Alright, a few of you may have already heard about the NRAS, but for those who haven’t… I’ll quickly fill you in on the brief details. NRAS, or National Rental Affordability Scheme, is a government incentive for property investors to rent out their properties at 20% below market value, qualifying them for an annual subsidy of $8,672. This only applies to NRAS-approved properties, but has amazing potential for investors. Essentially, the government is aiming to increase the supply of affordable rental properties, reduce rental costs and encourage large-scale development projects.

To show you exactly what the possibilities are, I’d like you to take a quick look at this modern 4 bedroom house in Caboolture, QLD. As we can see, it is NRAS-approved, and appears to be in a nice growth area.

The property is selling for $396,587 and I’ve gotten agent estimates of something around $440 ordinary rental income per week. This puts the gross yield at 5.77%. Decent. Now if we then take agent’s fees, rates, insurance, just a little bit for maintenance, it looks like our hypothetical investor gets about 4.69%. At this point, the property would actually be negatively geared, costing the investor just over $100 a week.

Now, to apply those beautiful NRAS benefits. First, the rental income will be reduced to $352 a week. Quite a steep fall, but remember, we’re getting a hefty rebate to compensate. The subsidy is paid as a Commonwealth government incentive of $6,504 per dwelling, and a state government incentive of $2,168 per dwelling, totalling $8,672.

If we then work this into the equation, the property actually becomes positively geared, despite the reduced rental income. Nice!

Averaged out, our investor will be earning about $10 a week in positive cashflow for that first year. While the tax benefits go a long way towards bringing this property into positive territory, it’s important to note that only the federal incentive can be accessed in your PAYGW Variation and the state bonus will need to wait until you lodge your tax return.

Well, it’s definitely something worth looking into. If you happen to come across a property that you think might be NRAS-approved, work the numbers, talk to the agent / developer, and see if that’s a viable option for you. As you can see here, it can be profitable but of course, is not without it’s own risks. And don’t forget we’re always here if you need help with analysing any property. Bye for now!