Nras

[euro73]

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.

forgot to add- the clause you are referring to is the head lease agreement, and if the consortium I think it is thats involved in Chinchilla, the problem the banks have with their head lease agreement is that in the event of a mortgagee reposession, the lender is required to give a certain amount of notice to the consortium before being able to repossess the property. There are also restrictions on who the mortgagee can then sell the property to. You can see how that would have no appeal to a lender. They could be waiting ages to get their property back and the have huge trouble selling it. No lender will take that chance. This is why the head lease agreement I referred to earlier on this discussion is proving such a problem. n major citioes banks might be ok with the head lease on a 70% LVR, but not in a place like Chinchilla.

 

[euro73]

Its that bit where the issue may lie.

1. By entering into such a transaction, and knowingly having a material change to the security, one could (?) be in breach of your mortgage loan contracts.

2. More to the point, once the property is in the NRAS allocation, and assuming that the property value increases, and say in 4 years time you want to take out 100 k to leapfrog to the next deal, I reckon you might have an issue if todays lender approach continues. Its that bit that may slow ur investing progress real quick. This is why I believe this product is best suited to a SMSF, or an investor whose investment horizon is within the next 7 to 10 years

3. From my discussion with the risk areas of various lenders, they see this asset the same as any forced pool rental or specific investor use only product. They are concerned that in the case of default the product has a limited resale market.

Its the same chicken and the egg problem we have with say small studios. They can be a good investment, but dont suit the majority of investors, because its hard to get decent LVRs on them.


ta
rolf

The headlease agreement is the problem Rolf. The clauses that cause lenders to look at these deals like they look at studio apartments or the like. You are right. Theres one particular conortium in Qld that has had the majority of stock so fa and they operate such a head lease agreement, so thats what the lenders and insurers have seen of NRAS so far. Thats what has shaped theior appetite ( or lack of) so far. That will change in coming months as consortiums without a restrictive HLA get into the game. Id bet that by Spring, banks and LMI will be much more comfortable with NRAS. You're dead right about SMSF and NRAS though- it makes alot of sense.

 

[euro73]

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.

The rental index is based on the national average- its not localised. Each year your NRAS rebate will be adjusted in line with the average national rental CPI.

 

[paramount]

nras in tassie

We have had no problem financing nras dwellings in tas and we have used all the major lenders to date.

The banks panel valuers consider homes in Tas with NRAS have a increased value in excess of 10% compared to a traditional home, which is good news for purchasers.

 

[Nth Brisbanite]

We have had no problem financing nras dwellings in tas and we have used all the major lenders to date.

The banks panel valuers consider homes in Tas with NRAS have a increased value in excess of 10% compared to a traditional home, which is good news for purchasers.

I find it very strange that you have been able to use all of the major lenders in Tasmania. In stark contrast, none of the main lenders in Qld, bar NAB, will even consider NRAS. All of the major lenders are national banks so cannot understand why the difference. Surely NRAS in Tasmania is the same as NRAS in Qld, tenants are no different, puzzled?????

 

[paramount]

i think its all about the head lease. The banks are concerned with how they gain vacant posession in the event of the borrower defaulting becuase effectively they have leased it out for 10 years.

Plus the PR doesnt look good when they are seen to be evicting a tenant becuase the porperty owner has defaulted.

 

[paramount]

The tenants most definetly are different. In Qld the tenants have to come from the Housing Commission register.

In Tas anybody is eligble based soley on the federally set income levels. In tas wages are signifcantly lower so nearly all the population qualifies to be tenants!!!

I doubt this would have anything to do with the banks decision its more about the product type, and the head lease arrangement.

 

[Nth Brisbanite]

The tenants most definetly are different. In Qld the tenants have to come from the Housing Commission register. No, the tenants do not come from the Housing Commission Register. As long as they meet the criteria, which is based on income, they are eligible. It's been made very clear to me that most tenants in fact do not come from the Housing Commission. They are usually employees with reasonable levels of income ie over $100,00 for a family. Look at the ATO website, it shows the income levels for eligibility

In Tas anybody is eligble based soley on the federally set income levels. In tas wages are signifcantly lower so nearly all the population qualifies to be tenants!!!That is a gross exaggeration. There are some workers eg banks who are on same enterprising bargaining agreement whether they are in Tasmania or Queensland

I doubt this would have anything to do with the banks decision its more about the product type, and the head lease arrangement.The product type in Qld is exactly the same as in Tasmania. The head lease arrangements are the same here as in Tasmania

I'm still amazed at your claims that you were able to get loans from all the big 4 banks. That's not what I am hearing from my broker and the banking representatives of the big 4.

 

[bumpyroad]

Have been reading a bit about NRAS scheme, and it is my understanding that as long as there is no head lease arrangement in place, that individual investors can get the govt subsidy... anyone else think I'm reading this right?

http://www.ato.gov.au/businesses/content.asp?doc=/content/00179876.htm&page=15&H15
and for trusts:
http://www.ato.gov.au/businesses/content.asp?doc=/content/00179876.htm&page=19&H19

I am pretty sceptical about scheme type investments - given ATO backflips on deductibility issues on olives, trees etc etc I would hate them to do one on this... i realise it is government backed as opposed to private investment coys, but the ATO seem to almost enjoy contradicting the govt - like a F%^ you

Also, is anyone getting finance for these things? And who are the players not requiring HLA?

Can contribute 20% plus costs, but really don't want to put in anymore. Thanks Rolf for comments about hobbling your other investment buying potential.... hadn't thought of this and certainly a BIG factor to consider.

paramount - was an ad for nras housing in tas in latest YIP mag by paramount housing assoc...any relataion?

 

[THEHEATH]

...........!...........

 

[Smuel]

NRAS fees

I just a had meeting and found out about NRAS specifically in SA. Not sure if this is the same everyone else has been offered?

A few things to note:

It cost $2000 to setup house as NRAS.
- On top of this the company I would get NRAS through takes 10% of NRAS every year. (at least $800 a year)
- The PM gets 11% of rent.
- Cost another $2000 to break the NRAS contract.
- The NRAS payment is not made upfront so I will need to go 1 year with 20% less rent before receiving any money for ATO.

With the loan side of things I was told to just not mention to the bank it will be for NRAS. It is the same price for the property with or without NRAS so I don't see how they should be too worried anyway, considering if I pay $2000 it turns into a normal property (this was said to be SA specific).

I have 1 week to decide on the property. Anyone get charged the $2000 and 10% pa fees? It still works out okay but not CF+, about $80 a week. This is through company Ironfish.

Thanks for any input

 

[Gools]

- The PM gets 11% of rent.

So you have to use their PM? What are the comparable prices like in the area?

Gools

 

[Smuel]

Yeah I believe so. I have have 2 small units that have PM's and they charge 8%. But they charge extra for house inspections and advertising etc.

The house is comparable to others around it which are not NRAS. I can still buy this one without NRAS for the same price.
Edit - The area is Andrews Farm.

The $2000 and 10% annual go to the developer not the PM (not sure if I made that clear)

Mainly wondering if that's what everyone is getting charged or should I look elsewhere for NRAS. They were the only company I could find in SA to buy NRAS.

Thanks.

 

[Rolf Latham]

With the loan side of things I was told to just not mention to the bank it will be for NRAS. It is the same price for the property with or without NRAS so I don't see how they should be too worried anyway, considering if I pay $2000 it turns into a normal property (this was said to be SA specific).

hmmmmmmm, but if you provide disclosure about the NRAS then they are not likley to approve the loan, and the above suggests this to be the case.

Not an ideal way to start a long term business with someone I would have thought ?

ta'rolf'

 

[Ausprop]

Not an ideal way to start a long term business with someone I would have thought ?

exactly - taking on a tenant that can't even afford the pitiful market rents. the scenario is so bad that the bank doesn't want to touch it and you have to hide the truth from them in order to get them to agree. the whole thing sounds like a disaster

 

[euro73]

What everyone needs to understand before comparing apples and apples between NRAS properties in different states is that its not possible to compare. Apples and Oranges is the more accurate picture.
Each state is different because each state has a different consortium (or two) who administer the scheme. There are 13 consortiums in total across Australia. Each consortium has a different structure because the Fed Govt has not prescribed one. They dont all use a head lease agreement, and amongst the ones that do, each has a different head lease agreement. Each decides its own PM fees, etc...
This is precisely why banks will lend in some states and not in others. Choose the state/consortium as carefully as the property, because it will be the difference between obtaining finance or not.
As I said in an earlier post, most NRAS properties have been located in QLD so far and have been administered by one of the consortiums there who have a particularly restrictive Head Lease Agreement, but as more properties come online in other states , banks will start lending there (provided the consortiums in those states arent operating a Head Lease Agreement which the banks find too restrictive)
Im not going to mention which specific consortiums are better for being "bank friendly" as this isnt a thread for endorsing one consortium or property over another, except to say that you should look in WA and TAS at the moment, rather than QLD if you want to have an easier time with finance.

 

[Smuel]

So some may charge 10% of the $8000 every year?

Is there a simple web site that has the pros and cons or at least the differences of each states NRAS? The Ironfish group were not even sure if it's tax free or not?? Waiting on a phone call.

Even a website that has all the NRAS properties (or companies that sell them) in each state would be good. Save me going Google crazy

I would snap this one up if it wasn't for the extra fees (especially the $2000 to join and $2000 to leave)

Thanks.

 

[Spectre]

Maybe another aspect which I think was discussed previously is what if you decide to sell and the property is currently under NRAS. Id figure that its not like you can just convert it overnight to a 'normal rental' and then increase the rent and may have to wait until the anniversary/year.

But to sell it as NRAS your purchasing pool can be fairly limited... which makes it a hard thing to sell unless the price is right.

I look at it and say why would I as an investor go to buy an existing NRAS property when I could buy a 'normal' property at the same effective cost and have complete control

But with these... I just figure that you dont have as much control over your investment as you do a non-nras property. And if something goes wrong the last thing you want to be told is that you cant do "X" due to the tenancy agreement or whatever.

Think the other issue which I just cant my head around is that they increase rents with CPI(?) and quote historical yields. But when I went to a ABS website and worked out the current quarters percentages, the increases only worked out in dollar terms to about 0.01%. Can someone clarify that for me

But for the guys to be selling them saying dont tell the bank they are NRAS is just them getting you to do some fraud on the bank (noting this is probably more Qld).

And then really, I only know of one lender which is NAB which is halfway NRAS friendly.
So for purchasers, if they cant get a loan with NAB then you're stuffed. Noting they would be using current rent which is reduced to support their application.

I'd figure it'd be easier to add a granny flat to a house. and people are better to wait on the NRAS stuff until such time as the government fixes up the ship as its a mess right now. Give it a year or two and buy something else in the meantime.

 

[Aaron Sice]

You are right. Theres one particular conortium in Qld that has had the majority of stock so fa and they operate such a head lease agreement, so thats what the lenders and insurers have seen of NRAS so far. Thats what has shaped theior appetite ( or lack of) so far. That will change in coming months as consortiums without a restrictive HLA get into the game. Id bet that by Spring, banks and LMI will be much more comfortable with NRAS. You're dead right about SMSF and NRAS though- it makes alot of sense.

you are prob talking of the Devine Group?

thanks for clearing some of the myths up euro73.

 

[paramount]

In tassie properties have
highest growth rate in all capital cities thru out australia over last 10 years ave 12+%pa
Lowest price of all capital cities
price from $240,000
vacancy rate less than 2%

You can get cash benefits now from your non-cash deductions by using a form better known as a 221D or the new term being PAYG Withholding Variation. The old “221D” “PAYG Withholding Variation” under “Section 15-15 of Schedule 1 of the Tax Administration Act 1953,” is Tax office talk for a Variation of Tax Instalment Deductions form that you must fill out to obtain a tax variation to your weekly pay.