NRAS Rental Valuation

Discussion in 'NRAS' started by D.T., 9th Jan, 2017.

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  1. D.T.

    D.T. Specialist Property Manager Business Member

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    We're property managers approved to take on NRAS properties. As some of you might know, after 4 years the NRAS Consortium organises a licensed valuer to go through and advise what the rent should be for the units.

    One of the units we manage just came up for this. The valuation came in $5 a week lower so we are forced to do a lease renewal at that amount to remain compliant (and non compliance means the owner doesn't get their $10k pa).

    The guy I deal with manages the PM's across SA and QLD and was saying all of them were coming in lower.

    This is one of the dangers of being in a government ran system instead of on the free market. Our normal (non-nras) properties we could at least keep them the same rent or negotiate a lesser increase if the market was poor (and I'm not convinced that it is).
     
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  2. Ross Forrester

    Ross Forrester Well-Known Member Business Member

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    That sucks. I never thought about the future impact of not being able to control your rental income.

    Sort of takes away your control. Obviously the $10k incentive is still attactive.
     
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  3. neK

    neK Well-Known Member

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    @D.T. Do you know how the Non NRAS properties that must be rented under the "Affordable Housing NSW" works?

    Is it the same as NRAS, except you don't get a rebate?
    (ie must go to an approved property manager that can take on Affordable housing etc)
     
  4. Marg4000

    Marg4000 Well-Known Member

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    I think DHA houses are subject to rental reviews also.
    Rents can go up or down.
    Marg
     
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  5. bigals

    bigals New Member

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    My rental valuation has just been carried out and the rent has been valued at $26/week (NRAS value) higher. My PM is concerned that if the rent is increased that much then the tenants may leave. (A reasonable comment) However they have not had an increase since they have rented my property as the PM says the local values are too low to increase. I don't really want to push tenants out however if I don't apply a reasonable increase then I will be constrained by the cpi for the next 4 years.
    Would appreciate peoples thoughts if they have dealt with this.
    B
     
  6. geoffw

    geoffw Moderator Staff Member

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    DHA reviews however can be appealed. I had one once, backed by evidence of comparable rentals, where they ended up increasing the rent.
     
  7. D.T.

    D.T. Specialist Property Manager Business Member

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    That's terrific, what town or suburb is the property in?
    I'd advise the tenants thats what the independent valuer valued it at (therefore rents must be really healthy in that area), so increase to all of that (or maybe negotiate to half that increase?). If rents truly have risen its not like they can go anywhere else and find cheaper.
     
  8. euro73

    euro73 Well-Known Member Business Member

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    Its not thje same, but it is similar. 20% discount is required for 10 years. Generally the requirement is that it must be managed by Community Housing Provider. But there is no tax credit paid to NSW AHSEPP ....unless they come to someone like me and ask for me to organise NRAS credits for them... :)

    RE the rental reductions some NRAS owners are experiencing. They are based on CPI data for that state. So if they are going backwards, it's a result of non NRAS rents in that state going backwards.

    Here are the figures for the 2018/19 NRAS year, which runs from May 1 2018 to April 30,2019
    Screen Shot 2018-04-17 at 8.25.44 pm.png
     
    Last edited: 17th Apr, 2018
  9. Redom

    Redom Finance Strategist Business Plus Member

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    I think they're done on individual properties and benchmarked against these frameworks mentioned. Individual valuers go in i think and come up with their assessment which needs to be used.

    Anecdotally, of all 4 NRAS properties we own, the cash flow is worse today than original forecasts and original dates. Rents have moved backwards across all four properties in the 3rd/4th year rental val, around 10% on average across the portfolio (one is close to neutral). That probably means a 20% real decline in rents over 3-4 years. Not sure why, i just assume the market rent drops after a property becomes older.

    Nonetheless, the cash flow overall remains decent while on IO terms, just not as good as expected (although rates have dropped, so there's been a saving there).
     
    Last edited: 20th Apr, 2018
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  10. euro73

    euro73 Well-Known Member Business Member

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    I also think that if you are in areas where lots of new houses were built during and after your purchase, and there's been very little wage growth, the market in general is feeling downward pressure on rents.

    I dont think its peculiar to NRAS. I have seen most my properties tread water at the review stage or slightly increase, because I didnt play in the popular areas where everyone else was playing. Only my Perth property dropped, and I think anything anyone owns in Perth would be facing that issue.

    With P&I re-sets and flat or declining rental markets in many areas around the country (most to be fair - with probably more to come as the East Coast apartment tsunami comes online ) its not going to be a fun time to be holding a large vanilla yielding portfolio stacked with IO. So I'd much rather have the 11K incentive underneath me than not.
     
  11. New Town

    New Town Well-Known Member

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    Must be a pretty confident valuer to know the rent price within $5.00! What a hassle!