National Rental Affordability Scheme (NRAS)

G'day Lamp.

NRAS is magic!
It's a government scheme that provides an investor with a financial incentive of more than $91000 over 10 years TAX FREE!. Often, NRAS makes it possible to turn brand new properties into cash flow positive properties, including all the running costs associated with the property whilst receiving $35 – 45000 of tax benefits each year. What's not to like?
However, there are strict criteria's with regards to the rent you can charge. The government just doesn't give out that kind of coin because they're nice politicians. NRAS was fundamentally developed to allow certain properties to remian affordable to certain demographics so usually the rent you can charge has to be at least 20% under market. Check it out, do the maths, but it is the closest you can get to a rental guarantee without paying through the nose to get it!
Hope this has helped!

CHEERS!
TC

Like any investment decision don’t think in generalisations.

I can say some NRAS developments will be good and some NRAS developments will be bad. You should never buy an investment for a tax break. Olive farms anyone?

Excuse the pun but similar to sub prime loans, these properties have been intended for sub prime tenants. NOW, I’m going to get lots of abuse for that statement. But similar to sub prime loans not all of the loans went BAD. A small proportion of them, and this dragged the entire assets security down with it.

Remember this is going to be a NRAS property for a while and if a few bad tenants wreak havoc on the scheme. Guess whose property (if you want to sell) is going to be tainted with this? “oh that one of those NRAS properties” 

I also urge you to look at the underlying asset. Areas to look into include:

If it’s OTP:

– Developer

– Contracts

– Builder

Individual property:

– Layout

– Room size

– meet market

– etc

Area:
– future growth

– Future government spending

– crime rates

– private developments other then NRAS

– etc etc etc

Scheme:

– who’s managing agent

– agent’s contract with you

– etc etc etc

Hi everyone

I’m a newbie. Apologies if the question has been asked before. Who are those lenders to borrow from as my understanding the big four are reluctant.

Respectfully- bollocks!

These dwellings are intended for essential services employees such as police, nurses etc. particularly those at the early stages of their careers, when their incomes are at the lowest rung.  Of course the scheme is not restricted to those professions but  the income thresholds required for eligibility make over 70% of taxpayers eligible.  This is not social housing. It is affordable housing, designed to deliver some stimulus to the construction industry and discounted rent to essential services employees.

The scheme is flexible. It allows for an individual eligible tenants income to increase. A tenants income needs to increase by more than 25% for two years consecutively before they lose their eligibility to remain a tenant in an NRAS approved dwelling.  Take a closer look at the income thresholds for eligibility.
http://www.fahcsia.gov.au/sa/housing/pubs/housing/nras/Pages/factsheet_tenant_profile.aspx
http://www.fahcsia.gov.au/sa/housing/progserv/affordability/nras/Pages/nras_info.aspx#nras_12

As far as property valuations being affected by a stigma… NRAS dwellings are located everywhere, with a maximum concentration of 30% in any one development- except for a very small number of medium density unit blocks where 100% concentration has been allowed.  In most cases, concentration is far less than 20%.  There will be 50,000 dwellings across at least 1000 locations.
Builders such as Metropolitan, Devine and AV Jennings are delivering stock.  Are we really to believe that a typical Australian residential housing development full of AV Jennings built houses will suffer pricing shock as a result of 1 in 5 or 6 securities being rented to police and teachers at 20% below market, as part of this scheme?

There will be dud properties and there will be rippers. That is a given, of course. There will be great tenants and terrible ones. That is a given also, but that's no different to any investment property  – DHA, non NRAS or NRAS included.

If a stigma does develop around NRAS -it wont be because the properties are rubbish or because the tenants are on the dole and damage your property – it will be because of irresponsible commentary.   People should be supporting this scheme enthusiastically, as far as the concept goes at least.  It is well conceived and intended to deliver very real, useful and valuable outcomes.

One of my colleagues actually advised the federal government on NRAS. Generally speaking, it's a good initiative but although the developer / manager benefits from the tax scheme, a lot of these properties are actually not based in good capital growth areas. Fundamentally, NRAS is in the interest of society rather than for investors. You'll invest in NRAS properties for the purpose of net yield + the intangible social benefits. Your total financial returns aren't going to be fantastic if capital gains are low.

Obviously there are exceptions like anything else.