NRAS investment finance
What is the NRAS?
The National Rental Affordability scheme is an incentive from the government to stimulate the rental market in Australia with the aim to increase supply of rental properties by 50,000 new dwellings by 2012. The government understands that rental affordability affects the ongoing living and savings of renters in the market place which makes it harder for renters to purchase their own home.
The governments aim:
- Provide more affordable rental properties.
- For lower threshold income earners they ill be able to access rental properties at reduced costs.
- Stimulate the investment market in rental properties.
How does it work?
Throughout the ten year period of the agreement the investment security is to be rented out for 20% less than market rent to the lower threshold income earners. The incentive is provided on a yearly basis as a tax offset or payment at the moment there is a commonwealth government incentive and an additional state government incentive.
How does this benefit me?
If the dwelling is to obtain a rental of $300 per week which is $15,000 per annum, a 20% cut will mean the rent would be reduced by $3000. The grant alone at the moment from the commonwealth government is $6,855 per annum. This means a further tax offset of $3,885, as you can see the government is provided a further tax offset by reducing your current rental.
In this example the prospective investor walks away a better off and they are contributing to the strengthening of the national economy. This is a win-win-win situation for you as the investor, the government & the low income tenant.
This will work best of all for high income investors who would normally invest in new properties to gain the maximum depreciation benefits. By investing in a NRAS property instead they can reduce their tax and still maximise their capital gains, which are often significantly more for an older NRAS property than for a new property.
How can I get finance?
Financing your NRAS investment is more difficult than financing a standard investment property. This is because the banks view the long term lease as a potential obstacle to selling the property. The secret to getting approval is to apply via a mortgage broker. They have access to the lending policies of the various banks and know how to get your loan approved.
About the Author Otto is a Mortgage Broker that has specialised financing unusual property types such as NRAS for over 7 years. His company the Home Loan Experts is now one of the top home loan broking firms in Australia. They can assist you to apply for a NRAS home loan at a great interest rate with a major lender.
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