Would you like a $9,140 annual rebate with that investment property from the government?

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Would you like a $9,140 annual rebate with that investment property….from the government?Jenna Ford
By Jenna Ford

 

NRAS information for property investors

What is NRAS?

The National Rental Affordability Scheme (NRAS) is an initiative by the Australian government (federal and state) that seeks to address the shortage of affordable rental housing inAustralia.

The Australian government has committed approximately $1 billion to the scheme over four years to stimulate the construction of up to 50,000 homes and apartments.

The goals of NRAS are to;

  • increase the supply of new affordable rental housing,
  • reduce rental costs for low and moderate income households, and
  • encourage large scale investment and innovative management of affordable housing.

What are the mechanics of NRAS?

Investors involved in the NRAS scheme will be offered a $9,140 rebate which will be paid annually and indexed for 10 years if the following criteria are met:

  • investors offer tenants a 20% discount of market rent,
  • investors pay for three valuations over the 10 year period to verify market rent,
  • an annual audit of accounts which will incur a $685 administration fee, and
  • the property to be managed by an NRAS approved property manager.

What are the benefits of NRAS to investors?

The benefits can be summarised as follows:

  • a $9,140 cash payment or tax offset,
  • indexed yearly by inflation (4%) for 10 years,
  • pre-qualified tenants readily available,
  • tenants are middle income earners,
  • low vacancy rate,
  • market anomaly – high yield + high growth,
  • ability to turn negative cash flows into positive cash flows, and
  • exit strategy not limited – if sold within 10 years, the new buyer has option to enter scheme or not.

What to be careful of?

  • You need to have a clear strategy for wealth creation. Don’t base your property investment decision solely on the fact that NRAS is available.
  • NRAS is designed to increase the supply of affordable housing. Properties are not necessarily located in areas which are expected to provide investors with strong capital growth.
  • Do not discount the role of research in making your decision. Only deal with reputable real estate agents and investment property organisations. Chan & Naylor Finance has access to a selection of excellent NRAS properties in S.E Queensland via a strategic partner and so shoot us an email if you would like to review some of these.

What type of tenant will this scheme attract?

NRAS tenants tend to be key workers such as childcare workers, nurses, police officers, fire fighters and paramedics. Approximately 1.5 million Australians are currently eligible to rent NRAS properties.

Investors can pick any tenants for NRAS properties (except in ACT and QLD where tenants go through respective government agencies) as long as tenants do not exceed the following income thresholds:

 

Table

 

Whilst not all lenders accept these security properties they are becoming more willing to consider them as a security property, which is good news. The lenders’ positions are evolving weekly and so do check with us around finance options and shoot us an email if you would like to review some NRAS style properties.

Look forward to meeting you “face to face”.  Shoot us an email if you would like to know more at finance@channaylor.com.au

Disclaimer:

If you intend to rely on any of the information in this document to satisfy liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law, you should request advice from a registered tax agent. This information does not take into account your individual objectives, financial situation and needs. You should assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision. The information contained in this document is given in good faith and is believed to be correct at the time of publication, but no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors or omissions (including responsibility to any person by reason of negligence) is accepted by Chan & Naylor, its officers, employees, directors or agents.

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