I have been in the industry of Property Development, Real Estate Sales, trades and general property related stuff for the past 20 years. As a professional property investor I follow the likes of Robert Kiyosaki and have never understood why people would buy a negative geared property when I can get the same tax benefits from a positive geared property. Then a tax expert sat me down and went over it all and it started to make some sense. (Not much but some) So I set out to find the best of both worlds and have now found it. it is called NRAS and some of you may have heard of it and gotten a bit scared but all the rules have now changed and it is an absolute pearler!!! I have the ability to negative gear the property whilst making up to $260 per week positive cash flow for an investment of only $590k. Even better the bank funds it !!!
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Just out of curiousity which Bank funds the NRAS that you deal with.
Probably read the recent report about NRAS properties and how 90% of them where overpriced.
We have found most have been undervalued by between 10-15% which is equivalent to the commission the developers are paying the marketeers.
Good investment for who may ask ……………
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
I've been watching the various protests from local residents, protesting that the new NRAS projects are the slums of the future and they don't want them in their area. I think I'll stay away.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Qlds007 wrote:Good investment for who may ask ……………Yours in Finance
I would like to know also…
Hi Ben
Dont worry i know the answer to my question but just keen if BJM does and as Paul has mentioned i think you could find these are the slums of the future with the wrong project.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi
There is risk in any purchase, obviously if you buy into a project where every apartment/unit/house is NRAS then the risk is magnified. There are some projects where only some dwellings are allocated to NRAS, lowering the risk.. you just need to research, research. There are some good opportunities, eventhough most you may find are in questionable locations, identifeid by Govt as growth areas.
I have found many websites that I use to rate locations/suburbs (when I don't know the area well), here is one for EVI (Employment Vulnerability Index). Again not definitive , but helps puts some science around research to help make more informed decision. This is only at the postcode level
http://e1.newcastle.edu.au/coffee/indicators/job_loss_index/
Regards Tim
(I don't have any pearle of wisdom!)
I have to say, the attacks on NRAS as slums of the future are a little unfair.
There are only three types of property that can attract NRAS
1. Completed Spec Home
2. New Construction Home/Townhouse
3. Units/Apartments.Except for small unit/apartment developments, concentration levels for NRAS are limited to 30%. There are only a very small number of apartments/units small enough to have been awarded 100% NRAS concentration ( and most of those have been bought by institutional investors who will be very keen to maintain their assets) so the idea of NRAS properties becoming slums is pretty unfair.
NRAS stock was never intended for Mum and Dad investors. NRAS was intended for Institutional Investors- ie pension funds, superannuation funds, etc….and these institutional investors have so far accounted for about 40% of all NRAS purchases- mainly units. The limited number of developments where NRAS concentration has been allowed to 100% have been almost entirely swallowed up by institutional investors. Its unlikely that these investors/funds will allow their assets to be poorly managed, run down and left in disrepair, so the probability of those developments becoming slums is remote. In any event, those developments are not available to investors such as you and I, generally. The institutional investors almost always take the whole lot. So theres nothing for you or I to worry about with these NRAS developments.
NRAS was always intended to drive new unit and townhouse construction, in delivering its affordable housing objectives. It was aimed at providing centrally located, easy to manage medium to high density stock to institutional investors, at price points that suited NRAS ie-300-450K. Perfect for 1 and 2 bedroom metro units, and perfect for 3 bedroom units and townhouses in outer metro suburbs of some capital cities and major regional centres. However,as we all know, the GFC created difficulties for developers in the past 2-3 years, in obtaining development finance, so the number of medium and high density units FAHCSIA antcipated would be built and sold to institutional investors through NRAS, has been severely affected. The only other new construction finance that can be obtained relatively easily is residential property construction finance, so we've seen a shift in focus over the past few months towards house and land stock. Institutional Investors arent interested in owning hundreds of different houses in a variety of locations, so as a result, we are now seeing NRAS opened up to Mum and Dad investors.
Under NRAS guidelines, concentration levels for house and land estates are limited to 30%. The reality however, is that in almost every instance, the real world concentration levels have not exceeded 15% in any estate yet, as most housing developments have multiple stages and NRAS hasnt existed long enough for allocations to exist across 30% of the total development. So again, the probability of new housing estates where NRAS property is available, becoming slums in the next 8-10 years, is unlikely. With concentrations well below 30%, and the majority of other houses being owner occupied, the risks are low.
There have only been about 15,000 of the proposed 50,000 NRAS incentives awarded so far. Of the 15,000, the first 6,000 or so were bought up by institutional investors ( units mainly, as described above) and another 3,000 or so have been bought up by housing co-ops to provide affordable housing to their clients ( I would agree these have the potential to turn to slums in years to come because of the potential tenants they attract through their owners, but these are not properties you or I have access to- the co-ops have bought every NRAS allocation in those developments, so its not a valid consideration in this discussion) and that just leaves a few hundred units/townhouses available off the plan, and several thousand 3 and 4 bedroom house and land construction deals – which is the bulk of investment stock available to the public at this stage.
So all in all, unless you're buying one of the very few units in a development that hasnt already been swallowed up by a co-op or institutional investor, and that development is in a less than desirable area and has 100% NRAS concentration, its highly unlikely there is going to be any slum issue to worry about.
Remember, this is affordable housing, not housing commission. Tenants have to be working and earning money to qualify to be tenants. The target markets are police, ambulance, nurses, teachers etc… in their first and second years out, on lower incomes. There are significant compliance requirements that approved participants/property managers are required to undertake to keep the property NRAS eligible- and that includes valuations in years 1,4 and 7, plus rental re- appraisals annualy, as well as income checks and employment checks on the tenants…. all in all, I think people are making pretty invalid accusations about the risks and slum potential for NRAS properties.
I'm currently going through the process of getting NRAS accreditation for a development i am a partner in. We are doing it mostly to hold although we have sold a few blocks to other people and are including their blocks in the process. Because the tax free amount is set a $9,140 the scheme works better from a cash flow point of view, the lower the cost of the housing. The strategy we have decided to use is to choose high quality blocks and build small houses that can be easily transported, so that at the end of the NRAS agreement we can transport the houses to cheaper blocks or sell them, and then build larger houses for sale. The scheme, if we are successful, basically will allow us to gain cashflow for 8 years from the blocks while still benefiting from the potential capital gains.
I looked @ one the other day. Dare I say for the site in question, it would be more profitable to build SEPP5 under the existing zoning or medium density under a proposed zoning next year. However a housing co-op owns the site and any approval is contingent on 10 years use as low cost housing.
" why people would buy a negative geared property when I can get the same tax benefits from a positive geared property. Then a tax expert sat me down and went over it all and it started to make some sense. (Not much but some) So I set out to find the best of both worlds and have now found it. it is called NRAS and some of you may have heard of it and gotten a bit scared but all the rules have now changed and it is an absolute pearler!!! I have the ability to negative gear the property whilst making up to $260 per week positive cash flow for an investment of only $590k. Even better the bank funds it !!! "
>>>>> NRAS has evolved and I will post a new thread about this shortly. Banks are changing lending policies on a weekly basis nowadays and finance is readily available. NRAS is an excellent scheme in my opinion. Heres some info on it http://www.mediafire.com/?emd8ml2igfffldr
I have a pos geared portfolio and am looking into NRAS properties now so I can enjoy growth as well as CF+
APerry
Can you advise how you managed to apply and be considered for NRAS accreditation. I have looked at a few NRAS oppurtunities, but usually conclude they are 30-40k too dear, and not in the types of locations i would like to build.
Are you in a group that is building >20 properties?
Hi everyone….
Properties that lend themselves to positive cash flow tend to be in areas of low capital growth. Assume nothing and always crunch the numbers so you know exactly what you're asking the property to achieve.Hi just bought an nras through our super fund,looked into it in depth. cant see them turning into slums of the furture. now looking at a second one out side of our super for tax deductions. cant see any down side to the goverment giving me 100 grand over ten years ! even if they are a little over priced at the start. i bought in burpengary 30 min north from brisbane and 10 mins from a westfield shopping centre. due to the floods the rent is only going one way, up !
geoff
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