Puzzle Finance Blog

Scheme worth broadcasting

Investors are cottoning on to a poorly sold government initiative.

It's one of the most tempting property investment opportunities in years, but only a small number of investors have tapped into the National Rental Affordability Scheme (NRAS).

The federal government-backed program is designed to provide 50,000 affordable rental properties by 2014.

The scheme isn't widely known but is rapidly becoming something every buyer should consider.

The federal government is offering generous subsidies to investors - up to $114,000 during a 10-year period - in return for investors offering rental properties to approved NRAS tenants at rents 20 per cent below market rates. The scheme provides an annual tax-free incentive of at least $9524 for 10 years.

The incentive increases each year in line with the consumer price index and is structured as a refundable tax offset. That means a taxpayer will have the incentive offset against his or her tax bill. If investors have no tax to pay, they receive the incentive as a refund.

There are caveats, however. The NRAS is focused on building new dwellings; established apartments and houses aren't eligible. And the majority of NRAS approvals so far have gone to projects run by community housing organisations.

The scheme is not directly available to small-scale investors; it favours multi-dwelling developments, so small investors are most likely to access the incentives by buying into a developer-led project.

The NRAS's cash-flow benefits should also be evaluated if you plan to build townhouses or units on land you own.

Many investment properties produce negative cash flow. Investors, especially first-timers, often pay $7000 or more a year out of their own pocket to make up the shortfall between rental income and outgoings. But through the NRAS, you can produce positive or neutral cash flow early in the life of an investment.

If you choose wisely and structure the financing properly, you'll also enjoy low holding costs and capital growth.

Units and houses under the NRAS scheme are starting to spring up in the inner city, as well as outlying areas. The scheme helps workers such as nurses and police officers, with eligible tenants able to earn up to $125,590 a household.

Michael Matusik, of Matusik Property Insights, says the scheme's merits have been poorly communicated by the government.

While the incentives are attractive, Matusik is also impressed that investors can exit the scheme at any time with appropriate notice and without financial penalty.

He says the "design and quality of NRAS dwellings compares favourably with any private non-NRAS dwelling".

For more information about the national rental affordability scheme, see fahcsia.gov.au/nras.

Posted by Chris Tolhurst - Domain (Fairfax Digital) on 1st November, 2012 | Comments | Trackbacks

Bookmark and Share

The trackback URL for this page is http://www.puzzlefinance.com.au/trackback?post=26460909


There are no trackbacks for this post


There are no comments for this post

Post a Comment

HTML is not allowed in comments, http://... will be automatically linked.

Name (required):

Email Address (not displayed):

Comment (required):

To help prevent spam, please enter the word fact here:

Puzzle Finance Blog

About Puzzle Finance


September 2017
August 2017
July 2017
June 2017
May 2017
March 2017
February 2017
January 2017
December 2016
November 2016
October 2016
July 2016
June 2016
May 2016
April 2016
March 2016
February 2016
January 2016
December 2015
November 2015
October 2015
September 2015
August 2015
July 2015
June 2015
May 2015
April 2015
March 2015
February 2015
January 2015
December 2014
November 2014
October 2014
September 2014
August 2014
July 2014
June 2014
May 2014
April 2014
March 2014
February 2014
January 2014
December 2013
November 2013
October 2013
September 2013
August 2013
July 2013
June 2013
May 2013
April 2013
March 2013
February 2013
January 2013
December 2012
November 2012
October 2012
September 2012
August 2012
July 2012
June 2012
May 2012
April 2012
March 2012
February 2012
January 2012
December 2011
November 2011
October 2011
September 2011
August 2011
July 2011
June 2011
May 2011
April 2011
March 2011
February 2011
January 2011
December 2010
November 2010
October 2010
September 2010


Purchase or Rent (1)
The Age (1)