It is a known fact that Australia is anticipating a huge increase in population – ”Australia’s population is projected to grow by 65 per cent to reach over 35 million people in 2049, up from around 21.5 million people now,” Treasurer Wayne Swan, Canberra Times . In 2009 we reached 21,875,000 persons. (An increase of 443,100 persons (2.1%) since June 2008.

The Solution
The ‘National Rental Affordability Scheme’ is an incentive scheme designed to provide affordable housing, at reduced rental charges to enable low to moderate income earners better living opportunities. This scheme was launched by the Rudd Government in 2008 to encourage large scale investment and provision of this affordable housing. 50,000 new, affordable rental dwellings are on the drawing board to be available across Australia by June 2012, at a cost of $623 million. This incentive scheme is offered to investors for the building of these houses, rather than the Government taking on the job of building them themselves.

The scheme has now been made available to the private investor, as the large scale institutions/developers have not taken up the Government incentive as much as had been hoped. A non-entity joint venture participant can now invest in an NRAS property which means that by buying a property which is linked to an approved NRAS body you can receive a contribution in the form of a tax-free incentive delivered to you from the government each year.

The scheme provides quality and affordable NRAS properties to be purchased. The most unfortunate part of buying investment properties is the need for investors to sell their properties – before they had had a chance to maximise capital growth – because their rental income and tax deductions were not sufficient to enable them to cover their costs, and therefore investment had to be paid for out of their own income the NRAS incentive makes property investing in most case positively geared giving the property infester a chance to full y realise the investment

The reason behind the NRAS scheme is, on the one hand, to have a secure place for the service people in the area to settle for long periods Kamagra jelly of time and add their contributions to building communities within the area. On the other hand it enables people to save for a deposit to purchase their own home. However, under circumstances where higher and higher rents are being charged, it is often extremely difficult for people to achieve this home ownership goal.

In Simple Terms
This means that you purchase a NRAS property as you would normaly purchase an investment property you then enter into a NRAS contract with the Government for ten years. You are obliged to offer your property for rental at 20-25% below the market rental rate. This will be determined by a registered valuer. As a ‘reward’ for doing this, the Government will contribute $8,000 worth of tax free incentives. $6,000 is to be a tax off-set (not a tax deduction). You will also receive a $2,000 payment from the government of the State or Territory in which you purchased your property. This payment will be made to you every year for the next ten years, with increases in line with the rental part of the CPI.

So how much will the Government Pay Under the Scheme?
The current payment for NRAS is $9,140 because in 2009-2010 there was a rental component CPI increase of 5.4% compounding on top of 8.4% in 2008-2009.
Rent valuation takes place every year by a registered valuer who must complete, on your behalf, in the first fourth and seventh year, a registered valuation. In the in-between years, a ‘desktop’ valuation is carried out. In this way, your rents are kept in line with the market and you receive 75-80% of the increased rental.

What happens if I wish to sell my property within the 10-year period?
Investors no longer wanting to participate in the Scheme can sell their dwelling or cease their participation prior to completion of the NRAS 10 year term without incurring any early exit Cialis Jelly penalties. Investors may not be eligible to claim the full Incentive for the year the dwelling was removed from the Scheme.

Dose the incentive change for different properties and prices?
Whether the property is worth $200,000 or $7500,000, the government incentive is the same. If you have a cheaper property, there will be a more positive cash flow. Some investors, however, favour buying a $400,000 property looking for high capital growth and with no, or minimal holding costs, for ten years.

Someone on an income $45-$55k may well be looking to invest in a cheaper property and yet still enjoy the benefits of negative gearing, this scheme provides is a negative geared investment with positive cash flow!.

Is this social housing?
Their has been some concerns about the term “affordable housing” and how it relates to government funded housing, NRAS tenants are only eligible for the reduced rent if they have income and are currently employed.

What type of tenants will the property attract?
Tenancy will be targeted to people who service the community in the area such as hospitality workers, nurses and essential industry workers, i.e. police, teachers, cleaners etc. It will also be available to the over 55 age bracket and families to cater for Australia’s increasing ageing population.

The criteria for people applying for NRAS tenancy is that they can only earn up to a certain amount – proof will be required. This amount is higher than the social housing scale tenancy which is up to $58,292 per annum. The NRAS tenant can earn up to $125,960 a year and still be eligible for the discounted rental rate in an NRAS tenancy situation. In the social housing scheme the government sets and subsidises the rent charged. However, with NRAS tenancy, there is control with tenant selection – full checking procedures – and the rental rate is set according to the market rate provided by an independent and registered valuer.

Are the payments guaranteed?
Your government payments are guaranteed for a ten year period. The government only stops payment if your property is vacant for more than 13 weeks, but payment would begin again once the property is re-tenanted.

They are brand new dwellings with rents at 20-25% below market rates. Tenants are unlikely to want to leave and pay full market value for another place, so in the majority of cases full tenancy is secured.

Author Bio: NRAS is a specialised investment that requires an understanding of the requirements from both development to property management. NRAS Property Group provides a seamless end-to-end process to ensure your investment or development is professionally administered visit www.nrasvictoria.com.au

Category: Finance/Real Estate/Buying
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