Exiting NRAS

They don't HAVE to exit NRAS to sell. Sometimes the Agents just don't understand the product.

 

Yes I've been watching a property trying to be sold for nearly 6 months with 2 price reductions and everything around it is booming, certainly puts buyers off

 

Need to pass on the details of the future owner or exit. Future owners asked to exit it.

 

NRAS shouldn't affect the sale (as mentioned it can be easily exited upon settlement)
More than likely the type of product (usually townhouses/apartment or poorly located house) would be the reason

 

I think it just scares people off due to the confusion and some NRAS buildings weren't exactly built to a great standard

 

It was built for affordable housing so expect the spec to be low spec but yeah your right

 

At one stage I looked at an NRAS property that was much cheaper than other similar properties, and the agent basically told me it wasn't worth as much because it's NRAS and you'll get crap tenants. Not hard to see why it wouldn't be selling, if that's the sales spiel.

 

Ha, that doesn't surprise me at all, I've heard similar, even had an agent tell me to lower my offer on a place a few months ago because the tenants had messed the place up.

 

NRAS property may be best marketed as a investor property with the tax benefits of NRAS a specific mention. These details and the end date may need to accompany the contract. If the agent doesnt understand NRAS dont let them sell it as they are like a blunt steak knife. Many NRAS owners find that quite the opposite occurs as the NRAS occupant value their more affordable housing and then the incentives are in a large part tax free. (State is approx 85% tax free and commonwealth is 100% tax free cash). Annual benefit is $11K on top of the lesser rent. I have seen one out of probably 30 properties poorly tenanted. Owners love the returns. VERY good yields and some of its isnt even subject to tax. Just checked 4 and 6.6% was the yield prior to the tax free further grossing on approx 40% of rent....Perhaps a 8%+ yield.

There are investors out there who would jump at the chance if the NRAS time left is acceptable. A copy of the last two years rental tax schedules etc and details of the state and commonwealth incentives may be solid ammo to assist a competent agent to sell the benefits

 

Just a CGT question on the sale of NRAS property :

1. National rental affordability scheme - refundable tax offset and other taxation issues

How shall we intepret the above ?

a) Does it mean that if we sell NRAS property, there's no CGT at all ?
or
b) When we rent out our NRAS property, the benefits ( ie. federal goverment tax offset & state govt NANE Income) are not categorised as CGT ?


2. If the question to point 1 is not option a), does the extra 10% CGT discount apply to the sale of NRAS property according to the link below ?

CGT discount for affordable housing


Nudging @Paul@PAS @euro73 if you know the above

Thank you for your thoughts & opinion !

 

ah yes, thanks for pointing that out to me @euro73


The reason NRAS is excluded, is it because there is already NO CGT payable if we sell NRAS property as shown by this link National rental affordability scheme - refundable tax offset and other taxation issues ?

 

It is only wishful thinking that makes it seem so.
My reading is that your CGT position is treated the same as for any other asset, with no extra favours because it was under NRAS.
So, if you have held it for more than 12 months, you get the 50% discount. That's all.

 

I am not aware of any additional tax benefits aside from the NRAS credits ....
I don't see any reference in the NRAS Act 2008 nor any of its amendments where capital gains are treated differently to any other residential asset.
I am not aware of any favorable treatment being afforded to any of my several hundred clients who purchased NRAS approved dwellings, some of whom have been sold for significant gains.
I have to concur with others here who are suggesting that a capital gains tax event is going to be treated the same as it would be treated had the property not participated in the NRAS; but a call to your accountant or the ATO should confirm things.

 

Well, I navigated the rapids and come out with a few grams of gold.

1. I got my difficult NRAS tenant gone. (Had transmogrified the paint job, in addition to tobacco staining ++, and done a DIY on the toilet to make an anal wash hose. The property agents never even noticed, aside from warnings about smoking inside. They were as much a cause of pain as him.)

2. Renovated the property very nicely (yes, it was $$, whole tenant bond included; I think 12K all up.) It looked great.
https://www.realestate.com.au/sold/property-house-wa-maddington-139027619

3. Only had one on-paper offer across 7 weeks of marketing. But it was good one.

4. Settled yesterday for 23K above entry costs.

5. Minus the Reno + the Exit costs => maybe a tiny Capital gain. I'm okay with that. Because of the NRAS subsidy.

But I don't get why people claim it's a generous scheme for the investor. Maybe if you never had to give any attention at all to the property, zero, fair enough.

But I had to put scores of hours over ten years into managing it despite the property managers, including ~ 25 non-deductible 45km drives (outbound) to the property to assess what they were complaining about, make sure maintenance work had been done and not paid out before it had been properly completed, which the agent would otherwise do.

In fact I think this is an overlooked factor in Real Estate investing… How much time the owner puts into the "invisible work" of property management / administrative management (including bills, bookkeeping and tax) including checking on property repairs / services.
[And let's *not* hear from those with excellent property managers… this is about the vanilla and the mediocre, which is the majority.]

 

@euro73 : thanks for sharing your views , I will double check with my account abt how we can interpret that link about NRAS CGT

@Frank Frick : you mentioned that CGT is around 23k but the historical price mentioned that it is sold in 2011 for ~201k and in 2022 sold for 399k. Have you done a major reno on that property ?

 

No, I didn't say I had a CG of 23K.
Yeah, that entry price is wrong. This particular development was sold by getting you to buy the land first, then paying for the building as it was completed. Land 201K + legals = 207K.
Building 169K. Total = 376K. 399Kis 23K above entry costs.

Now that I reckon it: Minus 12K reno and 12K exit costs = Yikes, I lose. Ah well.

 

Oh no, I am sorry to hear that...hope you got gains elsewhere.
Nevertheless , the NRAS benefit would certainly help your cashflow in the past