Give Euro73 a call, he's the guru in this space - my experience with NRAS is there's lots of pumped up marketing destroying valuations. Order upfront vals.
Cheers,
Redom
Positive Cashflow Strategy
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Give Euro73 a call, he's the guru in this space - my experience with NRAS is there's lots of pumped up marketing destroying valuations. Order upfront vals.
Cheers,
Redom
There are a few, but I would say that you can manage your risks by doing your due diligence and I would argue that the risks of capital losses are higher than those of declining rents.
That's very true, I was assuming that others were talking about your run of the mill capital gains from asset appreciation. Manufacturing growth is a whole thing in its own as it generally creates capital gains and an increased cashflow.
Yes, agreed.
Hi Spludgey,
I think in the end we both agree each other more or less mate
I do strongly agree with you when you said " Obviously you should still look that the fundamentals are correct, you want population growth, jobs and infrastructure spending to go into the area where you're buying."
Nice one mate!
Leo
I think in the end we both agree each other more or less mate
I do strongly agree with you when you said " Obviously you should still look that the fundamentals are correct, you want population growth, jobs and infrastructure spending to go into the area where you're buying."
Nice one mate!
Leo
Paul,
You have a strategy, so long as it's been well-researched and you stick to it ignore what others are doing. From very basic appearances, you're doing just fine
When you have children you have to be prepared to stop buying properties for a while (at least I did anyway). Kids are expensive. It's important to buy as many ppties as you can before you have children.
Paul, I think you're doing great--in fact amazing considering you have two dependants and a combined income of $70K. We didn't buy ANY properties for more than 10 years when we had children. perhaps at some time down the track you could sell one of your properties to buy something that will give you capital growth. In any event, if I were starting out on that income, I would be doing exactly what you're doing.
Or just skip that nonsense altogether
But, DT, they bring you such JOY--lol--especially when they're teenagers!.
I am being extremely facetious. I absolutely adore my kids, but parenting is bloody hard. They don't come with a manual.
NRAS is not social housing. The myths and erroneous information peddled by some so called "property guru's" with easy access to forks, or others who have enjoyed "property success' continue to lump NRAS in beside social housing. Without saying so directly, the implication is clear - cruddy tenants who wont pay the rent and will ruin the property. They conveniently ignore the fact that NRAS income thresholds for tenants are quite generous - a single tenant can earn up to $59,111 and a couple + 3 children can earn up to $140,541. 1.5 Million PAYG Australians are eligible under the income thresholds according to the Australian Bureau of Statistics/ATO.
These commentators will also be happy to peddle several other false facts;
1. NRAS properties do not value up. Wrong. My clients will tell you otherwise.
2. NRAS properties are located in rubbish areas. Wrong. Unless places such as Castle Hill, Baulkham Hills, Elanora Heights, Zillmere, Alderley, Annerley, Nundah, Gregory Hills, Enfield, Brunswick, Carlton, Warriewood, Berowra and others where my clients have invested and made good money are actually horrible, ghetto ridden, disasters.
3. NRAS locks you in for 10 years. Wrong! Its a completely voluntary tax benefit- simple as that.
4. NRAS is linked to inflation. Not that this would be a bad thing, having guaranteed inflationary increases as your worst case scenario for 10 years ( which makes it strange that they would suggest this is a negative) but it's actually rental CPI , not CPI, which NRAS is indexed to. For those wondering what that all means in real terms - Rental CPI has performed at 5.2% since 2009, against 2.8% for CPI (inflation) So again, wrong!
Where they were right to be concerned is the topic of house/land spruikers /snake oil salesmen. But this practice of loading up new house/land deals with massive commissions existed well before NRAS and will continue long after. Now I have no problem whatsoever with big commissions being earned by property sellers as long as its coming out of the developers NET rather than being added to the developers NET. In other words , good for them if they can earn big bucks and still deliver you a fairly priced investment property; after all , like anyone else they are entitled to try and maximise their income. Unfortunately that is not usually what happens with such sales groups, and they simply add their comms to the price. That particular problem is easy to avoid though - deal with people with strong reputations for delivering well valued stock - and get things valued.
Paul, you are awesome ! well done
Can only certain people who are acknowledged under the NRAS (ie low incomes) be considered for these houses?
What if i offer 20% under the rental appraisal. Then get someone in i know to rent it out that price and buy me a $50 voucher each week.
Is this highly illegal? Id imagine so.
Also how would one apply? Is it worth it, i read about it that you get roughly 10k per year from it plus the 20% below rent per week.
There are income thresholds that tenants must meet.
https://www.dss.gov.au/our-responsi...ility-scheme-nras-household-income-indexation
Any eligible tenant can apply to rent an NRAS Approved dwelling
The NRAS Tax Credit is currently $10,661 tax free - per NRAS dwelling. This figure is reviewed/indexed annually on May 1 . I would expect the figure to increase to @ 11K in May 2015.
So you buy a property, run it at 20% below market rent- generate X amount of deductible losses from a pre tax cash loss, plus X amount of deductible losses from depreciation (remember- NRAS dwellings are brand new so the depreciation will be maximised) which results in X amount refund from the ATO. Then add $10,661 tax free dollars to whatever your ATO refund is. This is how NRAS generates both a significant tax benefit via negative gearing AND a significant tax free CF+ outcome at the same time.
https://www.dss.gov.au/our-responsi...ility-scheme-nras-household-income-indexation
Any eligible tenant can apply to rent an NRAS Approved dwelling
The NRAS Tax Credit is currently $10,661 tax free - per NRAS dwelling. This figure is reviewed/indexed annually on May 1 . I would expect the figure to increase to @ 11K in May 2015.
So you buy a property, run it at 20% below market rent- generate X amount of deductible losses from a pre tax cash loss, plus X amount of deductible losses from depreciation (remember- NRAS dwellings are brand new so the depreciation will be maximised) which results in X amount refund from the ATO. Then add $10,661 tax free dollars to whatever your ATO refund is. This is how NRAS generates both a significant tax benefit via negative gearing AND a significant tax free CF+ outcome at the same time.
Cash flow positive is largely interest rate driven
A lot of properties are cash flow positive because interest rates are so low. Rents can only go up as far as wages allow. However interest rates can go above 10-15%. In these higher interest rate environments, not many new purchases are cash flow positive.
The opportunity now is to take advantage of low interest rates and utilise rentals to hold the property and build a cash buffer.
If interest rates go too high you will have to sell, unless you want the negative gearing for tax purposes, or you have built a large enough cash buffer.
So while interest rates are low, you are betting that the capital gain will occur at a higher rate than the next interest rates cycle, and you will get out in time. Or you continue to build buffers and hold though the cycles. Because of the tax benefits, and population growth effect on inflation. Property over the longterm has historically outperformed interest rates.
Also when you get it right , banks will partner with you and give you 95% leverage. This is why property investors become wealthy when they buy right and manage their investments.
A lot of properties are cash flow positive because interest rates are so low. Rents can only go up as far as wages allow. However interest rates can go above 10-15%. In these higher interest rate environments, not many new purchases are cash flow positive.
The opportunity now is to take advantage of low interest rates and utilise rentals to hold the property and build a cash buffer.
If interest rates go too high you will have to sell, unless you want the negative gearing for tax purposes, or you have built a large enough cash buffer.
So while interest rates are low, you are betting that the capital gain will occur at a higher rate than the next interest rates cycle, and you will get out in time. Or you continue to build buffers and hold though the cycles. Because of the tax benefits, and population growth effect on inflation. Property over the longterm has historically outperformed interest rates.
Also when you get it right , banks will partner with you and give you 95% leverage. This is why property investors become wealthy when they buy right and manage their investments.
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While I agree interest rate changes can erode cash flow - i'm not sure where you get the idea that rates can go to a 15% level.
Last experienced over 2 decades ago - before a credible inflation targeting was in place. There's well and truly a well set anchor on inflation and thereby nominal interest rates in Australia (and the developed world).
Gone are the days of 1970s level inflation and IR in Australia.
Cheers,
Redom
What do you see happening in the next 2-3 years in regards to rates?
I know hard to predict
ta
z6
