Here's a really simple Cash Flow Analysis to help you understand.  In this example I want to use the example of a 400K property, completed, being purchased in SA.

For this exercise, I also want to assume you are borrowing 90% plus LMI, so your contribution is 10% of the purchase price, which is  40K  ( this is borrowed against equity)

You will also need to contribute Stamp Duty in SA, which is $16,630  for a 400K purchase ( minus $8500 Revenue SA rebate)  =  $8,150 ( also borrowed against equity )

I'd also like you to set aside 10K as a "cash flow buffer" – to cover the  out of pocket holding costs for Year 1  ( also borrowed against equity)   You'll see why, below.

let's also allow 2.5K or so for conveyancing, quantity survey and building/pest inspections.   (also borrowed against equity)

So let's consider your total contribution is $51,650 – the bank is funding the rest

EXPENSES

You have borrowed $51,650 , plus 90% ( 360K)  plus capitalised LMI  ( Im using 2% in this example- so $7200)   so your total borrowings = $418,850. 

If you borrow at a 2 or 3 year fixed rate of 4.99%, Interest Only , your repayments = $20,900.62 per annum

You will also have miscellaneous expenses such as Property Management, Strata, Rates, Water, Insurance – lets call it 5K per annum

So your total expenses for the year will be $25,900.62.  Lets just call it an even $26K

INCOME

The property would normally achieve $400 per week rental income, but under the NRAS, you will receive 80%, so $320 per week, or $16,640 per annum

THE TAX STUFF  PART 1

Your expenses are $26K for the year ( see above) .   Your income is $16,640 ( see above) .  So you have generated a cash flow shortfall of $9,360  ( if you recall, this is paid for by the 10K you borrowed against equity – see above. In other words, ZERO cash input from your pocket. It's a straight up equity play- nothing else. )   This is a deductible loss for tax purposes

You will also have a further deductible loss which you can claim for the depreciation.  Let's use a figure of 10K in this example.

Your total deductible loss is therefore $19,360  ( $9,360 cash loss AND 10K depreciation)

THE TAX STUFF  PART 2

Depending on your Marginal Tax Rate, you will most likely be entitled to an ATO refund for the $19,360 "loss" you have incurred.  Assuming a MTR of 37%, this "deductible loss" would result in an ATO refund of $7,163.20  PLUS a tax free NRAS incentive totaling $10,350.  ( Total = $17,513.20 received back from ATO and NRAS)

Remember that your pre -tax "cash flow shortfall" was $9,360,  ( see above) and you've now received an ATO / NRAS refund for $17,513,20 ( tax free)   so your AFTER TAX outcome is to be Cash Flow Positive $8,153.20

If you recall; you accessed exactly $51,650 of your equity to produce a tax free CF outcome of $8,153.20, which is equal to a 15.79% tax free return on equity.

Of course, you can change the purchase price , stamp duty ( less for house/land for example) and interest rate to suit whichever scenario you're considering-   and just by way of an example, on 350K  (ish) house/land packages  where Stamp Duty is only payable on the land, you'll generally be contributing 40-45K instead of 50-55K , but still netting 8K or more tax free, so the ROE is closer to 20% tax free.

Whichever way you do the numbers, the returns are entirely tax free, and entirely superior to any other opportunity in residential property.  But as others have warned-  valuations can be a serious problem. ESPECIALLY when you buy from the online project marketer community. 

So before all else- rule 1 is very simple – ask for a copy of a recent valuation, completed by a reputable/recognised firm, before agreeing to anything.  Or, have your broker order a valuation upfront before signing anything.

There are many, many good NRAS opportunities where valuations are rock solid.  Every one of my clients will tell you that every NRAS property I recommend has valued on the contract price or in a rare few examples, very close to the contract price.   Just make sure to ask about valuations first and foremost

There are 137 consortiums, and only about a dozen (actually, 14 I think) are actually approved by Genworth LMI and various lenders. To get approved, their agreement documentation has to pass the banks and the insurers scrutiny, which means no restrictions on repossessing or disposing of the asset in the event of a delinquency.

So bottom line is, if a bank has approved the NRAS model, there is simply ZERO excuse for a valuer to treat it any differently.  If the banks and Genworth LMI have OK'd the consortiums model, they are obviously satisfied that it places their mortgage under no threat whatsoever, as far as disposing of the asset (selling it) is concerned.  So a valuation should reflect that!

The only time this might come up and be understandable is if you are purchasing an NRAS property where the consortium (the owner of the NRAS allocation for that property) has a rubbish agreement, which isnt bank approved.  And no one should be dealing with those properties anyway because the only way to get finance is to not disclose NRAS, and you'd be committing fraud by doing that.

Unfortunately , like many investors and commentators, its been my experience that many valuers just dont understand NRAS. The first Head lease model released in 2009 had severe restrictions on lenders abilities to repossess and sell a property if the mortgage became delinquent, and I think that many valuers still think that's the case, and applies to all NRAS consortiums agreements. Its just not the case though. That particular consortium ( QAHC)  has long ago (at least 2 years ago) amended their head lease agreement to remove that restriction, and all the lenders are happy to lend against their model these days.  I think valuers just arent up to speed in many cases, is all.

She is confused, Im afraid.

When the Commonwealth and State Governments issue  an NRAS approval for a dwelling,  it has an NRAS "entitlement " awarded to it.   The NRAS "entitlement" does not form part of the title, however.  It is simply an eligibility for the property to be entered into the NRAS.

Now,  here's where people get confused.  if the NRAS "entitlement" is not part of the title, who actually owns it?  The answer is, the "entitlement" is owned by an NRAS Approved Participant , more commonly known as an NRAS Consortium.  The "entitlement" has been approved for the particular dwelling in question, but is owned by the consortium and isnt attached to the property in any physical way or linked to it via the title.  After all, its really just an eligibility for a tax scheme, so there's nowhere to "attach" it to a title.

There is a very simple reason for this.  The NRAS legislation only allows for institutional investors (also known as approved participants, and more commonly known as consortiums) to participate in the scheme.  So when you buy an NRAS approved dwelling, you cannot enter it directly into the scheme yourself, because you are not an Approved Participant. 

The consortium that holds the NRAS "entitlement" for the dwelling you are purchasing, is an Approved Participant though, so you have to enter the dwelling into the scheme via their legal vehicle. Depending on which consortium owns the "entitlement" on the property you purchase, this can take the form of either a Head Lease Agreement, Non Entity Joint Venture or Managed Investment Scheme. 

FYI – No investor "owns" the title on any property until the bank releases it to you. And that only happens when the title becomes unencumbered of a mortgage

You're talking about the QAHC model- which is unfortunately the most expensive in the market, and requires a 25% rental discount.    All other NRAS models have lower fees and require only a 20% rental discount.  I dont know why so many people choose to go with NRAS properties approved under the QAHC model, when there are so many other options…..

I've said over and over again… try to stay out of SE Qld and make sure you talk to people who know what they're talking about with NRAS

This is not a fair comment.  Sorry.  Not trying to "flame" you, but you havent qualified any of your opinions…

Resale is not complicated.  same as any property.  What do you believe is more complicated?  Can you qualify your comments please?

valuations are done by lenders to determine suitability of the contact asking price- same as any other property.  If some NRAS approved properties are overpriced, that's the developers issue- why blame the NRAS?  Does that mean the non NRAS properties in an overpriced developments are OK, or is it just the NRAS ones that are causing the problem?

What are you basing Capital growth opinions on? How do you predict capital growth?   Especially given the current market, where the RBA Governor says there will be none, and when the CEO's of major banks say there will be none for at least a decade,  and when RP DATA and APM stats show there has basically been none since 2007 across most cities….?

Ive posted on the question of NRAS finance quite extensively previously.  This should help answer your questions.

https://www.propertyinvesting.com/forums/property-investing/general-property/4334862

In a nutshell.  Westpac , St George and Firstmac and the three serious NRAS lenders. Some other lenders dabble a bit, but these are the three that are fair dinkum.  Best LVR is St George and Westpac at 85% ( firstmac does 80%) . Best borrowing capacity is Firstmac by quite a distance. ( Westpac is ok too.  St George is poor)
The most important thing in any NRAS purchase is making sure you are buying a property where the NRAS allocation belongs to an NRAS model that one of these three lenders will fund- otherwise you will really struggle to find finance.

Westpac and St George will lend against these NRAS models

QAHC
Brisbane Housing
Yarran
Questus
Affordable Management Corporation
Aspire Housing

FirstMac will lend against

QAHC
Questus
Affordable Management Corporation
Aspire Housing
Ethan Affordable Housing
Urban Affordable Housing Association
Accelerated Wealth Systems/Quantum

Lamp, you mentioned that you are considering buying an older unit and renovating, OR purchasing an NRAS approved unit within the Casey Gardens development.  I personally believe the NRAS scheme offers you far more, but its really your decision. Respectfully, it doesnt sound like you have much experience or knowledge about the basics of investment property, or investment property finance, so taking on a renovation may not be for you. Purchasing something new, with great tax incentives attached, which will basically be set and forget as you learn what you are doing, may make life far simpler. But do your own research and decide which better suits your knowledge and risk appetite. Ultimately its your choice. If you decide to purchase the Casey Gardens unit, please understand that it creates some unique issues for you to consider;
1. The NRAS consortium that owns the NRAS allocations for Casey Gardens is Providence Housing.  
2. You would be required to enter into a Head lease Agreement with Providence Housing to enter the property into the NRAS
3. The purchase will be Off The Plan 
4. You will require unconditional finance or cash for a 10% deposit, as Providence Housing does not accept deposit bonds

I know the development well and you are right in saying that the units are very good quality. They will offer excellent depreciation, are well priced and will easily be tenanted.  They should also offer strong growth- but none of us has a crystal ball on that. What I do know is that HSBC will NOT lend to you for an NRAS purchase. You can ask Westpac or St George or NAB ( all three will lend on NRAS to varying degrees) but I dont think they'll do it for you either. Non of them offer funding for the Providence Housing model- yet. Im sure they will in future, but they dont right now. Providence is a very new NRAS model, so the banks havent had much of a chance to due their due diligence yet. However- one lender can assist. The ONLY lender that offers NRAS funding, AND unconditional approvals for Off The Plan is firstmac. 
https://www.firstmac.com.au/Pages/Easy%20Livez%20-%20NRAS%20loan.aspx
Of course- the other advantage is that firstmac uses 100% of the NRAS incentive towards servicing – none of the other NRAS lenders do this- so they will offer you much better borrowing capacity.

So IF  you decide to take the NRAS path, you would need to consider do the following;

1. You could access some of the equity in your existing property by doing an increase with your existing lender for 20% plus costs, stamp duty, legals etc (approx 90K total) for the 370K NRAS purchase, and set this up as Jamie has suggested- an Interest Only split – secured by your PPOR,  OR,  I'd actually suggest something a little different- I'd refinance and consider something like this –
https://www.loans.com.au/Pages/Home-Loans.aspx    
If you set the loan up as Jamie has suggested, you are only using a very small amount of your equity. Thats great, and if you have plans to use further equity for another Investment purchase ( NRAS or non NRAS) Jamies recommendation is spot on, because you can do a further equity release ( subject to your ability to qualify for the loan)  to purchase another investment property at a later time. However, if you do not intend to use the remaining equity in your PPOR for a further investment purchase at any time in the next 4 or 5years, I would recommend a slightly different solution. I would refinance to one of the providers above ( to access a rate of 6.85%) and set the loan up as follows; assuming your PPOR is now worth 350K.
Split 1 –  44K Principle and Interest @ 6.85% with 100% Offset
Split 2 –  236K 10 years  Interest Only @ 6.85%
This would mean that your PPOR was geared to 80% LVR, but  you would then only need a loan for 134K plus costs ( lets say 15-20K)  – so 154K, against the NRAS security – ie @ 42% LVR.   In a nutshell, you'd still be funding 100% plus costs for the investment purchase, but more of your debt would be at 6.85% Interest Only, so this would mean cheaper repayments and better cash flow for you. 

So much of the "art" of property investment is in managing cash flow and using the right finance products to assist you in reaching your goals. With an income of 84K, I think cash flow will be critical for you as you take on debt, so my suggestion is worth considering.

Of course, if you dont go with NRAS – ignore this post completely

Richard- come on… there is no such thing. HomeRun08 is long ended.  Firstmac doesnt take sub 50m as a niche.  You guys are having a lend   

If thats the case Michael I apologise…but I want to be clear, I do the work and the research and Im right. Without having to copy and paste the relevant lending policy, I will just say this- they are not a sub 50m2 lender.  You would have had that deal set by exception only, and Im guessing it would have been some time ago.  In any event, your previous post ( and Richard's subsequent post)  implied its a space they lend in regularly (a niche), and that's simply not accurate.  Thats all Im pointing out.

I understand you provide commentary here free, as do I, but  everyone can put forward one or two deals that were done by exception, as an example of anything. I can find you an example of a 35m2 dual key investment loan written for a 60 year old, for example, but exceptions do not equate to lending polices.  These forums should be accurate, and comments should be fully qualified or they can be misconstrued.
More widely, the non bank sector has already suffered by not being well supported by introducers since the advent of the GFC and I would have hoped that finance professionals would recognise the hand that feeds them ( and their customers) Its not helpful to imply to investors here that non banks are rubbish.
 Its a great shame, because when the legislation to ban exit fees (which are the lifeblood of, and an absolute necessity for non banks, and which brokers use as a reason NOT to support non banks) passes, Im not sure people (or most our broking colleagues) quite appreciate what the consequences will be; every serious industry spokesperson and representative agrees that borrowers will pay more, competition will be less, and I think we'll all look back and wonder why we were so silly to ignore the obvious signs… the big banks are going to have a field day and finance professionals will more than likely need to move to a fee for service model. Will your cusomers pay you for a service they can get free at a bank? I dont know how it will play out, but its going to be a very different landscape, and broker books wont be worth a brass razoo. Id have thought some additional support of non banks may have quite easily avoided the situation that awaits us all in the second half of this year.
Anyway, it really bugs me when finance professionals bag non bank lenders on these forums.  Without them, none of us would have an industry,, there would have been far less innovation in products, and we would likely all be paying more. It's really a bug bear of mine so Im pedantic about making sure they are represented correctly, not unfairly.