NRAS and income vs growth

Would you invest more in NRAS or Dual Occ? What benefits do you look for in one vs. the other?

 

Great...we are in agreement....NRAS is not suitable for everyone then.

 

What's the average yield like for dual occ?

 

NRAS Is the more extreme cash cow and is more potent for 10 years. That first 10 years is where you want to do your best possible work... kill off debt as much as possible. It has compounding benefits that will be realised later.

Dual Occ is a great cash cow as well but is just a little inferior to NRAS over the first 10 years. But it is superior thereafter as it retains its dual income stream from year 11 onwards, whereas NRAS loses its turbo charged cash flow and reverts to a "vanilla" property from year 11 onwards.

The aim of the game was to utlise NRAS as Stage 1 - for the fastest debt reduction possible, then as the PPOR mortgage disappears and borrowing capacity is restored, layer dual occ on as the 2nd stage.

But there are very few NRAS opportunities left now. I have a few bits and bobs still available but I have already moved onto dual occ deals already for 2017 and beyond

 

Less than 1/4 of the time. less than 1/2 the properties.

 

That depends what you buy. I'm focused on regional NSW - Orange and Bathurst. And Im focused on detached 4 bedroom houses + detached granny flats , rather than a 5 or 6 bedroom houses under one roof , with dual key entry and living areas.

You should generate @ 8-9K after tax from dual occ ( mine anyway, dont know about others ) .

NRAS usually sits at 10K CF+ , but on some stock Ive seen it at 11 or 12K CF+

But whatever "cash cow" appeals to you...its all about using the extra income to pay off debt. People like @sash think its about NRAS. But its actually about the debt reduction strategy. Always has been . Never been about anything else except deploying dormant equity and remaining borrowing capacity into resi assets that will deliver fully franked dividends, which can then be reinvested flor debt reduction. NRAS just happened to be the best resi income producer and was therefore the best tool for the job. Now with NRAS opportunities pretty well exhausted ( except for a few bits n bobs) dual occ is the next best tool for the job .

Either/both will do the same job - pay down debt faster. Thats the end game...

 

Perhaps it would also be prudent to talk about the risks of NRAS:

1. Ability to onsell and finance
2. The fact that most NRAS properties are over valued ...will the CG be as good?
3. What happens after 10 years?
4. Difficulties in getting the 10-11k payment and long delays

If the property is a 100k over valued .....does the 10k payment over 10 years...haven't you gone backwards?

As for replacing your income...how much of it comes from your business?

 

Seems like there are quite a few NRAS properties on the market. I have looked at 5 in Perth and one in Adelaide for other people. I have no idea whether they are any good but they were NRAS properties available. No idea if anyone bought. My concern with those properties was what happens after 10 years. Take away the NRAS credits and they didn't seem particularly attractive to me.

 

@euro73 the cash flow is taking into account depreciation? If so how much is depreciation?

Are you talking about newly built dual occ? Or existing property but just adding granny flat?

 

Its kinda boring having to debunk your myths yet again @sash .. but I do kind of enjoy how easy you make it, so one more time for old times sake...

Onselling is easy- NRAS is not a part of the brickwork or insulation . Its a tax credit., and its voluntary to participate the dwelling in the NRAS. Its like suggesting a property that generates an ATO refund because of a deductible loss cant be onsold? or that a property with depreciation deductions cant be onsold.... Just what exactly would the restrictions or difficulties be with onselling, in your view? Help me understand....

Finance is easy. All the majors lend for NRAS for starters, plus 15 or more other 2nd tiers and non banks. So again... struggling to understand where this mythical problem with financecomes from? Help me understand....

After 10 years the property reverts to full market rent of the day. If rents have appreciated just 50% in 10 years, the market rents should comfortably sit at 7.5-8% yields. if you have used the surpluses to pay off a huge amount of debt and your property yield suddenly "collapses" and "deflates" to 7.5% or 8% , wheres the problem ? help me understand....

Since 2008/9, payments have been on time except for 1 year. That's hardly something to hang your argument on...

You like to go on about 100K overvalued... you have raised it many times , yet you never have any evidence to support it. I can ( and have previously) furnished you with countless NRAS projects that I delivered to my clients ( including many from these forums) at well below market value.

Castle Hill. paid 620K. Settled at 800K + valuations
Bunya . paid 560-590K. Sett;d at 750K + valuations
Enfield. paid 550K. Settled at 800K + valuations
Elanora Heights. Paid 600K. Now valued at 850K +
Port Macquarie. paid 260K. Now valued at 300K +

The mistake you keep making is to think that all NRAS is equal. There's my NRAS deals, and there's the others....

Keep trying though.. I like the opportunity to set the facts apart from the "alternative facts" One of these days you'll come up with an argument that holds water...

In the meantime I might start calling you @sash trump.

 

yes, of course. Cash flow is arrived at by calculating all expenses and all income and utilising all available legal remedies to extract every drop of juice from the ATO lemon.

yes, new dwellings.

As I have said. This is all about taking dormant equity and using remaining borrowing capacity and deploying it towards assets that create large dividends. Then reinvesting those dividends for debt reduction.

Rather than focusing on NRAS or Dual Occ as the subject , its far more important to understand the value of debt reduction. NRAS and Dual Occ are just the tools. The strategy is the debt reduction . Always keep your eyes on the end game. if your end game is that you want to retire from resi property income, just look at the screen shots I am about to post below, and you will see the power of debt reduction.

 

I think this is the issue. The NRAS properties I have seen were nothing like yours. They were not well located or well priced. I think when @sash criticises NRAS he is including these bad deals. The problem when you defend "NRAS" without specifying "my NRAS deals" is that you are defending lousy NRAS property deals that you would not touch. You make it sound like all NRAS is equal. It's not.

 

If for 10 years I can generate 10K tax free per annum, and pay that onto a PPOR mortgage as extra repayments - this is what reward I get.





And if at the end of 10 years I revert to full market rent and lose the NRAS credits and have a 7.5 or 8% yield and the property continues to run CF+ - even by $1 - it is having zero impact on my weekly or fortnightly or monthly or annual expenses.....

Its the debt reduction that you buy these for. Its the same with dual occ.

3 x 10K per annum would do this - mortgage gone in @ 10 years. Think what that does for your borrowing capacity.

And this is all achieved without having to sell anything. This is the key difference . I get to hold on to all that income and in 15 or 20 years time its yielding 12,13,14% or more... all without selling





Truly, Im sorry you dont see it. Y

 

Woah. I have painstakingly made that point for oh, I dunno... 4 years now..... You should check my record - you will find I have repeatedly segregated what i do from what online NRAS sellers do. My projects have always been my exclusive projects. You cannot get access to my NRAS deals from anyone but me. I put them together from the ground up. I organise the NRAS credits. i do all the transfer paperwork to the Govt. I do multiple lender vals on each project before it is priced...and I have a record of more than 350 settled NRAS deals with 1 val shortfall ever. I also have a record of having delivered countless projects where significant growth has already occurred , and the cash flow is kick ass!

@sash knows this only too well. He was presented with several of those opportunities and poo poo'd every one of them. His loss...every time.


But again - this isnt about NRAS. Its about the results that are clear to see on the screen shots posted above. Its about what cash cows do for debt reduction. Those screen shots prove that a PPOR mortgage can be paid off in less than 10 years with just 3 cash cows. Imagine being mortgage free in a decade, and not having to sell anything to do it... from a bank servicing calc perspective that creates a phenomenal platform from which to expand a portfolio.

 

First, I have no ppor debt. Second, I am not talking about your NRAS properties. I am talking overpriced, under built in areas with very high development. Three very bad deals I saw are in Perth. What happens after 10 years? You are now holding a 10 year old property with all the wear and tear, competing against new builds. Rents were low when you started and haven't improved much. You bought a place that is too small for the market, lured by thousands of tax free government handouts. Basically, you bought a lemon and your cashflow from these properties is never going to be that great. Worth it? I can't see it.

No need to be condescending. Expand your imagination outside your bubble and realize there are some truly awful NRAS deals out there. What will happen to those properties after 10 years? I can really see some losing money over this. Remember, not your deals.

 

If an individual has the financial capability, wouldn't it be better to develop 10 apartments on a single lot in inner city suburb costing $300K each, renting for $370/week. Each unit will be paid off every 3 years.

 

370 per week against 300K is 6. 4% yield before expenses.

Quick and dirty numbers.

You'd need $1.05 - $1.2 Million cash deposit to cover a 35 % - 40% deposit, as commercial lenders only go to 60 or 65% LVR....
Then you'd need $2 Million borrowing capacity
And that's if you can convince a lender to lend 2 million to you for commercial purposes without 100% pre sales and if they dont also ask to see an additional 300-400K cash at bank, over and above the 1.02- 1.2 Million deposit. - just to make sure ...

I assume you already own the site? Otherwise, you can add another 800K -1 Million to buy that.

So yes...if you can get through all of that and have the financial capacity to go this way... might be a superior play. But its not really the kind of thing most mere mortals can pop down to their bank and start on, tomorrow


But back to the question of how to retire from resi property, as it pertains to mere mortals without that sort of firepower. All you need to do is look at the facts ( its a difficult concept for some forum members I know) that the extra repayment calculators demonstrate above. It makes for a pretty compelling case , and any mere mortal can follow it and get great outcomes.

 

Perhaps you should talk aobut your NRAS deals in Gosnells......

 

Yes agree not for average individuals.
You have explained the numbers pretty well.

 

OK .Pay off other debt then. From memory, your current project offers very modest numbers - you could consider reducing the debt and the numbers would improve quite a bit .

But I am. Always assume this when I discuss NRAS or Dual Occ. I don't form my arguments for the usefulness of NRAS or Dual Occ as a debt reduction tool based on examples of other peoples rubbish deals . I form them based on examples that I am familiar with - ie Proven examples. Mine. I would have assumed that was a given after 4 or 5 years of distinguishing between my NRAS deals and the rest. It would appear not.

There are bad real estate deals everywhere. It has nothing to do with NRAS. Bad deals are bad deals whether they have DHA 12 year leases, rental guarantees of NRAS credits. I dont care about those bad deals. They aren't a useful benchmark to me, nor a useful ( or fair ) benchmark for the purposes of this subject, because they aren't my deals. I dont do rubbish stock. As I said in the above response, I use my deals as a benchmark. I can be judged on those..... in fact I should be judged on those. That's the point. And the record of what I have done is strong.

Stating the obvious - that Im sorry you cant see it - isn't intended to be condescending. This isn't our first rodeo. You have taken up a very negative position about debt reduction and NRAS many times in the past, in spite of me providing overwhelming evidence to the contrary. I have always distinguished my deals from the others, but you have always lumped all NRAS into one basket as it suited your arguments. Am I to keep humouring you, year in and year out as you misrepresent how effective a well deployed debt reduction strategy using NRAS can be , or shall I eventually reach the conclusion that you just dont get it, and say so?

Look, what I do is very straightforward. I help clients set a strategy in place that will deliver them a passive income for life using resi property, and a debt free PPOR ( if they have one) Then, when capacity is exhausted in personal names, we work with the clients and their planners to replicate the same outcomes through an SMSF. I have posted extensively on this as well, and show how straightforward it is to pay down a property through SMSF using dual occ.

While everyone else throws theories around about buying below market value or renovating for profit, or subdividing for profit - I keep it really simple with something that doesnt require mythical powers , or a whole lot of BS and bluster, or a whole lot of luck. Its a model that anyone can use and succeed with.

Dormant equity and available borrowing capacity is deployed to buy high yielding assets with the express purpose of paying down debt. And that is repeated over and over , just like a Dividend Reinvestment Plan, and a large income evolves over time.

The most effective tool for that job has been NRAS - but NRAS isnt the strategy. Its just a tool . A means to an end... The next most effective tool is dual occ. Again though - means to an end.

This isn't complicated. Its simple, and it works.