NRAS APARTMENT IN VIC park. GO OR NO GO?

hi All

Just looking at purchasing a NRAS APPROVED apartment which has got full 9 years left till 2026. only 1.5 years old , 2 bed 2 bath 1 car bay. price is around 320k.

it's in a good location near to shops and near to train station.So should be able to to on rent 20 % below market ie around 256 per week.

As perth market is pretty flat as you know hence made sense to go for cash flow of 8 to 9k per year till few years and then once the market picks up then should fetch close to 385k. hence bit of CG too along with cash flow till the market is down. does this make sense or I am blowing my trumpet too quick ☺. Any advice would be great

 

@rogerG - with Melbourne having grown significantly over the last couple of years, where do you think it would be going? Melbourne has an oversupply of apartments, coupled with tying yourself to an asset only sellable to investors who want to buy NRAS - really limits the market should you liquidate. Melbourne rental yields are poor as a whole, so how does shaving it down by 80% help 1) your borrowing and 2) your month on month negative cash flow?

What do you want this investment to do for you? Is cash flow the only focus or capital growth?

Whilst you may be able to get 10k x 9 years (or whatever the amount is). However, choosing a better asset, such as a house well located with an upside (potential for future development) and a decent rental return so the property predominantly looks after itself. Future upside with the property will help you move forward.

What's your goal?

 

Roger referring to perth

 

Why does that make sense? If Perth is flat, why not invest in rising markets like Brisbane in stock that is in demand? What makes you want to go from 'Flat Perth Markets' to an 'oversupplied peaking Melbourne unit market' ?

Even if finance and serviceability are an issue, I wouldn't be buying into a heavily oversupplied market and at the peak of a cycle.

 

Read it as Victoria Park

 

Agree with Leo

 

Do you know why the vendor is selling?

One or the more experienced NRAS owners/sellers eg @euro73 should be able to comment but you might want to confirm whether you or the former owner would be entitled to get the tax offset certificate. I'm not sure if it works like dividends payments for example i.e. owner at a particular date is entitled to the certificate but any other owner during the NRAS year is ineligible.

 

An NRAS approved dwelling does not mean it can only be sold to an investor. That's like saying a negatively geared property can only be sold to an investor. Its simply a tax credit and is only paid if the owner elects to meet the requirements of NRAS.

If an owner occupier purchases an NRAS approved dwelling, it simply ceases to be eligible for NRAS. There is nothing in any NRAS legislation that requires that an NRAS approved dwelling must be maintained in the scheme.

Im guessing its East Vic Park. There are some NRAS 2 bedders floating around there.

Its pro rata'd. NRAS year runs May 1- April 30. Lets say it settled today. Previous owner would be eligible to claim NRAS credit for the period May 1 - yesterday New owner would claim period from today - April 30,2018 in next years tax return .

 

Thanks Propertytwins. Basically I am looking at NRAS in Perth as option to have some cash flow going . Its a positive cash flow. the first year will be negative but once the NRAS credit start coming in next year, I won't be out of pocket.

I have other plans as well not only focusing on NRAS but want to put it in the mix as well by pursuing assets with add value potential and Chase Capital Growth. I have been looking in North Moretan Region of Brisbane and Logan areas as well.

As far as NRAS being only suitable for investors being the disadvantage, I have confirmed that once u get your property out of NRAS condition(which is super easy) it's like any other investment property. So I am not too worried about that.

 

Do you have servicing issues or extremely tight cash flow where you NEED to purchase this type of deal?

 

Hi Leo

Thanks for the advice. I agree we should invest in rising markets and that why I have been looking in Brisbane as well. As Far as Perth is concerned, yes it's flat at the moment. The apartment in consideration,similar ones fetched 385k not so long ago. Now possibly I can get for around 310k mark let's say for example. Let's assume I am.not worried about CG for 5 years till 2022 too. My plan
1. Buy at 310k below market value(valued at 340k)
1. Get 9k each for 5 years =45k under NRAS
2. By 2022, the same apartment which sold for 385k in 2016 should be valued at more if not less than 385k, don't you think? Perth will not remain stagnant for long.
3. Then either sell it or keep till NRAS finishes in 2026. Then sell. It all will depend when the market is booming in Perth which I believe will by 2026.

even for 5 years from now, I will be happy with 45k plus the 50k at least growth.

This is my thinking. I am still pursuing rising markets too, and have put in an offer on one in Brisbane. Fingers crossed. Just a learner!

 

It all depends on your income, serviceability and CF situation. I am not saying your plan to buy CF property is necessary a bad thing, but if you told me your income in 150k plus and your partners is similar, you have no debit and saved up 100-200k, then I would say the above CF plan is not the way to go.

It all depends on what your financial situation is as well as what goals you want to achieve.

 

Thanks Leo for the great post. While me and my wife are not on high salaries just average but these past 5 years we saved and tried to stick with our budget plan. We saved around 150k which is a big deal.for us and we want to have a portfolio albeit small but just a start. I have been given two years by my beautiful wife to start having few properties before we have kids.We have some equity from our OO house which we will use for the upcoming purchase.

This forum has been fantastic to learn and ask/share ideas. Cheers

 

Sounds like a good starting position. Do you know what your borrowing ability is? If you haven't already, I would meet with a very good mortgage broker.

 

Leo

I did speak with a broker and I should be good for 450k purchase and another 350k purchase but with 20 % Deposit through equity and savings which I am fine with.

 

OK. If fit were me on that budget I know where and what I would be investing in, and to be frank it wouldn't be NRAS unit in Melbourne. Seriously consider all your options before you make a move. Importantly, ask yourself what is your actual goal, how much risk your willing to take on and what is the best way to achieve your goal.

Good luck mate.

 

Hi Leo

the apartment is in Perth. 8 km from CBD. search for victoria Park.

like I said I am just learning and gaining ideas. haven't decided on anything but better to ask questions and get advice than regretting later . Probably I should seek your advice and look at what other options could be. thanks

 

Read the Perth, Melbourne and Brisbane threads to get a good idea. Don't just listen to 1 person, regardless of who it is and what they tell you. Imo the problem is you don't know what you don't know. I don't know how much reading you've done but whatever decision you decide, really the major goals for many property investors is to create that 'critical mass' of equity so it can be then transitioned into cash flow at a later stage.

The deals you end up buying, try to make sure they have the best chance for CG while you can manage their CF situation. If you're willing to be more proactive, try to find deals that you can add value to, eg reno and hold then revalue in 6 months.

 

Its in East Vic Park WA...

 

ooops. thanks for correction.