Nras

Venno, you are correct about the properties you have mentioned.

The consortium in question , Questus, is approaching this in an interesting way. They have developed a salary sacrifice model for employers which would enable the tenant income thresholds to become workable.

How successful or realistic this will be, I cant say. Numbers wise, it adds up IF the employer AND the employee are agreeable to it, but for me, it makes the whole thing all too hard. It does work though... as long as everyone plays along :)

http://questus.com.au/files/BROOME-QRIF-Brochure-2012-08-10-LO.pdf
 
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Cheers euro73, I dont think I can be bothered with a complex arrangement such that Questus are proposing. I guess it works real well if your a business that needs to house non-resources staff in the region but not one for individual investors I think.

On a bright note it has opened my eyes to resource towns as a possible yield play, more investigation I think.

Still keen on NRAS as a CF+/neutral investment though, failing to see the realistic downside (as long as you buy well) in making it a substantial part of a property portfolio.

Benefits as I see them:

1. New property so appealing to renters.
2. New property so low maintenance costs for a while.
3. New property so maximum depreciation benefits.
4. Rent below market (ouch) but you'll always have a tenant and they'll be keen to stay.
5. Substantial tax offset payment from the Govt.
6. If you buy well and at the lower price point end, there should be headroom for capital growth over the long term.

Negatives:

1. Slightly more expensive property management.
2. Extra but slight expensives for NRAS compliance pa.
3. Not market rental, for 10 yrs anyway.

:)
 
all true, but you're being very very nicely compensated for the lower rent :)

And to be fair, sometimes you can still achieve the best of both worlds.

For example, one of the 385K duplex 3 bedder projects I have available in Roma offers $600 per week market rent, so even after the 20% NRAS discount is applied, the $480 you receive yields more than most other 385K properties could generate at full market rate. Then you also get the $9981 :)

Because its a 3 bedder, $480 will still attract eligible tenants under NRAS quite easily.

The property generates almost 12K CF+ at a 38.5% MTR. If purchased as a combo, the builder is discounting the combined price to 725K, so you get both at 362,500 each essentially.

So there's a great example of how you can combine mining towns with NRAS and still have it work for tenants, without needing to do any complex salary sacrificing.
 
A tale of two cities.... or more accurately, Sydney v anywhere else.

Listed a completed 24 Unit NRAS development in Rosehill (near Parramatta) and had the first open inspection yesterday. Between 1pm-2pm , 20 deposits taken! Only 4 Units left.
 
Hi All

I am new to this but we have been doinga lot of research into NRAS too. My conclusions :
1.NRAS properties are incredibly low risk, we have done the spreadsheets, you can put in high vacancy rates and it will still have quite little effect on your bottom line BECAUSE OF THE TAX ADVANTAGES and THE GOVT PAYMENTS. That stuff cushions you.

1. They may or may not be high capital growth - but no one can really predict this anyway. So EURO78 is right, the cashflow positive is main thing - it repays your mortgage and its generally safe. Plus you have the discounted rent so unlikely you wont get tenants.
2. The cheap properties are good because ,a again they are low risk, the govt gives you about $100 000 regardless of how much your property cost.

3. DONT buy anything you wouldnt buy without nras. The property must be good on its own. Look for the area you want, then look for nras.

4. Be careful of too many nras properties in the same building, or plot, although tenants will probably be fine (people misunderstand the tenant selection, they actually are middle income earners, not dole bludgers), it may still be a problem as many nras investors may want to offload them at the same time after the nras runs out. (If you can get it in buildings where theere are owner occupiers, that be great).

5. NRAS in mining towns can work well if you dont mind cash flow positive (they cant be used for negative gearing then) and the mining town risks.

6. Always check that there is the right income and demographic for your nras rentals (as has already been mentioned)/ I have heard of people getting caught out because the area couldnt support their rents (hence low cost nras are better).

7. In theory, nras licenses are only allocated to areas with great great rental shortages so you should be safe, but the govt cant be accurate all the time, so do your homework.

8. Likewise, nras developements cant be shonky in theory as the govt issues licenses and require them to be built to high turn key standards. Your consortium (the people who manage your nras applications) will also include stuff the govt requires if the developer does not). For example ; landscaping.

9. People who are distrustful of NRAS simply dont know how to do the numbers properly. The numbers do work but that doesnt mean NRAS is idiot proof, you still have to do your homework just like any other investment.

Hope this helps...also, if anyone is looking for nras, during my time researching and plyaing on the nras circuit, here are the players I found helpful : Onyx (Ruby is lovely and honest), NRAS Australia, Ray White in Roma, NRAS REAL ESTATE (the website with that name), we very nearly picked MOSAIC apartments by Burbank in Dandenong but the bendigo one came through last minute so we picked that. Again , it depends on your judgement about possible capital growth in Dandenong, and how well you think Places Victoria is able to make it work !!


Here are the players i would avoid because they dont tell you the whole story: Investor Coach, Yaran (they apparently lost 600 licenses and have trouble delivering the products).
We are currently settling on (our first) unit in Bendigo at $275k with nras, will keep you posted on how it goes.
 
Another crack at NRAS from Margaret Lomas who's apparently not a fan

NRAS is a tax scheme; a property investment must stack up on its own: Margaret Lomas

It’s pretty easy to counter the flippant claims of NRAS marketers when they use simplistic three line statements espousing the benefits of buying one – just buy it, discount the rent and get tax benefits–with a plethora of dangers;

  1. The middlemen do make big commissions – I’ve not seen one less than $20,000, and you’d have to be very dull to be convinced that this isn’t built somewhere into the price.
  2. They are released in lots of 100 – that’s a very large influx of competition all at the one time – affecting both the capital value and the potential rent return. Your 20% discount may end up being a 20% discount to a rent that has already dropped by 30% because of oversupply!
  3. They are rarely built in hotspots, and when they are, well, refer to point 2!
Click to expand...

Page 2 goes into some more information from an investor
 
One thing that gets me, is that she always wants an investment to stack up on its own.

If there is a $10K pa kicker for 10 years, then I'd argue that it should be included in calcs and in most cases the investment will still stack up.

She says that most of these developments are in large clusters. There are developers out there building non-NRAS in large clusters. The same principle holds there too, don't buy in oversupplied areas.

So what if you are paying $20K in commissions? The purchase price of a property might vary double that amount between two prospective purchasers. Plus, it is only about two year's worth of the NRAS payment.

There are NRAS products being sold that are stand alone product in areas with high yields (even after the 20% discount) and work OK without NRAS and are a money making machine with NRAS.

She calls it a "tax scheme". Interesting coin of phrase and seems like a throw away line to me. To me "tax scheme" brings me thoughts of pine plantations, capitalising interest and other such dodgy schemes to pay less tax.

The difference here is that NRAS is government backed and funded. They are happy to give you $10K.

She's not right or wrong in every detail, it just seems that she paints NRAS as an evil tax scheme only favouring dodgy developers and agents and that you should invest in Adelaide where there might be growth one day, but that's OK, you can make tax losses in the mean time and save tax. :confused: :confused:
 
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HotRod said:
One thing that gets me, is that she always wants an investment to stack up on its own.

If there is a $10K pa kicker for 10 years, then I'd argue that it should be included in calcs and in most cases the investment will still stack up.

She says that most of these developments are in large clusters. There are developers out there building non-NRAS in large clusters. The same principle holds there too, don't buy in oversupplied areas.

So what if you are paying $20K in commissions? The purchase price of a property might vary double that amount between two prospective purchasers. Plus, it is only about two year's worth of the NRAS payment.

There are NRAS products being sold that are stand alone product in areas with high yields (even after the 20% discount) and work OK without NRAS and are a money making machine with NRAS.

She calls it a "tax scheme". Interesting coin of phrase and seems like a throw away line to me. To me "tax scheme" brings me thoughts of pine plantations, capitalising interest and other such dodgy schemes to pay less tax.

The difference here is that NRAS is government backed and funded. They are happy to give you $10K.

She's not right or wrong in every detail, it just seems that she paints NRAS as an evil tax scheme only favouring dodgy developers and agents and that you should invest in Adelaide where there might be growth one day, but that's OK, you can make tax losses in the mean time and save tax. :confused: :confused:
Click to expand...



Besides the tax accountant she uses on her panel, just about every single panel member on her TV show is a property marketer that charges 6% plus GST to developers to sell their stock, so I find Margaret's criticism of marketing fees quite hypocritical. Those same "marketers" are plenty good enough to offer her callers and emailers advice on her TV program, but when it doesnt suit her purposes, they are scoundrels?

They are NOT released in lots of 100. There is ZERO requirement for this. It's a falsehood. How does such a supposedly respected and intelligent woman get it so wrong??? How it actually works is that NRAS approved participants were required to make applications for a minimum of 100 entitlements in Rounds 1,2 and 3. It was not necessary that they were all in the same development, or built by the same developer. It was only necessary that the TOTAL number of incentives applied for was 100.

So her Points 2 and 3 are basically discredited
 
HotRod said:
So what if you are paying $20K in commissions?
Click to expand...
RE agents also charge commissions to make a sale. I'm not sure how much they charge but on a 300K property @ 3% it would be about 9K.

euro73 said:
They are NOT released in lots of 100.
Click to expand...
In order to build lots of 100, the builder may have to allocate NRAS props so that they can get the permission for their development. So it may not be 'lots of 100' NRAS properties but 'new properties'.
 
euro73 said:
Besides the tax accountant she uses on her panel, just about every single panel member on her TV show is a property marketer that charges 6% plus GST to developers to sell their stock, so I find Margaret's criticism of marketing fees quite hypocritical. Those same "marketers" are plenty good enough to offer her callers and emailers advice on her TV program, but when it doesnt suit her purposes, they are scoundrels?

They are NOT released in lots of 100. There is ZERO requirement for this. It's a falsehood. How does such a supposedly respected and intelligent woman get it so wrong??? How it actually works is that NRAS approved participants were required to make applications for a minimum of 100 entitlements in Rounds 1,2 and 3. It was not necessary that they were all in the same development, or built by the same developer. It was only necessary that the TOTAL number of incentives applied for was 100.

So her Points 2 and 3 are basically discredited
Click to expand...

But if you sign up with Destiny Solutions, she'll help you out (for a fee :D )
 
Look, she's a lady who used the credit boom well to make a lot of money and build an $8-9 million property portfolio, and because of that people think she's smarter than them, and that's OK. That's how the world works. Create a profile and people will flock to you as an "expert". She's taken the time to develop a profile and that's smart of her.

To her credit she has had the courage of her convictions and when she saw the opportunity that was going to unfold after deregulation of the Australia's banking industry and after CGT tax reform and after Neg gearing tax reform, she acted. She rode the credit boom, doubled her money and then doubled it again, and used the free for all decade of decadent bank lending to gear and re-gear and re-gear and build a massive portfolio with debt. Because she was more aggressive and courageous and willing to act than most forum readers, she has most of the readers convinced she is somehow in possession of skills that are special.

And that's wonderful. Well played. But as Ive said before and will say again, ANYONE who bought property just about ANYWHERE between 1990-2005 made money, and it was easy credit that made them look like superhero's , not superpowers.

I would put it to you that if she started with 20K today like she did in 1996, she could not turn it into a $9 million portfolio in 15 years ( and nor could anyone else) The credit availability is simply not there. So the growth just isn't going to be there.

Anyway- smart lady but like all of us, makes mistakes. And on the subject of NRAS, just like Mr Whittaker and plenty of other commentators who don't seem to be doing their research, she got it badly wrong this time around.

When you are influential and send out newsletters that people believe are gospel, I think you need to do a better job of checking your facts, Margaret.

But above all else, it's just amazing to me that a lady who writes books about creating an income for life using positive cash flow, cant do the maths on NRAS :)
 
devank said:
RE agents also charge commissions to make a sale. I'm not sure how much they charge but on a 300K property @ 3% it would be about 9K.


In order to build lots of 100, the builder may have to allocate NRAS props so that they can get the permission for their development. So it may not be 'lots of 100' NRAS properties but 'new properties'.
Click to expand...




Real estate agents also charge additional fees for marketing.- over and above 3%. Important to compare "all" of the apple with another apple. :)

Re the 100 NRAS requirement. See page 3 - paragraph 2 Dont worry too much about the rest of the document or the NRAS Rouse Hill information - this is exclusive to the community housing sector so none of us can buy these.
http://www.google.com.au/url?sa=t&r...eSgoFg&usg=AFQjCNGSKh3jdYcSlQYdFbHALrhjY5DObw


And let me make a correction. The Round 1,2 and 3 MINIMUM application number was 1000, not 100. My error. I apologise. For round 4, the preferred minimum was 100, but the "actual" minimum requirement per tender was 20- see link above

What it means is that a TOTAL number of incentives of at least 1000 (rounds 1,2 and 3) and at least 100(round 4) had to be applied for. There was ZERO requirement that all 1000 (Rd 1,2,3) or 100(Rd 4) had to be built in the same location, development, suburb, colour scheme or anything else. There was also ZERO requirement that they all had to be delivered simultaneously.

For example, using NSW as the state in this example, an application made by Consortium XYZ for 100 incentives could be for 10 in Blacktown ( to be delivered by June 11,2013) , 3 in Richmond ( delivery Oct 17,2013) , 43 in Greystanes,(delivery Dec 12,2013) 12 in Manly(delivery April 4, 2014) , 15 in Homebush (delivery Jan 7,2014) and 17 in Wollongong(delivery May 10,2013)
 
Ausprop said:
I agree that the article seemed off on a tangent. If anyone wants an NRAS house, either finished or as house and land for around the $300k mark give me a yell. they are on about 1800sqm, separate houses, spread throughout the subdivision. Got some dearer ones too at closer to the $400k mark.
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Can you please PM me details? I am currently looking into NRAS and considering strategies. Thanks,
 
euro73 said:
Can you please explain what you mean David??? "a company takes the benefit"....???? Not sure where you are coming from??

The NRAS consortium through whom you participate in the NRAS, takes between 5% plus GST and 12% plus GST of the NRAS tax incentives as a compliance fee, and nothing more. That leaves you with between 86.8% and 94.5% of this years $9981 tax free incentive in YOUR pocket :) ie $8663.51 - $9432.05
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Fair enough, what I wrote was an assumption.

In fact, I was VERY interested in NRAS, until I found out it was not available directly to private investors, and assumed any middlemen would end up taking too much and make it unattractive.

To get my head around the typical real world costs, can we do a NRAS vs buying near new privately comparison? (as that's what I would

i.e.

Property value on second hand market - $400k, market rent $350pw

Regular Private Sale - Near new established property
Fees - Purchase:
Vendor pays ~3% commission to REA (say $12k)


NRAS - Off the plan development
Fees - Purchase:
Developers margin / premium over near new equivalent on second hand market (??)
NRAS consortium agents commission on sale (??)

Fees - Ongoing:
NRAS consortium fee (say 9% inc GST) - ($898pa)

Incentives - Ongoing:
NRAS annual tax break ($9,981)


Questions in my mind:

1. What are some typical values for the ??'s above? How long would it take with the NRAS benefits before I am better off than buying myself on the 2nd hand market?

2. Are there only new, OTP NRAS properties available? Any established?

3. Do we have a second hand NRAS market yet?


Note - I can see an OTP NRAS would be more favourable compared to a regular OTP, however I need to compare to what I would buy instead.
Click to expand...
 
What specifically are your questions David? There are a number of questions/assumptions/half questions across the thread, so if you can outline exactly what you'd like answered, I'll try and answer them as best as possible
 
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