If you've got taxable income and can borrow for servicing properties - 2 x NRAS properties. Will get you very close to that and can easily be done <100k.
Cheers,
Redom
This is correct. If you have a taxable income, let me give you a real world example - 1 bed villa in Orange 65M2 + courtyard + parking. 260K.
Let's say you contribute 10% (26K) + stamp duty (2,590 - you get a 5K discount on stamp duty in NSW for new stock under 650K) + a 5K cash buffer + legals, depreciation, building and pest (lets call that $2500)
Total contribution = $36,090.
You borrow the other 90% + LMI - which is @ $237,600 - you borrow at 4.69% fixed for 5 years in this particular scenario. ( ME Bank - who do 90% + LMI for NRAS)
Interest Costs for 12 months = $11,143.44
Body Corp = $1300 per annum
Rates = $1200 per annum
water = $400 per annum
landlord insurance = $300 per annum
Property management = $1071 per annum ( based on 9% + GST of NRAS rent of $208 per week)
Total expenses = $15414. Lets just call it $15,500 to be conservative
Market Rent $260 per week. NRAS = $208 rent per week
Total income = $10,816. Lets call it $10,500 to be conservative
Income = 10.5K. Expenses = 15.5K. Pre tax loss = $5,000 ( this is an allowable deduction)
Depreciation = $9,000 (this is also an allowable deduction)
Total allowable deduction = $14,000
If you are paying a MTR of 32.5% , your ATO refund is $4,550 + $10,661 NRAS , for a total return of $15,211 after tax. take 5K and replenish your buffer to cover the pre tax loss for Year 2, and your real net CF + result is @ 10,211 Your contribution was @ 36K, and your tax free return ( after all costs have been accounted for) is 10.2K. That's a touch over 28% return on 36K - tax free. Rinse, repeat x 10 years. $0 from your pocket, other than the initial 36K.
If you are paying a MTR rate of 37% , your ATO refund is $5180 + $10,661 NRAS. Total return of $15,841. $10,841 CF+ after setting 5K aside for Year 2 buffer. 30% tax free return on 36K Rinse, repeat x 10 years. $0 from your pocket, other than the initial 36K.
You only get the 5K stamp duty rebate on 1 property per financial year in NSW, so the 2nd purchase would cost you 41K instead of 36K. bUt the numbers would be pretty much the same. So for property 2, Rinse, repeat x 10 years. $0 from your pocket, other than the initial 41K.
That's one way to generate more than 20K tax free ( $400 per week give or take) from just 77K of your cash. Then, to improve it further, if you had done something like this and used 77K, left 23K alone, waited 1 year then added the 20K of CF+ tax free money to your 23K to fund the 10% deposit , stamp duty , buffer and legals for a 3rd NRAS property, you'd then be generating over 30K tax free per annum , indexed to rental CPI so increasing annually for 10 years - but with all your debt fixed at 4.69% for the first 5 years, so no shock factor to worry about. No smoke. No mirrors. The numbers are correct
Then, even if you sell after 10 years and just get your 260K + stamp duty + legals back.... in otherwords, even if you get next to $0 growth - which is very unlikely but lets humour the cynics- you've got all your 100K capital back, have not had the joy of paying CGT, yet you've still generated over 300K of tax free $$$ ( ie a 30% + return ) for 10 years.
Not sure where else you can take 100K and turn it into that sort of tax free money in any other form of asset ( non NRAS resi, commercial, or anything else you can think of) without extreme risk.