NRAS Property Investment

Opee what would you like to know ?

Financed 1,2 or 101 over the last few years.

Cheers

Yours in Finance

I'm a noob investor but I DO love my spreadsheets!

The decider's for us:
We wanted to invest close to home but its hard to find cf+ properties in perth metro and we are too busy.
One of us pays a lot of tax so we could benefit from a negative/neutral geared property with some capital growth potential.
We wanted to make both scenarios work.

We did our gearing calculations first then added the NRAS benefit back in. We looked at the NRAS as icing on the cake, especially as we have also got some capital growth expectations in our target area.
 
We found a cf neutral (in year 2) property in NRAS and we'll use the incentive to pay off our non-deductible  property in less than 10 years.

Nobody has a crystal ball but if the investment ticks all the normal boxes why would you not go for the incentive?

So far we've had everything come up to market (no high fees or valuations) and actually got lower management and strata fees.

We did decide we would NOT buy off the plan because we wanted tenants from day one of settlement and no uncertainty about costs and finishes.

One thing I found is that there are so many different scenarios out there you just have to knuckle down and crunch the numbers in your situation.

This calculator was really helpful.

From what i have seen WA is still a year or 2 away from having quality NRAS stock so i would be sticking to Vic or certain parts of Qld. Need to watch parts of the Qld market as the valuations are not coming in at the right sort of price for most of the deals i have seen.

Careful selection is needed and is a service we will be bringing to our clients shortly.

Cheers

Yours in Finance

We (mrs an i) bought an NRAS property in QLD, only 3kms from the Brissy CBD, had it for about 3 months now, very early days but so far so good, tenanted straight up, because of the 20% discount in rent there was a fair bit of interest.

We couldn't find any good NRAS places in Perth (where we live) at the time that compared to this one in Brissy and the one off $10k QLD bonus at the time tipped me over into buying there so hopefully a good decision for growth.

It is positive geared only after deductions and the NRAS $10k/yr tax credit/rebate whatever you want to call it and of course the $10k once off bonus didn't hurt.

Downsides I found to it are, you're locked in to the NRAS scheme for 10yrs, unless you sell, the new owner can continue or opt out of the scheme.

Unable to refinance that property while in the scheme which would be a down side to trying to draw equity out and go for more properties.

Buying is usually through an investment/property mob so they'll hit you with their commission so you'll be paying $20-$30k above valuation cost which isn't good investing is it

In the end though I thought it was a good addition to our portfolio to sit quietly for its 10yrs hopefully see that capital growth in that area, being positive geared after tax atm then moving to positive cash flow in the next 2yrs. Seemed like the right decision for us.

Hope that helps

Hi Opee,

In Tassie the scheme has been run so badly and is a total mess.  Pete & I are small time developers and have a couple of lovely 2brm units that have just been completed in Sorell, 15 minutes from Hobart CBD.   They are on the market for $265k each and would rent out for atleast $275pw each.  We have had a few people interested, including investors, however Hobart's property market is extremely slow at the moment and people are hesitant to jump in and buy.  Don't know what everyone is waiting for!

I came across the NRAS scheme by accident and thought how wonderful it would be if our units could be sold under the scheme to an investor as they would be totally cashflow positive.   Upon further investigation I found out who to contact in regards to the allocations only to be told that they were all gone and I was too late.  Not happy at all about that outcome I happened to come across a Liberal MP who has been questioning the way the scheme has been run in Tasmania.  Apparently of the 670 properties that were to be made available by Sept 10, only 91 were delivered.  One particular candidate who received an allocation of 261 failed massively to deliver.  That was just from the first 2 rounds.  We emailed the MP and to our surprise had a call from her office to arrange a meeting with her.  We are meeting this week.

For the lower end purchase price (under $300k) this scheme is fantastic.  Why wouldn't you want a cashflow positive property, professionally managed by a Property Manager it would be an awesome investment.  Sit back and enjoy a cashflow for the next 10 years.  If by chance you want to sell, you can.  As long as you bought at market price in the first place.

We have found a fantastic site just 15 minutes south of Hobart where we can put 3 units on one part of the site and 8 on the land next door. Unfortunately our Money Partners are currently hesitant to invest on this project at this time due to the uncertainty in the market.  If we were able to tap in to the NRAS scheme and sell the properties with approved tenants in place upon completion, I couldn't think of a better investment.  Our end sale price would be mid $200's and market rent would be $250pw.  Discounted rent of $200pw over a year is a loss of market rent of $2600 however with the Government's incentive of nearly $10k, you would be totally CF+.

I thinks its awesome and as a developer I would love to see more smaller developers being able to build the type of properties that would work well with this scheme.  

Fingers crossed our meeting goes well and we can get some of the allocation away from the big end of town.

Cheers

Jackie & Pete

There are few forums on this topic, so I am simply pasting my comment from the other NRAS threads to this one.

My only comment would be to remember that the NRAS tax offset is a refundable tax offset and therefore you need to have relevant income or a tax liability to offset it against. This type of investment can have its place in your portfolio, however, you simply can't continue to build your portfolio on pure NRAS properties because at some stage you have nothing left to offset the offset against no matter how cash flow positive they are.

Troy is absolutely correct.  You get the Commonwealth Component (75% of the total $9981 incentive) paid to you by the ATO via your tax return, whether you have an income to offset it against or not.  A refundable Tax Offset is different to a tax offset. 

For the State Component ( the other 25% of the total incentive of $9981) it is paid by the States in August , as non assessable, non exempt income.  In other words, they send you a cheque or make an electronic deposit to your account, and the money is also tax free. 

So you get the full amount tax free whether you have an assessable income or not.  This is where most people get tripped up in misunderstanding NRAS. Here's something that clears it up nicely.

http://www.ato.gov.au/nonprofit/content.aspx?menuid=0&doc=/content/00179876.htm&page=4&H4

Hi Derek,

You're quite right – you can opt out of the Scheme at any time. My understanding is that if you opt out part way through the year you receive a pro rata payment of the incentive, but I would have to check this with some of our staff to be 100% certain.

One of the good features of NRAS properties is they need to be located in government identified areas with high rental demand. While this is no substitute for proper due diligence, it can be a great booster for the rookie property investor in terms of narrowing down what can otherwise be an overwhelming array of options. (Of course as DG Hayes points out, NRAS properties have a place in an experienced investor's diverse portfolio too!)

Not wanting to blow my own trumpet here but I worked with our team of property investment and financial advisors to compile a pretty comprehensive overview of NRAS for individual investors. There's links to the relevant government sites as well as answers to common questions in clear, plain English – I hope some readers here find it useful.  http://onyx.net.au/nras/

Regards,

Melanie

Bit of debate about NRAS property here