Have you heard of the NRAS scheme that is encouraged by the Australian government? Well, this is something very interesting that you'd love to know about! Let me share some of the advantages that you must know about. The advantages include: • Promote investors into expand further housing projects for the rental market. • It presents cost-effective and economical typical rental system for typical Australian residents. • It comes with greater returns for investors within the real estate market. • Maximizes further rental dwellings created with accordance to the incentive demands and assets while maintaining the necessities of the building industry. Aside from these, there are other advantages that can be obtained from it. I might help you with these matters if you'd love to. I hope that you'll learn something from my post. Good day! -NRAS Property
With the Senate's recent tax legislation change to allow joint venture partners to access the full tax offset when delivering National Rental Affordability Scheme (NRAS) housing projects, the future funding of these projects will no longer be "under a cloud", according to Residential Development Council executive director Caryn Kakas.
"This means that not-for-profit housing companies can confidently move ahead in their delivery of long term affordable housing outcomes for key low to moderate income families across the country," said Kakas.
Kakas said these tax legislation changes would provide certainty for financial backers including banks, financial institutions and mum and dad investors.
"We thank the government for providing renewed confidence to the property and financial sectors engaging with this vital program to ensure the continued supply of affordable housing to all Australians," Kakas said.
AUSTRALIA's big four banks and super funds show little interest in lending to investors in the federal government's National Rental Affordability Scheme (NRAS), dealing the much-needed housing initiative another blow.
Two of the big four banks, the Commonwealth and ANZ, still refuse finance for small investors wanting to buy homes through the scheme, which was designed to boost low-income housing across the country.
That lack of interest was revealed in this column last week when it published details of a financial blacklist of ''unacceptable'' buildings circulated by one of the big four banks late last year, which specifically barred finance for NRAS projects.
Since then Westpac and NAB have changed their policies and begun lending on NRAS developments, joining a small list of second-tier lenders willing to finance the rent-subsidised housing program now entering its fourth year.
NAB changed its policy in January this year and Westpac began lending late last year.
I am sorry to hear that you had such a bad experience but really it had nothing to do with it being an NRAS property. Not all NRAS properties are good properties and not all NRAS builders are good builders.
If it is any compfort to you the property should work for you anyway, while it obviously would have been better to not have these problems you may find that your NRAS property will still out perform a non NRAS property even if you start 30-50k behind.
Have you run the cash flow showing where you stand on this property? Have you looked at the figures if you take the positive cash flow and use it to pay down the mortgage? I did one for a client this morning and for them on 65k income the property would be debt free in year 17, most investors will still owe everything they borrowed in that time. On a 350k property using 6% growth at the end of the NRAS subsidy the property will be valued at 632k and they will only owe 112k.
If you want me to run the figures for you let me know and i will do it at no cost.
I believe RAR accidentally clicked report instead of reply:
Reported by RAR @ 50 minutes ago
Reason Hey Nipa Hut,
A simple evaluation from an independent builder and builder suppliers helps to determine that.
For example I have written quotes from two frame builders who have quoted on my drawings its a simple matter of comparing the wood vs steel for the difference.
Fire walls are the same... a quote for a "lafrange" vs a CSR it becomes very obvious as the cost difference stands out.
Electricity meter boxes were a simple quote to fix the issues created by the NRAS approved builder.
I also have a quote for the approved plan vs what the NRAS approved builder built for me.
The mechanism as I understand it works something like this... the delegate appointed by the dept. chooses a number of organisations often referred to as the "instrument" or organisation used to administer the NRAS. This "instrument" is required to meet a set criteria of standards with a range of market models etc. These are the organisations that approve a builder to build a given number of NRAS investment properties. To the best of my knowledge the "instrument" has no stated selection criteria for choosing or approving a builder to build the NRAS. No mechanism for dealing with issues or for meeting any standards. This is something that the Government both State and Federal have not explained in their advertising. As I see it their is no checks to even view if the property meets the funding requirements... simply a form 11 is required by the instrument.
The point that I am making is this... simply be aware that doing business with the NRAS approved builder for me has meant that I have been the victim of a very large building company. This NRAS approved builder is NRAS funded and that knows exactly how much it can get away with and how to save money on the contract that it signed with me, in my view.
It is very difficult to get what you paid for and no one... not the Federal or State Governments not the instrument or the delegate wants to know... you only get sympathy ( I have a letter from the Hon Minister) but no help.
You are on your own to deal with a very large and well funded NRAS approved builder.
As my NRAS approved builder stated words to the effect.... it's just an investment property, it has a roof and a firewall so get over it.
To my surprise, very few investors (and sadly fewer property gate-keepers) know about the National Rental Affordability Scheme. And if they know something about it, then they are dismissive of it. And mostly – I feel – out of fear and/or ignorance.
Yes, like most government schemes, what NRAS is and its merits have been poorly communicated. And in some instances, its application further entrenches its incorrect “welfare housing” persona. But overall, it is a great scheme and too few investors (and developers) are taking the $10,000 annual rental subsidy seriously.
So what exactly is NRAS?
The National Rental Affordability Scheme or NRAS is a federal government initiative designed to tackle the issue of affordable housing.
NRAS is not a public or social housing program, but rather a tax incentive to provide quality housing at below market rental rates.
Run in conjunction with state governments, NRAS aims to induce more investment in the lower price range of the residential construction and rental market by offering inducements to investors who participate in the scheme.
NRAS offers property investors a tax-free incentive for each property for a maximum of 10 years.
Currently, this incentive is $9,524 per year for every NRAS dwelling an investor owns, comprising a federal government contribution of $7,143 per dwelling, available as a refundable tax offset; plus a state or territory contribution of $2,381 per dwelling per year, as a cash payment or in-kind financial support.
In return, rents for NRAS dwellings must be charged at no more than 80% of the market rent valuation and there is to be a maximum of one rent increase for each dwelling each year.
In Queensland for example, the state government maintains a list of NRAS-approved tenants, who must meet strict eligibility requirements.
When a vacancy occurs, eligible rental applicants are referred to approved tenancy managers who manage NRAS properties on behalf of owners.
Standard residential tenancy laws apply to NRAS properties just as they do for any private residential investment.
In other words, the same rules regarding evictions, maintenance obligations and responsibilities of tenants apply to NRAS tenants as they do to other tenants in the private sector.
Rents are indexed annually in line with the percentage change in the rental CPI component, except in years four and seven, when independent valuations are required.
And importantly, investors may exit the scheme at any time with appropriate notice and without any financial penalties.
In general, NRAS projects are well-located in terms of jobs, amenities and public transport. And in general, the design and quality of NRAS dwellings compares favourably with any private non-NRAS dwelling.
NRAS properties often co-exist within developments with other non-NRAS product.
Some of the points of difference that NRAS offers to property investors are:
• all the benefits of a normal investment property with added annual tax-free government incentives
• investors can apply property expenses, non-cash deductions and allowances against a lower assessable rental income, increasing the gearing benefit
• more than 1.5 million Australian households are eligible to rent NRAS properties, hence vacancy risk is negligible
• tenants are selected on their potential to be good tenants and their capacity to meet strict eligibility requirements
• in many markets, NRAS properties often deliver a cash flow-positive investment
• importantly, self-managed super funds can purchase these properties
• NRAS dwellings are private property – no government holds or caveats.
So here we have a scheme that shows many investment properties as cash-flow positive in the first year – and these are more often than not backed up by impressive (well by residential property standards) independent financial analysis.
What’s not to like here? You are making money from day one; providing affordable rent for those that are finding it a bit hard; have a 10-year rental guarantee (assuming the government doesn’t water down or scrap the scheme); hassle free-management (on paper at least); and a box of chocolates from the government every year.
It appears to tick all the boxes.
Several of our developer clients inform us that their NRAS product is now the first to sell to investors.
Yet the banks are scared of it and will only finance 70% of the purchase price. Some banks flatly refuse to be involved. So, too, do too many solicitors, accountants, loan brokers and real estate agents.
True to form, valuers are discounting end prices by 20% – one assumes because the owner can only charge 80% of market rent and most valuers won’t include a subsidy when determining value, despite it coming from the government and being a 10-year program.
Yes, NRAS is somewhat new; it hasn’t been that well communicated and it is a government-funded subsidy. But welfare housing it isn’t and gone are the days where one’s residential investment strategy was as simple as “buy and forget”.
Our mindset is that property investors will need to look for every break they can get.
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