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Latest Finance offerings, including interest rate trends
How does NRAS work & the Benefits
A great example of a current NRAS property deal
Fixed interest rates – To fix or not to fix?
3yr Fixed rate 5.42% (Full Doc loans)
5yr Fixed rate 6.24% (Full Doc loans)
I believe in Multi – Banking
Do not Cross Securitize
Over 90% of home owners I meet have the wrong finance structure
NRAS – What is it?
The National Rental Affordability Scheme
With rents to grow at approximately 4% - 7% p.a. over the next two years for most cities, mainly due to lack of building new dwellings, treasurer Wayne Swan launched the NRAS scheme in July 2008.
It is estimated that the upper end in rents will stay flat or fall while the middle and lower ends are expected to grow significantly.
The shortage of houses across Australia in 2008 has been estimated at 85,000 and possibly increasing to 213,000 by 2013.
The National Rental Affordability Scheme or NRAS was launched for the purpose of providing assistance and funding to increase the supply of affordable rental dwellings, reduce rental costs to low to mid income earners and to encourage investment on a large scale to provide more affordable housing.
NRAS is expected to deliver up to 50,000 affordable rental homes by 2014.
If the investor reduces the rent by 20% (may vary according to incentive provider) of the market rent, the government will provide an incentive of $9,981 per annum. This payment increases in line with CPI.
Eligible tenants are determined on an income basis with the service industries such as police, teachers and nurses targeted as potential tenants.
The incentives are TAX FREE. Reducing the rental by 20% means negative gearing has increased benefits, especially higher income earners.
NRAS – What are the Benefits?
Benefits of NRAS for Investors
Improved Rental Yields
The national Rental Incentive is income tax free, indexed to the rental component of the Consumer Price Index (CPI) and is complemented by existing taxation arrangements including depreciation.
With rents at 20% below market value and a large pool of eligible tenants, investors can expect reduced vacancy risk.
With rents at 20% below market value investors can be more selective in their choice of tenant. Certainty of contributions from the Australian and State governments for a period of 10 years.
Government Subsidised Property Investment
Secured Income Stream (10 Years)
Cash Flow Positive Investment
Maintained and Managed
Approx $100,000 Plus Tax Credits Over 10 Years
There is no limit to the number of NRAS properties that can be held by an investor.
An example of an NRAS deal
If the total purchase price (i.e. $585K) is borrowed this investment returns in excess of $426 per week after all Bank Interest & after all costs associated with operating the property. This return is based on a total cost (ex stamp duty, legal’s etc) of $585,000 with an NRAS allocation on each tenancy. Of course if you elected to purchase the total property, (i.e. the two lots at total cost after construction of $1.170M), therefore ending up with 2 duplexes (i.e. 4 separate tenancies) then the positive return would double to $ 852 per week.
Using RP data’s 5 year property growth forecast & extending that out to 10 years the projected value of the property would increase from $585K to $988K in that period.
This is not your standard NRAS style property investment as these properties are not units in complexes surrounded by other NRAS tenancies, these are stand alone Duplexes scattered in & amongst established bayside suburban streets. These duplexes have been cleverly designed & can easily be converted from a duplex into a large 5 bedroom home should the owner ever wish to move into the property as an owner occupier. Strata titling the property may also be another option down the track.