NRAS properties can offer tax benefits and a set rental arrangement, making them appealing to investors. The catch is that they can be harder to finance than a typical investment property.
Many lenders don’t like using NRAS properties as security, so approval isn’t just about your income or deposit. The bank also needs to be comfortable with the NRAS setup.
Specialist lenders may still be able to help, especially if your NRAS provider is accepted or you’re borrowing at a lower LVR.
What Is The National Rental Affordability Scheme (NRAS)?
The National Rental Affordability Scheme (NRAS) is a legislative initiative that aims to increase the supply of new rental dwellings and improve rental affordability.
Investors who purchase or construct rental properties under this scheme agree to set rental rates below market rates. In return, they may be eligible for tax incentives.
Generally, properties are rented at 20% to 25% below market rates.
NRAS properties are rented to tenants who meet the NRAS eligibility criteria and are administered by a Government-approved consortium.
How Much Can You Borrow For An NRAS Property?
The amount that you will be eligible to borrow depends on the consortium that you use:
- ALL NRAS: If your company is not listed then we can finance up to 80% of the property value.
- 4 Walls Ltd: 90% of the value of the property.
- Affordable Housing Consulting Pty Ltd (AHC): 90% of the value of the property.
- Affordable Management Corporation (AMC): 90% of the value of the property.
- Aspire: 90% of the value of the property.
- Brisbane Housing Company (BHC): 90% of the value of the property.
- Community Housing Canberra Ltd (CHC): 90% of the value of the property.
- Ethan Affordable Housing: 90% of the value of the property.
- Evolve Housing: 90% of the property value.
- Loddon Mallee Housing Services: 90% of the property value.
- Providence Housing Pty Ltd: 90% of the value of the property.
- Quantum Housing Group (QHG): 90% of the value of the property.
- Queensland Affordable Housing Consortium (QAHC): 90% of the value of the property.
- Questus: 90% of the value of the property.
- Urban Affordable Housing Association (UAHA): 90% of the value of the property.
- Tremplin Ltd: 90% of the value of the property.
- Yaran: 90% of the value of the property.
- Other schemes: We can lend up to 80% of the property value.
- Construction loans: Building a new investment property for use under an NRAS scheme is acceptable, as long as the consortium / scheme that you are using is accepted by the bank.
- 100% loans: Available with some of our lenders if you have a guarantor.
- Low doc loans: N/A.
- Discounts: Competitive professional package and basic home loan discounts are available.
Do you need help applying for a loan to purchase an NRAS property?
Please call us on 1300 889 743 or enquire online and one of our expert mortgage brokers will call you to discuss your options.
Which NRAS consortiums are accepted by lenders?
- Yaran
- Affordable Housing Consulting Pty Ltd (AHC)
- Affordable Management Corporation (AMC)
- Aspire, Quantum Housing Group (QHG)
- Ethan Affordable Housing
- Evolve Housing
- Loddon Mallee Housing Services
- Questus
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View Program DetailsWhich NRAS Head Lease Schemes Do Banks Accept?
The Queensland Affordable Housing Consortium (QAHC), Providence Housing Pty Ltd and the Brisbane Housing Company (BHC) are currently the only “head lease” NRAS schemes that are accepted.
The QAHC and BHC:
- Provides a joint venture head lease to investors.
- Manages the NRAS 10 year compliance requirements.
- Allocates and supervises property management services.
NRAS properties administered by the QAHC and BHC are rented at 25% below the market rental rate.
Other consortium providers currently have restrictions which the banks find unacceptable for mortgage purposes or the banks have not yet investigated and approved for residential lending.
Do you need help to apply for a NRAS mortgage?
Please enquire online or call us on 1300 889 743 and speak to one of our specialist mortgage brokers today!
Why Do Banks Restrict Some NRAS Consortiums?
The lender has investigated the legal structure of these consortiums and has determined that the legal structure used by their investors will not impact the lender’s security position.
Please note that we can accept any consortium as long as your loan is for a maximum of 80% of the property value.
We can apply for a higher loan amount if your consortium is one of the ones listed above.
Can NRAS Tax Incentives Improve Your Borrowing Power?
Did you know that some of the lenders will not take the tax benefits of an NRAS investment property into account when they are assessing your ability to repay the debt?
This reduces your borrowing capacity and, as a result, reduces the number of investment properties that you can buy.
The good news is that if you are borrowing up to 80% of the property value then one of our lenders can take these tax benefits into account.
As a result, you can buy more real estate assets and receive a larger tax incentive from this scheme.
Is NRAS A Good Investment?
The National Rental Affordability Scheme (NRAS) certainly presents some intriguing investment opportunities, particularly through its tax incentives and the potential to contribute to social housing. Whether an NRAS property is a good investment for you, however, can vary based on several factors.
Pros
- Tax Benefits: NRAS offers tax incentives. For instance, the scheme allows investors to receive annual tax credits, improving the overall financial return on the investment.
- Social Impact: By participating in NRAS, you are providing affordable housing to those who need it.
Cons
- Financing Difficulties: Many lenders hesitate to accept NRAS properties as security for a home loan. This could limit your financing options and affect the terms you receive, such as interest rates or down payment requirements.
- Marketability and Liquidity: Properties under the NRAS are rented at below-market rates and with long-term leases that can complicate the selling process. If you decide to sell before the scheme's 10-year term ends, this can potentially reduce the property's marketability.
- Complexity and Compliance: Managing an NRAS investment involves navigating compliance requirements and possibly dealing with consortium-specific restrictions, which can add to the complexity of the investment.
Whether NRAS is a good investment for you will depend on your specific circumstances, including your financial goals, ability to handle the investment’s complexities, and financing options.
NRAS tax benefits: Case study
Typically, in exchange for the reduced rental return, the investor receives additional tax credits amounting to $9,500 per annum (indexed).
For example, in a $500,000 purchase at a market return of 4%, the annual rent is $20,000. The NRAS discount, in this case, is $5,000, and the investor receives a flat $9,500 extra tax benefits.
However, it should be noted that there are minor admin costs, but overall based on a typical scenario as above, the investor is ahead by approximately $3,000 to $4,000 after costs.
The scheme runs for 10 years.
How can the banks identify an NRAS property?
Lenders can identify that the property you are buying is part of the National Rental Affordability Scheme.
They can see this from the following references being listed on the valuation, title search, Contract of Sale or building contract:
- National Rental Affordability Scheme,
- NRAS,
- Head Lease,
- Non Equity Joint Venture Agreement.
Furthermore, the lender can identify the property as an NRAS investment from the name of the consortium.
Need Help Financing An NRAS Property?
NRAS finance is a specialist lending scenario. The right lender will depend on the consortium, lease structure, deposit, guarantor position, income, liabilities and investment goals.
Our mortgage brokers can help assess your NRAS property, compare suitable lender options and explain what you may be able to borrow.
Call us on 1300 889 743 or complete our free online assessment form to speak with a mortgage broker.