Meadowview Drive

The tenant is installed and the Investor then sits back and receives the regular rent income as per the Head lease.

The Property Manager continues to manage the property for the investor with overall management for the investor by the QAHC.

The objective is that the Investor has a Hassle Free investment with Management by Exception by the QAHC. That means that the Investor has little management worry and is not required to be involved unless there are Exceptional Circumstances or in other words some type of problem arises that the investor should know about. All of the management stress is carried by the QAHC.

Q. THE PROPERTY MANAGER CHARGES 10% WHEREAS I CAN GET MANAGEMENT IN THE OPEN MARKET FOR 7% OR 8%

A. YES this is true but the services provided are not comparable. The QAHC has arranged Property Management Agreements that include all in costs. There are no extra charges for things such as

Letting Fees

Annual Rental Increments

Re-letting Fees

Advertising

Administration etc.

In particular the Property manager must pay rent for the first two weeks of any vacancy that occurs after a NORMALLY occurring end of lease situation. This is because the Manager has a large and ready pool of tenants to select from and extended vacancy should not occur in this situation. This penalty will encourage the Manager to make sure the incoming tenancy is set, the penalty is almost half of the annual Management fee.

Abnormal vacancies are covered for up to 15 weeks under the extended insurance Policy put in place by the QAHC, another significant benefit they offer.

Q. CAN I BUY MORE THAN ONE PROPERTY?

A. YES. There is no limit to the number of NRAS properties that can be bought, other than your ability to obtain finance.

Q. WHO SETS THE MARKET RENT AND HOW CAN WE BE SURE THAT IT REMAINS ADEQUATE?

A. The market rents are set by independent valuers appointed by the Government at the beginning of the lease term. You will be able to calculate your rental returns at 75% of this figure and to add your tax credit (Now $8,672 pa) and allowable depreciation to arrive at your net returns per year. We suggest you involve your accountant / tax advisor in this process. The rents are CPI indexed each year at the average Capital City Rent Component of the index (Last year 8.4%) and are reviewed to market every three years. It seems likely that this three year review will then result in substantial increases based on past growth in rentals and the continuing high demand for rental accommodation due to the population growth in Queensland.

Q. I UNDERSTAND THAT THE NRAS PROGRAM RUNS FOR 10 YEARS, SO CAN I SELL THE PROPERTY DURING THAT PERIOD IF I NEED TO?

A. YES

You can either sell it as a highly desirable, income earning investment property, without any penalty, by leaving it in the NRAS program. Or... You can opt out of the NRAS program to either sell the property on the open market or to move into it yourself. If you do that, you will lose a proportion of your Tax Credit for the tax year in which the property is sold.

Q. HOW MANY NRAS PROPERTIES ARE AVAILABLE?

A. The Federal Government plans to have 50,000 NRAS homes Australia-wide built by the end of 2012. However, the process of gaining approval for each home and the allocation of these to investors is time consuming and means that relatively few properties are currently available. These are being allocated on a first come basis to investors who complete the paperwork required and pay refundable deposits of $1,000 per property.

Q. WHAT IS NRAS?

A. NRAS is the National Rental Affordability Scheme which is an initiative of the Federal Government and is jointly funded and administered with the States. It is designed to provide quality rental homes at reduced rents for the large number of Australian families unable to buy their own homes or to afford the full cost of market rents. In essence the Government is using indexed Tax Credits currently at $8,672 per property per year to pay back investors who agree to accept rents at 25% lower than normal market rents. See letter from Treasurer Wayne Swann and Housing Minister Tanya Plibersek

Treasurer Wayne Swan explains

Dear Potential Applicant

Thank you for your interest in affordable housing and the Australian Government's National Rental Affordability Scheme. As you know, rent increases are outstripping wages growth and inflation. This is making it harder for Australians on low to moderate incomes in the private rental market. The National Rental Affordability Scheme is a major supply-side initiative to make rental properties more affordable by encouraging large-scale investment in rental housing for low and moderate income families and individuals.

It aims to assist institutional investors, developers and not-for-profit groups to deliver 50,000 rental dwellings over the next four financial years by creating a new residential property asset class for property investors.

The Scheme offers significant financial incentives to applicants commencing at a minimum value of $8,000 per dwelling annually, for a period of 10 years.

The Incentives provided under the Scheme will assist investors to develop proposals that provide an attractive rate of return. It presents a new investment opportunity in the Australian market. More than 1.5 million households will be eligible for tenancies under the Scheme - a large and diverse pool of potential tenants for investors in affordable housing projects that will be made available through the Scheme.

This document has been developed to provide information to institutions and organisations that are considering investment in affordable rental housing.

We trust this information will assist business to develop proposals to take up the incentives on offer.

Yours sincerely,

The Hon. Wayne Swan Treasurer

Q. WHAT ARE "TAX CREDITS"

A. A tax credit of $8,000 per year (Now $8,672) is given to NRAS investors for each property they buy. This is non assessable income. So if an investor is currently paying $18,000 in income tax per year, the amount payable will reduce by $8,672 to $9,328. The tax offset/credit can be applied from the start of a year by applying to the ATO to bring that tax credit forward, so that the tax payable per month is lower, rather than waiting for a rebate at the end of the financial year. Your Accountant or tax specialist will be able to give you the best information for your circumstances and advise how to apply for that facility.

Q. WHAT IS "CASH FLOW POSITIVE"?

A. "CASH FLOW POSITIVE" in investment terms means that the combination of income (rents), depreciation and tax advantages, including the $8,672 tax credit received by the investor are greater than the cost of buying (interest on mortgage) and maintaining the investment (NRAS property). For many PAYE and PAYG taxpayers their investment in one or two NRAS properties, with an interest only loan, is indeed actually or very nearly cash flow positive. Each case is different, as it depends on your marginal rate of tax and you should consult your Accountant or tax specialist.

Q. ARE NRAS PROPERTIES HOUSING COMMISSION HOMES?

A. NO.

It is important to distinguish this program from the federal Government Social Housing Program. This is NOT part of that program and attracts totally different tenants.

All NRAS properties are high quality homes, in desirable areas, designed to provide affordable housing for middle Australia families on good incomes but unable to acquire the deposits or to afford the mortgage payments needed for home ownership. A Family with three children can earn over $100,000 pa and still qualify for this program. Government projections indicate that continued immigration and Queensland regional growth will create a continued high demand for this style of home.

Other programs are under way for Social Housing/ housing commission style dwellings for those on low incomes and difficult circumstances.

Q. WHAT SORT OF PROPERTIES ARE BEING OFFERED UNDER THE NRAS PROGRAM?

A. The main emphasis is on House and Land packages with 4 bedroom homes fully completed and landscaped, ready to move into. Townhouses with two or three bedrooms are also available fully completed in all respects as well as studio and one bedroom units for couples and small families. With all properties there will be nothing to distinguish them from their neighbours’ in each estate or unit development, who will be either owners or renters paying standard market rents.