Risk Free Real Estate Investing2 min read
There is no such thing as a risk free investment. But there are ways of investing that can reduce the risk well below what any investor would consider to be acceptable. Investing in National Rental Affordability Scheme (NRAS) Real Estate is arguably the lowest risk real estate strategy available in Australia today.
Reduced Risk Profile
- With rents at 20% below market value and a large pool of eligible tenants, investors can expect reduced vacancy risk.
- With rents at 20% below market value and tenants qualifying income levels at up to $100,000 investors can be more selective in their choice of tenant.
- Certainty of contributions from the Australian and State governments for a period of 10 years. Improved Rental Yields
- The $9,140 annual National Rental Incentive for each rental dwelling, combined with the actual rent will improve rental yields over conventional residential investment properties.
- The national Rental Incentive is income tax free, indexed to the rental component of the Consumer Price Index (CPI) and is additional to existing taxation arrangements including depreciation.
- NRAS is a Government Subsidised Property Investment
- Secured Income Stream (10 Years)
- Potentially Cash Flow Positive Investment
- $90,000 Plus Tax Credits Over 10 Years. These are tax credits, not to be confused with tax deductions. Tax credits are effectively cash in your pocket. If your tax liability is lees than the credit, the difference is paid to you tax free.
NRAS property investment can counterbalance the risk and volatility of equity markets and helps to provide a balanced portfolio. The location of the properties and the attractive rents mean a stable and reliable income stream regardless of economic fluctuations.
With more than 1.5 million households eligible to rent NRAS properties, the vacancy risk is negligible. Properties must meet strict criteria for location, available facilities including public transport, schools, shopping centres etc as well as a healthy balance of rentals to owner occupied residences. All of which means high demand from tenants and potentially strong capital growth.
Investors can pick any tenants for NRAS properties, as long as these tenants do not exceed a certain income threshold. Income levels for eligible NRAS tenants are generous and allow for tenant salary increases of 25 per cent above the entry income limit.
For example, a couple with three children, earning a gross income of $100,768 per annum, is eligible to rent an NRAS dwelling. With the income increase allowance of 25 per cent, this family could earn up to $125,960 for two years before they become ineligible to remain in an NRAS property.
So investing in a National Rental Affordability Scheme property means:
- Better rental yields
- High demand from tenants meaning more choice for owners
- Negligible vacancy rates
- Strong potential for capital gains
That may not be risk free, but it is possibly the closest thing to it.