NRAS Explained Jul 2010

“ It (NRAS) represents a new investment opportunity in the Australian market. More than 1.5 million households will be eligible for tenancies under the Scheme - a large and diverse pool of potential tenants for investors in affordable housing.” The Hon. Wayne Swan (Treasurer) Copyright Queensland Property Investment © 2009

NRAS
The National Rental Affordability Scheme
Using the QAHC Model
A Summary Copyright Queensland Property Investment © 2009

NRAS What’s in it for you?
A tax free incentive of $9,120 per dwelling each year for 10 years
An incentive paid to owners as a tax certificate at the end of each tax year
In exchange for the tax free incentives new houses are rented at a discount of 25% to market rent to eligible tenants - resulting in higher occupancy rates and longer leases
Copyright Queensland Property Investment © 2009

NRAS
4 bed house & land $400,000
Market rent per week $400 $20,800
NRAS discount 25% -$100 - $5,200
Reduced rent per week $300 $15,600
Tax free annual subsidy $9,120
Gross cash per annum* $24,272
A typical NRAS enhanced property investment yield Copyright Queensland Property Investment © 2009 * (before allowing for normal operating expenses)

NRAS
NRAS Incentive is indexed annually to the national rental component of CPI. Currently the rental index is running at between 6 & 12% per annum (8.4% on 08/09)
Rent incentive is indexed annually to the state rental component of CPI. Currently the rental index is running at between 6 & 12% per annum (10.2% on 08/09)
Market rents are subject to independent assessment in years 1,4 & 7
Suitable stock can range from studio apartments at $200 pw to family housing at $400 pw
The important numbers Copyright Queensland Property Investment © 2009

What’s the value of an NRAS certificate?

4 bed house & land $400,000
Market rent per week $400 $20,800
NRAS discount 25% -$100 - $5,200
Reduced rent per week $300 $15,600
Tax free annual subsidy $9,120
At top rate of tax (46%) worth $16,890
Effectively producing $32,490
A typical NRAS enhanced property investment yield now looks like this... Copyright Queensland Property Investment © 2009

NRAS Income thresholds for eligible tenants
Parent/s with 3 children earning $98k - $123k* Parent/s with 2 children earning $85k - $106k* Parent/s with 1 child earning $71 - $89k* Singles with no children $41k - 52k*
Income thresholds are indexed and can be exceeded by 25% for up to 2 years and still remain within NRAS tenancy eligibility criteria.
Normal tenancy pre-checks are required & income levels do not guarantee eligibility.
Groups particularly targeted are community ‘essential’ persons such as policemen, firemen, teachers & nurses

WHY QAHC ?
The only guaranteed supplier of a TAX FREE incentive by agreement with the ATO
The only not-for-profit organisation working under the NRAS banner (versus fund management structures)
Provides a fully comprehensive property management model

The QAHC has arranged Property Management Agreements that include ‘all in’ costs. There are no extra charges for things such as
Annual Rental Increments
Letting Fees
Re-letting Fees
Advertising
Administration etc.

The Property Manager must pay rent for the first two weeks of any vacancy that occurs after a NORMALLY occurring end of lease situation. Abnormal vacancies are covered for up to 15 weeks under the extended insurance Policy put in place by the QAHC – another significant benefit they offer.
Copyright Queensland Property Investment © 2009 RENTAL SECURITY

NRAS
Long term tenancy agreements provide tenant & landlord security
Responsibilities of tenants improved through fear of losing NRAS discounted rent ($5000 reasons to pay rent on time and look after the place)
There is NO variation of discernible quality of housing within estate
NRAS housing is randomly distributed through estates generally at a maximum take up of 30%
Offering peace of mind to owners Copyright Queensland Property Investment © 2009

NRAS
The property can be sold to another investor with the balance of the 10 year lease in place
The property can be sold to an owner/occupier, however the NRAS certificate would be lost
The NRAS certificate can be transferred to another property that fits the criteria in the immediate vicinity.
What happens if I want to sell the property? Copyright Queensland Property Investment © 2009

NRAS disclaimer
The information recorded in this document is provided on the basis that readers will be responsible for making their own assessment of the information and are advised to verify all relevant representations, statements and information. No liability (in contract, tort or otherwise) will be accepted for any loss or damage incurred as a result of reliance upon any material contained in this publication, or for any information or advice provided in this publication or incorporated into it. Remax Property Associates nor its representatives are permitted by law to offer you financial (including tax) advice nor make recommendations.

NRAS Explained Jul 2010

by David Hedley Ward on Jul 22, 2010

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