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AU A scheme all can agree on

Property Here - Monday, May 13, 2013

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AN interesting acronym has been popping up among renters and real- estate investors in the past few years. And the NRAS - short for National Rental Affordability Scheme - is shaking off some of the earlier concerns people had about it.

The NRAS is a cousin to the more famous NDIS. They are both government initiatives with claims to win-win status.

In a nutshell, the NRAS delivers about $10,000 a year in tax-free incentives for 10 years to investors who are willing to knock 20 per cent off a home's market-value rent.

It started in 2008, and more than 11,500 homes nationally have been tenanted, or are available for rent, under the scheme. Another 28,000 financial incentives have been reserved by property developers to be passed on to investors.

Of course, there's always the fine print. Investors can't approach the Government directly for NRAS incentives and must go through property developers, who can add extra costs, while tenants generally need a household income below about $100,000 to qualify.

The scheme works best for homes around $400,000 or less.

Previous criticisms included most NRAS properties being offered in outer suburbs - although things have changed more recently with governments wanting them closer to CBDs.

In Adelaide, that translates to properties in areas such as Lightsview, Northgate, Woodville, Seacombe, Sturt, Warradale and the CBD. Banks used to be wary of the NRAS but now all major lenders are onboard, finance experts say.

They say quality tenants are lining up for the properties because of the hefty savings.

HLB Mann Judd partner James Hooper says investors are allowed one rental increase each year no larger than the annual house rent inflation.

"Property owners can sell the property with the NRAS incentives attached at any time during the NRAS period,'' he says.

"While the incentive is an added attraction for property investors, prudent property investment principles still apply.

"The overriding objective should be to acquire an asset that will offer capital growth together with a measure of income yield in the future.''

NRAS is not for everyone, but it's well worth crunching the numbers if you are thinking about investing in property.
Ahead of Budget week, when we're about to be bombarded by such acronyms as GDP, CPI, CGT and LMFAO, what's another one between friends?

Anthony Keane is the editor of Your Money.

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