2011

All You Need to Know About Investing In An NRAS Property

By Jo Brown

www.nrasscheme.com

All You Need To Know About Investing In An NRAS Property

2011

In July 2008 the Australian government launched the National Rental Affordability Scheme. It was modelled on the European and US version and was designed to increase the supply of affordable rental dwellings, reduce rental costs for low to moderate income households and to encourage large scale investment and delivery of affordable housing. NRAS is estimated to stimulate the supply of up to 50,000 new affordable rental dwellings across Australia by June 2014 at a cost of $1 billion. Australia is expecting a huge increase in population, Australias population is projected to grow by 65 per cent to reach over 35 million people in 2049, up from around 21.5 million people now, Treasurer Wayne Swan, Canberra Times .In 2009 we reached 21,875,000 persons. (An increase of 443,100 persons (2.1%) since June 2008. As the institutional platforms for large scale delivery of NRAS havent delivered as anticipated, the opportunity is now available for the private investor to purchase an NRAS approved property. You can now invest in an NRAS property entering into a non-entity joint venture (NEJV) with a consortium (NRAS approved participant). This means you can purchase an NRAS property and your consortium will make sure you will receive your incentives every year for 10 years. They will manage the scheme on your behalf for the term of NRAS. In a nutshell you purchase an NRAS property like any other investment and you receive title you enter into an NRAS agreement for 10 years (which you can opt out of at anytime) with an approved NRAS participant called a consortium and you offer your property for rent at 20%25% under the market rent (which is determined by a registered valuer). In return the government will pay you $8,000 worth of tax free incentives, $6,000 as a tax off-set (not a tax deduction) and a $2,000 payment from the state government. This will be delivered to you every year for ten years rising with the rental component of CPI. Hence the current payment for NRAS is $9,524 ($7,143 federal tax off-set and $2,381 tax free state government payment) as we have had increases in the rental component of CPI since 2008. That means that if you purchase a property as of today your 10 years begins at $9,524. The rents are valued every year. In the first, fourth and seventh year a registered valuer must complete on your behalf a registered valuation while in the other years a desktop valuation is conducted and determined by the increases in the capital city of the state in which you purchased. This ensures that your rents keep up with the market and you then receive the 80% of the increased amount. The cost involved is an average of 10% management fee. In many cases the managing agent is selected by the consortium and they must conduct screening of the tenants so they comply under the NRAS schemes terms and conditions. Some you will not charge administration or re-letting fees. It is important when youre purchasing that you know your terms and conditions of your consortium.

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All You Need To Know About Investing In An NRAS Property

2011

The incentive is the same amount whether the property is worth 250k or 400k. This means that the cheaper the property the more cash flow positive the property is for you. However some investors may look at purchasing a 400k property with the view of purchasing in a high capital growth property with having no or minimal holding costs for 10 years. Of course all net returns differ depending on your marginal tax rate. It seems though that a person on 40-50k will be able to invest in a cheaper property and enjoy the benefits of negative gearing, whereas on a nonNRAS property negative gearing an investment property on a low income is not a successful strategy. This is a negative geared investment with minimal cost, neutral or positive cash flow! The NRAS properties must be brand new. To be NRAS approved, the developer has submitted the property to the NRAS department in the government. The government researches to see if housing is needed in the nominated area. They look for such things as the accessability to transport, health facilities, shops and schools within its parameters. They then approve the dwelling which can then be sold to you so you can enter the property into the scheme and receive your benefits. Your tenants will be medium to low income earners; they are the people who service our communities such as retail workers, people who work in hospitality and essential industry workers such as nurses, police and teachers. It is also pitched to over 55s (like the rest of the world, Australia has an increasing aging population). These people can apply to be an NRAS tenant and can only earn up to a certain amount. Tenants are asked to produce proof of income. There are according to the government 1.5 million households who are eligible to be NRAS tenants. NRAS has vast differences to social housing. A family can enter as a social housing tenant earning up to $58,292 whereas an NRAS tenant can earn up to $101,561. NRAS is geared to key workers (service industry), over 55s and families. With NRAS there is control with tenant selection. Advertising for tenants is like any other normal tenancy arrangement. With social housing there is no control over the rental rate charged, the government subsidises the rent and sets the amount, whereas with NRAS the rental rate is set by the market rent and is valued by an independent valuer. Your incentives are for 10 years,if your property is vacant for more than 13 weeks then the government stops payment to your consortium for that period but continues them again once you have a new tenant. Rent from the tenant is not guaranteed however remember your tenant is renting a brand new property at 20% below market; this can be a one bed unit at $80 savings per week. Generally they would not leave to find another property and pay full market rent! We are already beginning to experience waiting lists! NRAS creates opportunities for our key workers (service industry) to stay in the one area for long periods of time, to contribute to building communities. It also offers the opportunity to the tenant to save a deposit to eventually get into their own home. The consortiums we promote are those where the investor can choose their tenant, opt out of the scheme at anytime and where the investor receives the maximum 80% of the market rent. This ensures maximum cash flow for the investor under the scheme.

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www.nrasscheme.com

All You Need To Know About Investing In An NRAS Property

2011

NO HEAD LEASES, no registered leases on title, contracts or caveats. You can go to our sister site www.nrasrealestate.com where we pride ourselves in providing quality and affordable NRAS properties for you to purchase. NRAS is possibly one of the most exciting opportunities that we have seen in the property market for some time. It is every investors goal to have minimal cost, neutral or positive Cash flow in a high capital growth area. It is now possible when investing in an NRAS property.

Call us 1300 963 950 or email info@nrasscheme.com.au

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