Comments on: Investor Alert: Is This The End Of NRAS?

By: Shookie

Shookie — Wed, 17 Sep 2014 13:23:51 +0000

This point is interesting :

“Firms that assist with compliance and monitoring of NRAS commitments” – I’m assuming this is referring to the various Nras consortiums? I wonder if there is any government regulations as to how these consortiums operate and how much they are allowed to charge for aspects such as property management (given that nras properties typically attract a premium in this regard). Has anyone had any experiences they would like to share?

By: SK

SK — Sat, 12 Jul 2014 21:52:15 +0000

If I were to buy a brand new property approx 15 km out of Brisbane, in a complex of just over 100 houses with approx 45 that have been allocated to NRAS but not mine. What would you suggest.

By: skidive

skidive — Sun, 25 May 2014 10:43:39 +0000

I agree that the biggest negative with NRAS is certain developers ripping people off in certain developments by adding 10-20k to the price. The biggest fool if a property fails could be the investor. Many investors purchased NRAS because the property possessed an NRAS license. Many investors purchased an NRAS property because it was NRAS, Ignoring the fundamentals of research and better decision making.
The underlying fundamentals of investing more successfully should have been adhered to. For example, but not limited to: trends in yield, capital growth, vacancy rates, days on market, as well as infrastructure and ‘population growth in conjunction with supply and demand’ determining decision making. If a purchaser followed the fundamentals of property investing and only then chose an NRAS property, priced the same as a non NRAS property, in the same location, they are bound to achieve the same result as someone who purchased a property with no NRAS license on it, in the same location in the same development. With the further assumption they were not stupid enough to purchase an NRAS property in a development where all the properties had NRAS licenses on them.

After 10 years, the market rent on an NRAS property would have increased, so with no NRAS remaining on it, it would probably be positively geared anyway, it would, at the very least be the same as a non NRAS property in the same development, again, if purchased properly. I do not believe therefore that after 10 years people will suddenly dump all their ex-NRAS properties on the market just because their 10 year license has ended. Based on 2 assumptions: 1. Capital growth potential remaining, external of any affect of NRAS expiring and 2. It being neutral or positively geared based on increased price and yield over the ensuing 10 years from having purchased it.

The real risk now is the increased likelihood of more developers ripping more people off as it is now potentially becoming more in demand with a very visible limited supply. I also am aware of information suggesting there are still 18,000 licenses out there.

By: Scott Abela

Scott Abela — Sun, 25 May 2014 09:16:48 +0000

Steve,

I’ve enjoyed all your stuff over the years mate, but we recently bought a NRAS property and the comment you make above about two properties one at $400 and the NRAS at $320. You said that it equates to a value reduction or almost $60k and that all things being equal which would I buy.. The NRAS property is recieving $192.30 each week in tax free NRAS subsidy, meaning its rent is $112.30 BETTER off than the non-NRAS property.. Being tax free and on a marginal rate of 40% thats a sweet earner of $512.30 per week.. Compared to the non-NRAS property the NRAS property is light years ahead so Im not sure why any investor would chose the lower return? Tax free money is the best there is, a small rent reduction for a larger tax free return is clearly a winner, in fact, I would argue its far too generous a subsidy and rightly has been cancelled. My experience with NRAS was positively geared from day one, but a tax free $10,000 helping balance the tax time very nicely. Love your work mate, I particularly agree with your points on an NRAS exit strategy, for us, we plan to keep it well past the NRAS end, by which time the rent returns to market and by then, will be even better than now. NRAS, is frankly, another stupid government handout thats too generous..

By: Steve McKnight

Steve McKnight — Sun, 25 May 2014 08:03:27 +0000

I recommend listing your concerns and then devising strategies to minimise risk in advance.

For instance, you should have plans in place for vacancy, management, body corp, etc.

Steve

By: Steve McKnight

Steve McKnight — Sun, 25 May 2014 07:59:31 +0000

Thanks for clarifying and contributing. Where did you get your data from?
Steve

By: Steve McKnight

Steve McKnight — Sun, 25 May 2014 07:57:46 +0000

While it’s not a strategy I would adopt, NRAS can still be effective in situations where there is unlikely to be a supply glut.

As a rule, any investment that requires a tax incentive to be worthwhile should be very carefully and critically examined.

Steve

By: Steve McKnight

Steve McKnight — Sun, 25 May 2014 07:53:41 +0000

Hi,

It’s good the property has appreciated against cost, but how has it performed against market?

If the investment is working for you, then great. Just keep in mind your exit as indicated in the article.

Steve

By: Steve McKnight

Steve McKnight — Sun, 25 May 2014 07:49:44 +0000

Thanks for the encouragement. Steve

By: Young investor

Young investor — Sun, 25 May 2014 06:40:13 +0000

I am a young investor and just committed to a NRAS property which is due to complete in the next few months. This article is giving me some doubts if I have make a right decision.

I am not into some knee jerk actions, but is wondering what are the options should the investment turns sour.