Advice and comments neede for NRAS property ?

The point I have always made is that NRAS is an accelerant that should form some part of a portfolio. Growth is great, of course - but it 's only uselful if you can access it or if you sell. It will only help you reduce debt if you sell. I guess Im saying that the value of debt reduction has been ignored by many previously, and now I think it's value is becoming apparent. NRAS accelerates the debt reduction.
For those starting out, who may still have a large PPOR mortgage - an NRAS or two will pay off later on ( 6,7,8 years later) when the PPOR mortgage has been reduced significantly. This is where it's value lies.... the longer term compounding benefits.
Even I dont own all NRAS - but I know it's value as an accelerant and if I hadnt paid down the 440K PPOR mortgage in the last 2 years, I'd be in a weaker position, borrowing capacity wise - than I am now.
Just like in a share portfolio, where it's just sound thinking to have some high yielding defensive stock, NRAS serves that purpose for a property portfolio. Think of it as a fully franked dividend for 10 years.

 

Hi All,

I just want to share the blog article from a professional Investor & buyers agent (Todd Hunter) which summarize and educates people that NRAS is such a high risk gambling scheme:

http://www.wheregroup.com.au/nras-are-you-kidding/
http://www.wheregroup.com.au/nras-are-you-kidding-part-ii/
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I guess it is not worthwhile to try for the sake of getting income / yield.

 

Yes Ive read this , and debunked it several times. In a nutshell. Todd's article is littered ( and I do mean littered) with errors. Just to point out a few ( several actually)

He says NRAS is primarily available on House and Land packages. In fact, less than 20% of the 40,000 NRAS dwellings approved since 2008/9 are houses.

He says the tenants are basically low income/pensioners etc. Rubbish. Couples with 3 children can earn up to 140K and be NRAS tenants. Anyone here believe 140K is pensioner or dole type income? The real facts are- 1.5 Million full time PAYG earners qualify under the NRAS income tests. That is the ABS talking, not a bloggers opinion.

He says the tax credits are adjusted to CPI - implying rents increase at 3% or less. Incorrect again. NRAS is indexed to rental CPI, which is a sub category of CPI, and has averaged 5.2% increases since 08/09 vs 2.8% for CPI during the same period.

He says they are Govt tenants and more difficult to remove if they get behind on payments - they are not. Standard state and territory tenancy laws apply- No harder to evict. No easier to evict. Simple as that.

He says you can only onsell to investors - wrong again. You can leave NRAS anytime you like.

He says NRAS sellers never buy any. He thinks we should own 10 or more. I do own 10+

He is only right about one thing - if you buy from a traditional marketer - typically based in SE Qld and even more typically not remotely interested in valuing anything they sell BEFORE deciding whether to sell it or not , you may well get fleeced. But that's got nothing to do with NRAS and everything to do with a project marketing industry still stuck in the 80's, where they wont get out of bed for less than 30-40K + commissions. It has been happening on non NRAS stock for years and years, and will continue well after NRAS. I have no issue with large commissions, as long as its coming from the developers end not the buyers end. For Todd to imply this is somehow an NRAS related issue only, is misleading in the extreme.

I am proud to say I have sold over 330 NRAS properties since commencing my business 3 years ago, have only ever had 1 valuation shortfall and my clients ( many of whom frequent these pages) would likely all tell you they have been very, very pleased with their NRAS purchases.

Like all things - there are always 2 sides.

 

NRAS is powerful when formed part of a strategy, it can work for you. You do need to be careful, as it does often attract spruikers and worrisome deals. Extra DD is a must.

In terms of CG, i've got four of them purchased for ~$1.35m. Done vals recently and they were back at ~1.6m. In 18-24 months. Nothing extraordinary, but does show growth is definitely possible. The key is to buy well.

It formed part 1 of an investment strategy. Realistically, when the markets moving at 7%+, NRAS probably isn't the go. Most that would've bought 1.35mill in assets through the current boom would've done better. Also, there are definitely better $$$ making and faster $$$ making strategies out there. I wouldn't say go blindly for NRAS as a strategy, but it can be a powerful part when viewed holistically as part of a portfolio.

This key to buy well, realistically, can be a painful process.

I've dealt with euro and most of his major competitors. There really needs to be a careful vetting process - i'd guesstimate that over half NRAS stock is overpriced, OTP marketed, just steer clear from. The mechanics/developers behind the scenes can drive up the price of a dwelling away from FMV.

You need to watch out for it and search for a good deal (and valuations that stack up).

I'm pretty sure the success of euro is based on doing some of this legwork for you...most of what he sells stacks up or he'd probably be the first to advise you to walk away (against his own incentives). He may not have all the options on the table (theres 40000 NRAS's out there!), but the ones he does have often work.

In terms of finance:

Be wary of OTP financing risks and understand your position before jumping in. In post APRA world, talk to people about this and be very informed.

With regards to financing - as well as being aware of how the borrowing power calculators may work for/against you (well utilised, as euro mentioned debt reduction, it can be a + for you), you need to be aware of potential equity release issues. This is the big one, if your properties have grown, it can be very difficult to release equity if the title has NRAS noted on it. The majors won't touch it, the insurers won't either. At sub 80, you've got a shot on exception.

Cheers,
Redom

 

If buying NRAS in Qld, just be aware that a criteria for NRAS tenants is that they must come from the State's Housing Register. All other criteria apply (income etc), but they will be people who have been through the public housing intake system and been deemed eligible for social housing assistance. Even if someone is on TICA or previously been evicted from social/community housing they won't be excluded from the social housing register so they could be nominated for your property.

This is not necessarily a deal breaker, but do factor into your risk assessment. It's worth spending that bit extra on the best landlord insurance.

 

One thing I was told by one PM ( haven't bothered confirming if it is true , as not relevant ) is that if you take a tenant who does show up on TICA , your Landlords insurance may not cover you . The point about Qld was relevant in our situation as the story I mentioned was in Q'land .

Cliff

 

I was thinking, without euro's continued great contribution and posting in SS and pchat, NRAS is just like another Nathan B....
You either love it or hate it.

 

Euro has provided excellent information on both NRAS and finance generally - he is a valuable contributor to the forum.

 

Euro has provided exemplary service for my property investments ... Shahin is 100% correct. Review his posting history to assist in forming your own views on NRAS as an investment vehicle.

 

Didn't realize investors can leave NRAS anytime. No extra cost or restrictions for exit?

What is the story of the only client who had valuation shortfall? Where is the property?

 

I hope you aren't comparing me to him.

1. I don't make unsubstantiated claims about the number of properties I own - every one of my clients knows EXACTLY what I own, how my finance is structured and I am a completely open book on that. Ive posted details on here many times as well. Everyone is free to review that information. No smoke. No mirrors. Just straightforward facts and figures.
2. If I did ever go on Sunrise, I feel confident I could speak intelligently on debt structures, cash flows etc - I wouldn't be a deer in the headlights the moment Kochie asked me a question.
3. I dont post youtube video's where my high level analysis of negative gearing equates to - "negative gearing sucks balls - and the reason behind that is there's nothing good about it" It's high level stuff !
4. I dont charge clients any money for my time. Every client has direct access to me - 7 days a week.
5. But perhaps more importantly - I generate @ 50% of Nathan's claimed income from a dozen properties, not 180!

On a separate note - gee it would be good if the Cowboys get up this Sunday!

 

not @ all.
Time and time again, you were able to provide a helpful information for those needed NRAS, along with your other great non-NRAS commentaries.