All Topics / Help Needed! / Opinions needed ! NRAS or not to NRAS?

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  • Profile photo of samgoudasamgouda
    Participant
    @samgouda
    Join Date: 2013
    Post Count: 19

    Hello everyone, 

    My name is Sam and i have been looking into investing in a NRAS property for quiet some time now but feel there might be some things that i might be missing. 

    I am a 23 year old university student/working part-time who has been saving for a LONG time and now wants to take the next step into property investing. 

    I am looking for something max 320k (cannot borrow anymore). 

    Capital growth investing IS my priority, and i am aware that NRAS is great for income investing. Although i have noticed some NRAS in areas such as Sunshine Coast, Toowomba etc. which to me are good capital growth investment areas.  

    Thoughts?

    Much appricated =) 

    Profile photo of TheFinanceShopTheFinanceShop
    Participant
    @thefinanceshop
    Join Date: 2012
    Post Count: 1,271

    NRAS has many benefits. The problem is that many developers understand this and overprice the property. This in turn affects the capital growth that you will get from the property because you have already started in negative territory. 

    I am a fan of NRAS but there are very limited stock I would buy as the majority (particularly those in Queensland) are overpriced. 

    How much deposit do you have?

    Regards

    Shahin

    TheFinanceShop | Elite Property Finance
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    Profile photo of samgoudasamgouda
    Participant
    @samgouda
    Join Date: 2013
    Post Count: 19

    Hi Shahin, 

    Am i right in saying that to get the full benefit from investing in NRAS, it is wiser for someone to use their super?

    30k deposit. 

    Regards, 

    Sam

    Profile photo of TheFinanceShopTheFinanceShop
    Participant
    @thefinanceshop
    Join Date: 2012
    Post Count: 1,271

    Not really. Investing via an SMSF has many benefits but this is not specific to NRAS.

    From a finance perspective many lenders will go to 90% on NRAS properties. If you are looking to purchasing something for $320k then you will need a minimum deposit of around the $38k mark. 

    Are you across the pros and cons of NRAS?

    Regards

    Shahin

    TheFinanceShop | Elite Property Finance
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    Profile photo of samgoudasamgouda
    Participant
    @samgouda
    Join Date: 2013
    Post Count: 19

    Is 90% the highest lenders will do ? 

    Can they do 95% loans for NRAS?

    As far as i am aware, 

    Cons: 

    – restricted market for re-sale and tenants 

    – Can't sell it for 10 years 

    – complications with resale (which i am unsure as to why, i was just told) 

    Pros

    – Cash flow

    – high demand

    – Long term tenants (skeptical) 

    – tax advantages 

    Anything i am missing?

    I feel that the pros are pretty self explanatory, its the con's that seem to be more difficult understand. Because its so heavily regulated i'm worried i might miss something. 

    Regards, 

    Sam 

    Profile photo of TheFinanceShopTheFinanceShop
    Participant
    @thefinanceshop
    Join Date: 2012
    Post Count: 1,271

    Hi Sam,

    I'm not aware of lenders going to 95% (unless its a lender not in the broker distribution network such as BoQ) however doubt it. 

    You are correct about the cons but a lot of people have a buy and hold strategy. Now if you hold onto the property for 10 years then it becomes a 'normal property'. You can do with it as you like but obviously you will no longer ascertain the massive tax benefits. 

    The tax benefits are almost $10k after tax per year which over 10 years is $almost $120k. Thats a lot of money however the kicker is that most are overpriced so in reality much of that $120k disappears. 

    Not sure what you mean about 'complications with resale' though?

    Regards

    Shahin

    TheFinanceShop | Elite Property Finance
    http://www.elitepropertyfinance.com
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    Profile photo of dangermouse99dangermouse99
    Participant
    @dangermouse99
    Join Date: 2004
    Post Count: 88

    Is there any way to avoid paying overpriced properties as its pretty hard at times to exactly know what a property should be worth/valued at?

    Cheers DM

    Profile photo of Alistair PerryAlistair Perry
    Participant
    @aperry
    Join Date: 2004
    Post Count: 891

    Hi Sam,

    The benefit of NRAS is that it is tax advantaged. It doesn't make much sense to put it somewhere at a lower tax rate than what you are paying outside of super (assuming your marginal rate is greater than 15%) as this benefit is reduced.

    I operate a small consortium in Bundaberg with 21 houses in it, there are a couple of consortium members who want to sell, I would be happy to do an introduction for a private sale if you like this area. The price point you mentioned is about right, you would have to borrow at 80% or lower though as it is not registered with any of the majors (this will change as I'm likely going to pass management over to Questus (the largest private consortium in Australia) pretty shortly). 

    Profile photo of TheFinanceShopTheFinanceShop
    Participant
    @thefinanceshop
    Join Date: 2012
    Post Count: 1,271

    Probably 7 out of 10 times I do an APM report to give me an idea of comparable and recent sales in the area. From there you would do add due diligence to determine the value of the property.

    Regards

    Shahin

    TheFinanceShop | Elite Property Finance
    http://www.elitepropertyfinance.com
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    Profile photo of TheFinanceShopTheFinanceShop
    Participant
    @thefinanceshop
    Join Date: 2012
    Post Count: 1,271

    Some use Residex and some use PR Data – these do the job too.

    Regards

    Shahin

    TheFinanceShop | Elite Property Finance
    http://www.elitepropertyfinance.com
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    Residential and Commercial Brokerage

    Profile photo of JPS25JPS25
    Participant
    @jps25
    Join Date: 2010
    Post Count: 121

    Hi Alistair

    We have just had to pull out of one at Coopers Plains had finance and valuation was good, it was the building that let us down.

    Really disappointed but its back to searching all over again. Would still like an Nras one to compliment the other 2 IP's that we have out in Chinchilla. They are at the point were they are paying for themselves with the low interest rates and good rents

    Can you send me some info on what you have and why some of them are pulling out and which area of Bundy they are in.

    Thanks Jean

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Danger and some brokers do a valuation upfront for their clients to ensure they are not overpaying for the property.

    No lender will go past 90% on NRAS even BoQ.

    in relation to Sam's query on resale that is not the case and you can certainly sell the property at anytime like any other property.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
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    100% Investment Finance now available on selected properties. Email us for further information.

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