Here is the results of a detailed financial comparison between an NRAS property investment and a standard (non-NRAS) property investment for an individual investor which shows the NRAS property to be significantly ahead.
In a previous post I wrote about an RMIT modelling study which highlighted the positive impact of the National Rental Affordability Scheme (NRAS) on investment in residential property for companies and superannuation funds. Unfortunately that study did not examine the situation for individual investors.
I’m posting here results of a financial analysis for an individual investor. The analysis takes a specific property which has been offered for sale as an NRAS approved property in Ballarat and compares the option of buying it as an NRAS or a non-NRAS investment property. There are both NRAS and non-NRAS properties in the estate in which the property is located.
The theoretical investor is an individual earning $85,000 per annum and borrowing 100% of the purchase price. The purchase price for both options is $372,900 and I have used the Residex predicted annual capital growth for the area of 5%.
On this basis the capital growth over first 10 years for the property would be $229,285 for both options.
However the NRAS property has an average weekly positive cashflow of $55 per week compared to the non-NRAS option which has a negative average weekly cashflow of $77. Over the 10 years this means the NRAS option will provide $24,612 income whereas the non-NRAS property will have a $43,673 loss.
That makes the NRAS option $68,285 ahead of the non-NRAS option over the 10 years.
This difference in cashflow is of major benefit to both new property investors and those with established portfolios. It not only increases the overall investment performance for residential property investment but also changes the financial status of holding the investment from one that is a cost burden to one that is providing a net after tax cashflow.
This reduces the risk of the investor not being able to fund the holding costs; enables many new investors who are not able, or prepared, to fund a negative cashflow to consider property investment; and for existing property investors provides a balance to a portfolio which is already has a negative cashflow.
There are a number of assumptions used in this analysis which I can’t fully outline in this blog but if you would like a full copy of the analysis on each property feel free to email me at [email protected] and I will send you a copy to you.
This analysis is for general information only and should not be taken as specific advice. The results reported are for the specific examples used and based on the assumptions applied in the analysis. If considering any property investment you should seek your own advice and undertake your own analysis.
Regards
Paul
In a previous post I wrote about an RMIT modelling study which highlighted the positive impact of the National Rental Affordability Scheme (NRAS) on investment in residential property for companies and superannuation funds. Unfortunately that study did not examine the situation for individual investors.
I’m posting here results of a financial analysis for an individual investor. The analysis takes a specific property which has been offered for sale as an NRAS approved property in Ballarat and compares the option of buying it as an NRAS or a non-NRAS investment property. There are both NRAS and non-NRAS properties in the estate in which the property is located.
The theoretical investor is an individual earning $85,000 per annum and borrowing 100% of the purchase price. The purchase price for both options is $372,900 and I have used the Residex predicted annual capital growth for the area of 5%.
On this basis the capital growth over first 10 years for the property would be $229,285 for both options.
However the NRAS property has an average weekly positive cashflow of $55 per week compared to the non-NRAS option which has a negative average weekly cashflow of $77. Over the 10 years this means the NRAS option will provide $24,612 income whereas the non-NRAS property will have a $43,673 loss.
That makes the NRAS option $68,285 ahead of the non-NRAS option over the 10 years.
This difference in cashflow is of major benefit to both new property investors and those with established portfolios. It not only increases the overall investment performance for residential property investment but also changes the financial status of holding the investment from one that is a cost burden to one that is providing a net after tax cashflow.
This reduces the risk of the investor not being able to fund the holding costs; enables many new investors who are not able, or prepared, to fund a negative cashflow to consider property investment; and for existing property investors provides a balance to a portfolio which is already has a negative cashflow.
There are a number of assumptions used in this analysis which I can’t fully outline in this blog but if you would like a full copy of the analysis on each property feel free to email me at [email protected] and I will send you a copy to you.
This analysis is for general information only and should not be taken as specific advice. The results reported are for the specific examples used and based on the assumptions applied in the analysis. If considering any property investment you should seek your own advice and undertake your own analysis.
Regards
Paul
