Nras

Rolf Latham said:
HI JPS

If u have provided full disclosure, then it will never be your problem !

Of late especially, we have seen some interesting things happen at branches that might not happen in the broker network.

How much equity did u have in ur home ? Perhaps the comboed LVR is very low ?

ta
rof
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Hi Rolf,

We have been with them since 2002 and yes had plenty of equity which helped we only owe $80K plus have a 100% offset conected with plenty in our savings was valued at $380K and our loan was for $375k still drawing down on it and probaly wont use 3k of it.

We are more unsure because of no PM yet and if you read through the Schedule there are things like the Pm takes direction from the consortium but at the same time in another section the consortium cannot be held responsible for negligence or actions the PM has or hasn't taken. Plus indexed link to Brisbane maybe good to begin with but when Chinchilla takes off may be a bad thing. Overall the scheme is really good but our builder has had lots of people not go through with it because of finance or they carried on but not through NRAS instead going private. They had 17 approved in stage 1 and there are more approved in stage 2. We are very seriously considering just putting ours on the open market too. We have not signed any lease yet.
 
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the developer i use has "x" number of allocations per annum. you buy a property, you buy it. then you can be assigned NRAS before you take the keys upon completion.

from someone at "a" bank, apparently organising an NRAS option is enough to satify the initial criteria.

This Agreement is made this day of 2009

Parties [Insert Name and Address] (Purchaser)
and
(Approved Provider)
Recitals
A. The Purchaser intends to buy the Property and make available to the Approved Provider to supply it into the National Rental Affordability Scheme.
B. The Approved Provider agrees to supply the Property into the National Rental Affordability Scheme.

This Agreement provides

1. Definitions
In this Agreement, the following terms shall bear the following meanings:

NRAS means the National Rental Affordability Scheme administered by the Commonwealth Government of Australia.

Schedule means the schedule of approved dwellings a confirmed by the Commonwealth Government of Australia and attached to this Agreement

Agreement means the Dwelling Supply agreement, including the lease of the Property between the Owner (as lessor) and the Trust (as lessee) to be executed.

Supply means the supply of the dwelling into the National Rental Affordability Scheme in accordance with provisions of the Scheme

Property means [Insert Address of Property].

Contract means a copy of the signed offer and acceptance to purchase the Property

2. Operative Part

Option to supply

The Purchaser has the option to supply the Property into NRAS following settlement of the Property by providing written notice of their intention to the Approved Provider.

Agreement

The Agreement will be executed by both Parties before the Supply of the Property may commence.

Expiry

The option to Supply the Property into NRAS will expire in the following circumstances:

A) The Contract comes to an end
B) The Purchaser notifies the Approved Provider that they do not wish to exercise the option to Supply the Property into NRAS
C) Within 90 days of settlement of the Property if notice to exercise the option to Supply has not been received by the Approved Provider

Annexures

The following documents are attached and are to be read in conjunction with this agreement:

A) The Schedule and letter from the Minister for Housing
B) The document titled Investment Opportunity, describing the intended agreement including the cost structure
C) A copy of the Contract

3. Assignment

This option agreement may not be assigned to any other party.

4. Confidentiality

The parties shall keep the contents of this Agreement confidential except where disclosure is required to be made to their respective servants or agents, bankers or shareholders or as required by law.

5. Jurisdiction

This Agreement shall be governed by and construed in accordance with the laws of Western Australia.
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We have not seen anything like that, in fact the first head lease we saw they are changing and we haven't seen any of it yet. The property managers agreement they sent us is for real estate PM's they are still working on the not for profit. The insurance and valuations are done as a group one and therefore how much you pay depends on numbers in a particular area, they still haven't supplied us with that info as to how many are definitly going to go ahead. As I said earlier most that are finished have decided to rent out privately instead, according to the builder and others never even got to the building stage as knocked back by the banks. There is still a lot to be sorted out yet. They just don't seem to be organised enough at the moment for us, so depending on how we get on with the local PM's not sure if we will follow through with them. We have yet to be presented with any legal lease to show our solicitor and bank and are only about 6-8 weeks away from completion regarding our IP.
 
Nth Brisbanite said:
I've got no idea what the above means. Can you please type this in plain English
Click to expand...

I'll follow with an update on Monday.

what I was trying to say is to be careful with NRAS as there are whispers that the federal government are doing an about face on the $8,000. As I understand it the state governments are still following through though.

Obviously this isn't great for people who have entered contracts for these properties.

Not sure of the legal implications yet, but will follow through with more info soon.
 
There is confusion between the Govn and the ATO with the ATO applying their own rules.

http://www.domain.com.au/Public/Art...onalIndex&headline=Scheme_not_paying_the_rent
The first was in 2008 when the ATO warned the non-profit sector that their tax status as charitable institutions would be placed "in serious jeopardy" if they took part.
The government had to scramble for a solution.
Then, late last year, another bolt out of the blue. The Tax Office scuttled the only model that had attracted private money to the scheme.
A dozen organisations, including West Australian funds manager Questus and Queensland Affordable Housing Consortium, had been signing up mum and dad investors to buy NRAS homes on the promise they would pocket the annual $8600 tax subsidies.
It works like a buy and leaseback arrangement, where small investors buy and own the asset, but lease it back to an organisation, which would then sublease it to eligible tenants.
However, the tax ruling said it was against the law for such organisations to pass on tax incentives to hundreds of small investors as promised.
​
Throws a degree of doubt into an already dubious scheme. In my opinion this scheme seems to made for the property sharks pushing out over priced property with tax benefits as the motivation to invest.


Cheers
 
Further to the reply above, I get a newsletter from Destiny (Margaret Lomas's company) and this cut and paste is from her:


I am often warning people to be careful of taking advice from those who stand to make a profit from the sale of property. In addition, I constantly warn people against 'schemes' designed around new laws or tax loopholes.

Such was my approach to those who wrote and asked me what I thought about the National Rental Affordability scheme, which has been designed to provide rental housing at 20% below standard market rent to low income earners.

Reports were that individual investors were being sold such properties with a promise for the tax incentives to be passed on to them on settlement. I questioned this, stating that the scheme was for large institutional investors and not individuals and that no provisions existed for these tax benefits to be passed on.

Last week the Tax Office ruled that mum-and-dad investors were not eligible for tax breaks under this scheme. The ruling leaves hundreds of small investors - who had already bought properties approved under the scheme - in limbo about the promise of a $8600 annual tax break over a decade.

It is the second shock ruling from the Tax Office to hit the National Rental Affordability Scheme (NRAS), which aims to add 50,000 new low-cost rental homes by mid-2012. The Tax Office ruled that companies and non-profit groups with NRAS approval could not transfer the tax break to individual investors.

It follows an earlier Tax Office ruling in October 2008 that warned non-profit groups that their tax status as charities would be placed “in serious jeopardy” if they took part. The latest ruling has again forced the government to scramble behind the scenes to amend the scheme, with talks between Treasury, the Housing Department and the Tax Office.

It may be that the tax office changes its mind but it brings to light important considerations for investors - and that is to always be careful about who they take their advice from and check all schemes or proposals with the tax office first. I am not sure what will happen to those affected but careful research before making a purchase may have helped them to avoid this in the first place.

Just contributing some info for the interested. I have no hard and fast opinions on this subject.
 
certainly is a mixed bag. the developers i know have just been issued a full allocation for their sites, with "Carry Over" options to other developments if all allocations are not taken, as well.
 
NRAS In Tassie

Starting prices of $240,000 with rents of 224 pw plus NRAS are available in Tas.

Its not common knowledge but hobart had the best capital growth over the last 10 years in Australia.
 
Do you have any affiliation with this NRAS Paramount its just you seem to chip in and defend it and say how fantastic it is.

What I don't understand is did the Govt not speak to developers/ taxation Dept etc about this whole process it just seems like its a little bit of the old making it up as they go along. When I first heard about this several months ago it did seem like a good idea but both my brokers have said " don't even think of it as no bank will lend you the money unless you put down a substantial deposit or put forward a large proportion of it as equity, you are better off turning it into a standard rental property" and now more information is coming out from the taxation dept which is putting this 8k in jepeordy or was this information available at the start and developers withheld it and it was hard to find it searching through Govt websites.
 
Hi Paramount

I would question your statement that Hobart has had the best cap growth over the last 10 years . I am sure it would not be kept a secret either. :)
 
There is no question about whether NRAS incentives will be paid.

There was confusion about how the property owner would receive it in tax free format which is what the govt wanted. This has now been resolved albiet temporarily
 
There is no doubt with the benefit of hindsight the govt could have handled the introduction of NRAS better. There has never been any doubt that the NRAS incentive will be withdrawn, There was difficulty with

Everybobdy has their own particular likes and dislkies to investing in property and have particular views on things such as capital growth, homes v apartments, cashflow positive, negative gearing, cash on cash returns, gross yields etc etc.

All I know the NRAS product is fantastic in tassie becuase

Lowest capital city house prices in Australia
More capital growth than any other capital city in the past 10 years
Vacancy rates under 2%

Due to lower incomes a large % of Tassies population (significantly higher than the mainland)are eligble to be tenants of NRAS homes. This means there is a better pool of tenants to choose from.

When you factor this in with the 20% reduction in rent (if there are 2 identical houses for rent the NRAS will be rented first becuase its 20% cheaper for the tenant) and the 13 weeks the govt will pay NRAS subsisdy for if vacant there really is almost zero vacancy risk.

The homes are located in "normal suburbs", and noone could tell them apart from a standard homes becuase they are the same as a normal home.

In fact to be an approved NRAS home the specifications are significantly higher becuase in Tas there was no requirement to build 5 star energy rated homes(required as of 2010).

The challenge is trying to sort out the fact from the fiction. No one really knows what the capital growth rate is going to be for a particular area, yet significant amounts of property are marketed on projected capital growth rates to demsonstrate returns to the investor. This is done because the weekly rental returns to the investore are too large for most individuals to finance and therefore would not attract a positive sentiment from the public.

Fact
There is a housing shortgage
The population of Austrlaians over 65 is 13%
The population of Australians over 65 in 40 years will be 25%
The poulation of Tasmanians over the age of 65 is currently 15%
The population of Tasmanians over 65 in 20 years will be 25%

The additional costs to the health system and the loss of tax base (as a result of retirement) will ensure the govt has to maintain a immigration to enable Australia to maintain the high standard of living it enjoys.

While most of the increased population will continue to the more populated areas there is no doubt that the numbers will trickle into Tassie for all of the reasons above. ( Havent yet mentioned the quality of life , lack of traffic, second driest capital city in Aus) etc etc

If we ignore all the smoke and mirrors used to promote selling of investment properties such as capital growth (in Hobart 12.34% per year for 10 years), (in hobart gross yield 13%) or cash on cash return 80% etc and just focus on the following fact.

The govt is offering $100,000 tax free if we purchase a brand new investment home that we will agree to rent for 20% less than the market rent (which is typically $60 per week ). This reduction of rent further improves the negative gearing which improves the tax effectivness of the investment.

For these reasons alone purchasing an NRAS home in Tassie really is an outstanding opportunity.


Try the following link for capital growth rates

www.themercury.com.au/article/2010/02/09/126631_todays-news.html
 
paramount said:
This reduction of rent further improves the negative gearing which improves the tax effectivness of the investment.
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This works on the assumption that one can actually get decent LVRs across a range of lenders..............right now, this appears not to be the case

ta
rolf
 
I dont think there can be any arguement the reduction in rent will increase the loss therefore will improve the tax effectivness of the investment

The LVR ratio available is a different matter.
 
Rolf Latham said:
Hi Paul

Im not saying you cant get money but when only a few lenders will do limited products and/or LVRs, you will end up with a compromised or "hobbled" security. A great comparison is student specific accom on strata.

Until the lenders become more accepting ( and they may) any client that comes to me wanting money for these (and they have longish investing horizon( will have a hard time to convince me to get my commission :)

ta
rolf
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Lets all take a moment here.Here's what we know
1. The scheme is supposed to provide incentives for 50,000 new properties to be built, but only about 1000 have actually been built so far.
2. The scheme is being administered through as many as 13 or 14 "consortiums" nationally, who are approved by the Govt. They each have different ways of administering the scheme, so lenders and mortgage insurers havent got consistency to work with yet.
3.Some consortiums have head lease agreements that lenders find too prohibitive. Ironically, the ones with the prohibitive head lease agreements are the ones who have stock, and are the ones finding limited appetite with most lenders. This is why LVR's and lending is so limited at the moment. Tanya Pilbersek needs to get the lenders and the consortiums together and have a chat about how to get LVR's up.
4. There is still some ambiguity around the rebate and hw it gets to the investor. There are some ATO issues, because of how some of the consortiums administer the rebate. For example, some consortiums are not for profit organisations who the ATO has ruled could risk their not for profit status by administering the rebates. Other consortiums are set up as a Managed Investment Scheme so no such concerns exist. Those who the ATO are concerned about have been provided with a temporary work around fo the time being, but tax laws need to be changed to provide certainity. This is being drafted as we speak according to Tanya Pilbersek. Its just another concern for lenders and LMI.
5. These issues will start to clear themsleves up in the next two months, because you'll see a big increase in stock coming to the market from July 2010. Between now and then, if Tanya Pilbersek can give lenders some confidence they will get interested. Its not like the stock is any different to any other stock they lend against. As more consortiums (with less prohibitive head lease agreements) get stock, it will loosen up.
 
saab463 said:
I signed up to buy an NRAS property in Chinchilla QLD. All was looking good until it came time get finance. Contract collasped as none of the major banks or credit unions would touch it.
Have now signed a contract on a non NRAS property in Kingaroy.
Would be interested to hear from anyone that has been able to get finance on an NRAS property as I still think the concept is sound.
As I understand it, their is a clause in the contract that the banks dont like that would make it difficult for them to repossess in the event of default.
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well for starters, Chinchilla is in a pretty remote location. with or without NRAS youd have a difficult time finding a lender who lends there, these days. They can push the 14% returns in Chinchilla all day long but Mortgage Insurers wont touch areas like that so non bank lenders are out at any LVR, and of the major banks usually only the CBA's and Westpacs will lend in regional remote areaslik that and they wont touch NRAS anyway. The people who sell this stock should know this. They should know where to send you for finance in those sorts of locations. They're idiots if they dont. Id talk to NAB if you still want to buy there. They are NRAS friendly and might take a deal at Chinchilla.
 

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