NRAS

Discussion in 'NRAS & NDIS SDA' started by Cactus, 20th Jan, 2016.

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  1. euro73

    euro73 Well-Known Member Business Member

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    Which is why I said you'd be looking in the wrong places. :)

    Would you have found any of these "touchable" for example?

    a 3 bedroom townhouse in Bungarribee NSW. 550K purchase price. 650K + valuation 12 months later.
    Or a 2 bed apartment in Castle Hill. 620K Purchase price in 2015. 760K val today
    Or a dual occ in Gregory Hills. large corner lot. 4 bed house + triple garage + 2 bed fonzie? P/Price 850K in 2014. Valued today at 1Mil +
    Or a 2 bed apartment in Enfield? P/Price 520K. Valued today at 670K+
    Or a 3 bed townhouse in Castle Hill? P/Price 745K in 2014. Valued at well over 900K now.
    Or a 3 bed house in Orange? P/Price 350K. Valued at 400K + now.

    Perhaps yes..perhaps no... but there's no denying these are all very valid examples of NRAS done right.

    On to dual occupancy next year and beyond.... it is the next best residential property cash flow available, with NRAS winding down. It will allow investors to reinvest the surpluses and pay down their PPOR fast, and build a passive income for life. Not quite as potent as NRAS, but quite close.
     
  2. Cactus

    Cactus Well-Known Member

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    What sort of numbers are you expecting on the dual occ product you'll be selling? Can you provide an example...
     
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  3. euro73

    euro73 Well-Known Member Business Member

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    I will be looking at regional locations, to keep the prices below 500K. I expect @ 7- 8K CF+ if rates stay around the 4%ish mark
     
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  4. Cactus

    Cactus Well-Known Member

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    Is that assuming 80% LVR and before or after after depreciation and tax add backs?
     
  5. Raydar

    Raydar Well-Known Member

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    Also from developer or investor perspective?
     
  6. euro73

    euro73 Well-Known Member Business Member

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    That's assuming all debt borrowed. 105% to cater for deposit and stamps.
     
  7. euro73

    euro73 Well-Known Member Business Member

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    That would be the cash flow outcome to the investor.
     
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  8. neK

    neK Well-Known Member

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    @euro73
    Dual Occ - as in granny flats?
    I'm guessing these are new builds on land that is 450sqm, where they build a single building, but split it internally?
     
  9. euro73

    euro73 Well-Known Member Business Member

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    Two ways to do dual occ. Under one roof as you are suggesting - or detached. I am working towards option 2 - detached dwellings.

    While the cash flow results are the same, I prefer the flexibility 2 detached dwellings offer. For example, if you sold in 10,15,20 years time , the buyer could have the main residence for their use, and still generate an income from the detached 2nd dwelling. This isnt quite as appealing when the 2nd dwelling is under the same roof!

    This is by no means a deal breaker - just a preference.
     
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  10. neK

    neK Well-Known Member

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    @euro73
    So are these new builds?
    Or are you simply referring to buying houses and building granny flats at the back of them?
     
  11. euro73

    euro73 Well-Known Member Business Member

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    New builds.
     
  12. Shankiedoodle

    Shankiedoodle Well-Known Member

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    hi euro, sorry to rez an old thread,
    but could you explain why or why it would be a bad idea to choose to find an NRA for a first IP, or whether its even viable considering its more for CF rather than CG? I would assume since its CG focused i would have a harder time withdrawing equity to fund my next investment.

    Also, is it preferrable to borrow 80% or would i be better off borrowing 105%?
     
  13. euro73

    euro73 Well-Known Member Business Member

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    Well to begin, I would simply say the premise of the question is flawed.

    This never ending debate about NRAS seems to go like this; NRAS is great for CF, but rubbish for CG. It implies that purchasing an NRAS approved property - any NRAS approved property at all, at any price at all , means you are making a choice between one or the other. But it's just not the case.

    Often, the people expressing these views complain that they have been unable to find good deals - not because they dont exist, but because they cant find them. Ive said many times that they have been looking in all the wrong places.

    NRAS is not a product. It is , just like negative gearing - a tax incentive. It is able to be applied to any dwelling type in any location, and that means it is quite impossible that it can only be found on bad stock, overpriced stock or zero growth potential stock. The entire premise is just completely flawed. It is like someone arguing that negative gearing is rubbish. Or that negative gearing benefits are frontloaded into the price. Without negative gearing the property wouldnt stand up as a reasonable investment. or that positive gearing is rubbish for the same reasons. It's just nonsense.

    Like anything different or niche, and as I have written about in great detail many many many times, it was abused and *******ised and hijackjed by the white shoe brigade early on - and if you attended the Sydney property expo over the weekend you would have met a few dozen examples of the types I am referring to...

    Now, let me further debunk this ridiculous argument that if its CF+ it cant possibly also offer good CG. I will start by giving you one really recent example. I sold 5 x 2 bed, 2 bath apartments on Cecil Avenue in Castle Hill. They sold for 620K @ 15 months ago. They are now completed and are about to settle and are valuing above 760K. There is some variation between bank valuers so I wont say 800K, but one buyer did get an 800K valuation. Lets just go with 760K so Im not accused of stretching any truths.

    Now, maybe its just me, but that sounds exactly like an NRAS property just saw a 140K uplift in value before it even settled. Possibly 180K ? But that cant be true, surely? well... sorry to say there are older 2 bedders being sold in the area at 799K now. A quick look at re.com.au will confirm that easily enough. So it could be that Im actually understating what I will get when I revalue the property....

    What I can calculate though is this; my clients can buy these with little or no deposit. Banks will accept the valuation over the contract price as the contracts are older than 12 months old. So for someone borrowing at 80% they can get a loan for 608K or more. That leaves them contributing 12K + stamp duty in cash or equity to settle the deal. Or at 90% LVR ( 684K Loan) it leaves them with a significant surplus. They get their property for zero outlay and they get an equity release on the day of settlement, and it's CF+ by 8 or 9K per annum...... Yep... it's all pretty horrible stuff, I concede. Yes, I bought one of these ;)

    I'll follow with another example . The Bunya Estate at Bungarribbee. Sold 34 x 3 bed townhouses there @ 15 -16 months ago. They settled recently. Purchase Prices ranged from 550-590K depending on lot size. Most were 560-570K . Surprise surprise... vals were all 650K + One lucky client even got 700K back from their NAB valuation. So that's a tidy 50-100K profit before settlement on those ones as well. Most are up by 80K or thereabouts . Yep- I bought one of these as well... :) But so did 33 others. And those deals - just like the Castle Hill deals, were available to any forum members who read my posts at the time.

    Similar stories for the 6 x dual occ's at Gregory Hills, the 22 apartments at Elanora Heights, the 10 at Enfield , the 24 at Fairy Meadow..... all have seen good uplift before and following settlement. I know , I know... it's impossible that any of this could be real. The fact I dared to put these deals together with NRAS should have ensured the stock was rubbish, right? And even if I goty lucky with finding half decent stock, surely the NRAS stigma must have led to trashed apartments and absolutely no growth, right? I mean, if the myths are to be believed, that is....?

    I guess I must have just been really really lucky, over and over and over again. Like , a lot! Perhaps its the Irish in me ? ;) Or perhaps, just maybe, its because the nayasayers have been looking in all the wrong places? #whatdyareckon?

    Anyway, the point is - the CF v CG argument need not mean choosing one or the other....

    To your questions...

    I dont know any of your personal circumstances. I dont know your Income, assets or liabilities , whether you have any non deductible debt , whether you have plans to buy or renovate or upgrade an existing or future PPOR, etc etc etc... so I cant really answer this without knowing those things .

    I would simply say that the point of cash cows such as NRAS is to reduce debt. So broadly speaking, if you dont have any debt yet, your early selections should be growth focused. Then get some cash cows into the mix to start paying stuff down... But that advice comes with a very large asterisk/disclaimer as I just dont know your circumstances...


    RE 80% v 105%. My view on this is that always gear everything you can, whenever you can. Using cash is not tax effective and is far far better utilised for non deductible debt if you have any - PPOR loan, car loan, credit cards etc.... or just park it in your offset .
     
  14. +men

    +men Well-Known Member

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    Hey euro73, is dual occupancy only available in QLD?
     
  15. Shankiedoodle

    Shankiedoodle Well-Known Member

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    From what you're saying, whether I go 80% or 105% is then just simply a matter of risk management?

    Anyway yea from what i've read around, it seems like I would be better off trying to source some CF+ive deals first and get some debt before coming back to NRAS. That said, as what you've stated above, of course its possible get CG on an NRA property as well, I probably just lack the experience and breadth to find it atm. That said, what you've described is pretty sweet. I don't suppose there will be future allocations for NRAs in WA that you know of? From what i've read of your earlier posts, apparently this year was the last lot? (i might have misunderstood what you were saying tho)

    also +men, from what i understand i do believe you can achieve dual occ in other states too. just varies by law
     
  16. euro73

    euro73 Well-Known Member Business Member

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    No. Subject to council you could do it anywhere.
     
  17. euro73

    euro73 Well-Known Member Business Member

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    There are WA NRAS available now. Rockingham, Brabham, Gosnells, and a few other bits n bobs. There are no additional NRAS incentives being issued. Thats side of NRAS is done.
     
  18. sash

    sash Well-Known Member

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    Found this from wheregroup site....it give a view which us spot on about NRAS:

    1. Issue with getting payments on time initially
    2. Reselling during the incentive period
    3. Poor capital growth - ie. opportunity costs

    NRAS - Are you kidding? Part II - WHEREGROUP

    Link also gives a balanced opinion of negative and positive comments in his blog. So pretty much a un-sanitised view ...warts and all...

     
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  19. tomlemke

    tomlemke Well-Known Member Business Member

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    How's the comments from Adam on that link haha
     
  20. Tekoz

    Tekoz Well-Known Member

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    @euro73 why is that "Merrylands NSW. Taringa QLD" is the last NRAS property ?
    is the program is abolished by the Government due to high national debt ?