That is quite simply, misleading. You are not really getting $10K per year "comparatively speaking" because you also need to account for getting only 80% rental income.... If you want to compare apples, then let's have at it, and discard your oranges...
As for the focus on growth & the -ve geared assumption, this not necessarily representative of the differing perspectives being offered in this thread, IMO. What is being said is that an alternative POV is to consider enduring CASHFLOW, not just equity or CG or "limited tenure" tax incentives.
The goal is to generate $200K in enduring Cashflow. Not grow some ridiculously large equity position. Sure, equity becomes the capital that generates the cashflow however, the amount of equity, whether it grows etc... is not necessarily the focus. (note: capital protection is importnt) Enduring Cashflow is the focus.... what happens after 10yrs when your NRAS "tax free" payment stops? What then? Sure, NRAS is a useful tool to get to an enduring financial position, but it has a shelf life & is not the enduring solution in & of itself.... Finding a structure to provide an enduring cashflow is just as important as the journey to get there in the first place and it just might be possible for the journey & destination to be the same.
Ie. high yielding assets that don't rely on temporary government incentives that can be held indefinitely and whose yield in not dependent on CG.
That is the alternate perspective being presented IMHO.
FWIW, I think NRAS is a useful tool, but there are better yielding assets out there....
woh. Slow down there cowboy. I absolutely accounted for the reduced rent. Read the post again. I have not been at all misleading. I use a figure of 6-8K CF+ in every post I write about NRAS, when discussing the net result. I do not use a figure of 10K in that context and never have. You can check as many posts as you like and you will find I am absolutely consistent with the maths. So I reject your accusation completely.
What I did say ( and was correct in saying) is that you will receive 10K in tax free incentives per annum (well, $9981 and increasing so far at increments of 5.69% since 2008) for a period of 10 years, for each NRAS approved property that you own and enter into the scheme, and it can turned into much much more.
And please note that in my modeling I have not accounted for the annual increments to the incentive, which have averaged 5.69% since the scheme was introduced in 2008. I have not factored in the increases in any way. So in fact, I have quite deliberately understated the cash flow outcome per NRAS property per year, for years 2 through 10, and the subsequent additional debt reduction that will facilitate across the 15 year timeline of my proposal. Hardly misleading.
I think you would have to agree that because I have used figures of 100K per property instead of the more likely figure of 125K per property, across 12 properties and across 15 years, I have kept well over 300K of tax free money out of the cash flow equation which I could quite justifiably have included.
Anyway, to answer your query- What happens after 10 years is this; the property reverts to normal market rent and I stop getting NRAS incentives. The result= If market rent on a 350K property started at $350 per week in Year 1 and increased 4% each year, when the NRAS roles off after year 10 the rent would revert to $518 per week. I would have 280K of debt still secured against that property. i.e 80% of the original 350K purchase price- Ive already accounted for paying down the 20% deposit that was provided from the 560K from my PPOR ( twice) if you review what Ive mapped out.
That provides me with a return of $26,936 against 280K of debt, or a yield of 9.62%, from year 11
If I had achieved 5% rental increases I'd roll out of NRAS at $570 per week, or $29,640 per annum, for a yield of 10.58%
If I had achieved 6% rental increase I'd roll out of NRAS at almost $627 per week, or $32,604, for a yield of 11.64%
This is enduring cashflow from year 11 onwards for the 6 ex NRAS properties from the first "batch" as outlined in my proposal. So on the first batch of 6, I'd be generating between $161,616 and $195,624 in income by year 11, and 2 of them carry no debt.
By the time the second "batch" of 6 NRAS rolled out of NRAS, the first 6 would have been with you for 15 years, and 2nd 6 for 10 years. You'd have 12 ex NRAS properties generating the following;
at 4% rental growth - $630.32 p/week or $32,776.65 each (x 12) 11.70% yield
at 5% - $727.62 p/week, or $37,836.24 each (x12) 13.51% yield
at 6% - $838.80 p/week or $43,617.60 each (x 12) 15.57% yield
So now I'd be generating between $393,319.80 and $523,411.20 in rent. I'd still have 2.8 Mil in debt (280K x 10 properties) so you may be right- the OP need not necessarily keep them if he doesnt want to. he would have at least $8.4 million in Investment property assets if we allow for a 350K increase in the value of the property over 15 years, so could easily sell 5 of them ( 700K each ) pay off the remaining debt and his CGT bill and that would leave him with 7 properties generating between $229,436.55 and $305,323.20 in enduring taxable income, but with very minimal deductions to offset against.
I still believe my proposal delivers a fantastic outcome - even retaining the debt, he will earn between $393,319.80 and $523,411.20 gross. And interest on the debt ( lets assume 2.8 mil x 7% - 224,000) may actually help, as it can offset some of the enormous income being generated by the properties as outlined above.
So yes, I agree its not about assets. But he wont get to where he wants to get (income wise) without building them, because they are what generate the income. And he wont get the assets built up without the NRAS cash flow and the right bank calcs.- not unless he earns hundreds of thousands. And your CF+ strategy wont get him there because you will run out of borrowing capacity well before the end goal is reached.
Unfortunately you still havent been able to demonstrate with numbers, how you can generate the income I have been able to demonstrate for the OP, without using NRAS.
I believe in numbers to make a case and I have produced them. I've taken 560K of equity and mapped out a simple an clear strategy that produces over $8.4 million in assets ( at least 5.8 million if and when debt has been paid down) with no out of pocket costs, in 15 years. Ive done it with a very conservative understatement of the NRAS cash flow. Ive done it working on extremely conservative Capital growth assumptions. But I have still mapped out a phenomenal return on investment in 15 years. My strategy also left an enduring income well above what the OP wants. You have not produced any numbers whatsoever to support your arguments, so we have probably exhausted the discussion at this point.
Please, before you ever accuse me of being misleading....
