Benefits of an NRAS property investment
When it comes to buying a rental property, some of your main areas of concern as an investor may be ...
When it comes to buying a rental property, some of your main areas of concern as an investor may be tenant turnover and ongoing expenses.
After all, tenants are the ones who pay the rent, and therefore, your mortgage repayments. So it's important that your house has reliable tenants living in it.
At the same time, ongoing expenses can cut into the return that your investment property provides you.
There is the option of buying a regular residential property for investment, but avid property investors may want to look towards buying a house under the National Rental Affordability Scheme (NRAS).
What is a NRAS property?
The NRAS scheme was put in place by the federal government to build affordable rental housing for low to moderate-income earners. As rents can be particularly high in some areas - such as Sydney - the NRAS helps to provide a solution for those who cannot afford high rents.
Owners of NRAS property are given an income-tax free incentive of $9,981 for each of the rental properties that they own for up to 10 years.
This funding is provided through both the federal and state government that the property is located in.
At the end of this 10 year period, the owner of the properties gets full control and does not have any obligations towards the federal government.
These properties are then rented out at no more than 80 per cent of market rent valuation.
What are the benefits?
For starters, NRAS properties provide investors with a tax-free investment option while at the same time increasing the level of affordable rental properties in the country.
Tenants of these properties tend to be more secure, as they stay for a longer lease term. There is also usually a long list of tenants looking to find cheaper accommodation.
This means that owners will have peace of mind knowing that their investment will be rented, rather than struggling to find tenants in a normal market and dealing with fluctuating vacancy rates.
Owners of these properties will need to appoint a tenancy manager to oversee the day-to-day running of the dwelling - such as maintenance and rent collection. This means that as an owner, you will not have to manage the property yourself.
Many homes under the NRAS are in well-located areas close to employment centres, public transport and other amenities. This will help them to hold their value over time, even after the 10 year period is up.