govt were to change the rules in the future, could an NRAS owner simply cut ties witht the head lease, and up the rent to market rent. Wouldn't this compensate for any loss of govt subsidies? Would this threat spook the govt?

The main issue is, and this has been established by Constitutional law many years ago, is that you cannot enforce Government policy if they reverse it. You are, however, bound by the contract you signed with the tenant. So if the NRAS subsidy is removed you are still bound by the original lower rent even if it is to your detriment.

 

[Angel]

Thanks Aaron, that is what I thought.

Hmm, so the govt can change the rules but no-one else can

 

[euro73]

You can elect to leave the NRAS scheme anytime you wish. There's a lot of misinformation out there, but banks ONLY approve NRAS consortiums when they have comfort that their mortgage is fully protected in the event of delinquency, so those NRAS models that are approved by lenders have all altered their contracts to allow for properties to be removed from the scheme by either the borrower or the lender, without restriction.

Some of the NRAS agreements include some minor penalties for investors for doing so, but the majority do not.