I agree that the underlying investment is what's important here and unless I'd buy the property without the NRAS entitlement then I wouldn't be buying it with the entitlement (although the NRAS incentive certainly does make some properties a lot more appealing). Take the Kawana Waters property for example: a 1 bed, $325k property with the estimated weekly rent at $320 discounted to $256 (NRAS 20% discount), with all things being equal the NRAS property will bring in an after-tax cashflow of $8,417 p.a. compared to the non-NRAS after-tax cashflow being only $496. Because of the tax incentives as part of the NRAS scheme (which I'm still getting my head around), if you have enough of these properties there is the potential to not only pay zero tax but to have the ATO pay you.
One thing I didn't consider, and thank you for pointing it out Euro73, is the available market under the NRAS scheme being dependant on the size of the unit. I'm only looking at a 1 bed apt (all I can afford), in Kawana Waters this is $325k, in Broome I'm looking at $365k. I imagine I'd therefore either be aiming for a single tenant (earning less than $45,956) or a couple (earning collectively less than $63,535). By my calculations, the discounted rent of $256 p/w would come in just under 29% of the single tenant's income and at nearly 21% of a couple's combined income. Although I was envisaging the market being predominantly workers/employees of the new Sunshine Coast University Hospital (or other new developments up there), I am told that most retirees would also qualify for NRAS and can take advantage of a brand new property at the discounted rent (in the case of Kawana Waters - with a nice view of the water).
So by the sounds of it either Broome is considered too risky by most, or the jury is still out??
See_change - in answer to your question on the commission payable - I'm still not sure what this is for Broome, but for Kawana Waters (for which I received the contracts last night), the commission itself is $3,575, lead generation fees nearly $6k and Marketing fees $8.4k - given that the agent knew very little about the development - and merely forwarded my email of questions to the developer - he's done quite well if I proceed with the purchase.
Just a little more information worth knowing - I didnt want to burden you with taking on too much information all at once. But it's useful to know, and may give you some additional comfort.
The income figures I quoted on my previous post are the qualifying incomes. But once qualified, tenants are able to exceed the qualifying income thresholds by up to 25% and maintain eligibility, so the income thresholds can effectively be quite a bit more generous than at first glance.
Eligibility is based on a review of the income earned for the
previous 12 months, not your
current salary, so I'll give you an example of how it can work ...
Police Officer goes to Goulburn Academy where he isnt paid for 8 months. he claims Austudy whilst there, graduates, and gets posted to his new gig at Parramatta Local Area Command. His starting salary in his new job is 55K.
He needs somwhere to live, and someone tells him about NRAS, and luckily enough, he finds a nice spanking new 1 bedder in Parramatta which might normally rent for $450 a week, but now rents for $360 a week under NRAS.
So he applies.... To qualify, he shows what he earned for the previous 12 months, which will be very low, because he's pretty much only earned Austudy. It doesnt matter how low, it only matters that it's less than the qualifying threshold of approx 46K, which it clearly will be. So he qualifies, and in he goes as a tenant in a brand new dwelling, paying $90 less per week than he would have otherwise had to pay to live there.
A year later, his income is reviewed by the NRAS Approved Participant ( consortium) and tenancy manager, and he now shows 55K for that 12 month period. So what happens? Well, go to the FAHCSIA website and you'll see that the income threshold to MAINTAIN eligibility is $57,445 -
http://www.fahcsia.gov.au/our-respo...ility-scheme-nras-household-income-indexation
So his 55K salary allows him to STAY eligible, as he is within the 25% range, and he can remain a tenant, and the investor can retain their compliance/eligibility to receive their full NRAS incentive. A year later, his income for the 12 month period is reviewed again, and so it goes, annually...
In order for that police officer to become ineligible to stay in that NRAS dwelling, his income would have to exceed the income threshold by more than 25%, and for 2 years consecutively. Not 2 years in total - two years consecutively.
Another example. Graduate doctor , first year out of University, doing an internship at Westmead Hospital. Starting Salary 60K. They find a nice studio apartment in Westmead, across the road from the Hospital. They were on Austudy last year and working casually during their summer break, so earned less than 30K for the previous 12 months. Voila! - they qualify. 12 months later, their income is reviewed, and they have exceeded the qualifying income by more than 25%. Strike 1.
fast forward 12 months and their income is reviewed again, and because it's increased to 80K, they have now exceeded the qualifying income, twice consecutively, so you need to give them 4 weeks notice, and replace them with an eligible tenant... But they've still enjoyed significantly reduced rental expense whilst your tenant , and you've still received your full tax free incentive for each of the years they were your tenant.
The more you learn about NRAS, the more you come to understand it's a lot more flexible than you may have first realised, and can capture a far greater range of incomes and changes in circumstances than you may imagine.