Property investors must be made aware of significant weaknesses in the National Rental Affordability Scheme (NRAS), a prominent real estate agent in WA has warned.
While the NRAS scheme offers significant incentives, RE/MAX WA regional owner Geoff Baldwin said the negatives may outweigh what it can offer an investor.
The scheme offers a $10,000 yearly payment to property investors if they reduce their rent to 20 per cent less than market average for an eligible tenant. This rebate is ongoing for 10 years.
The NRAS was created with the aim to deliver up to 50,000 affordable rental homes by 2016.
“One of the biggest concerns with the NRAS offerings are that they are located in concentrated lots whereby for example, an entire villa development houses only NRAS tenants rather than them being spread amongst owner occupied properties,” Mr Baldwin said.
“My experience, selling investment properties for the past 26 years, is that it is never wise to buy a rental property in a development that does not include a substantial component of owner occupiers to ensure an ongoing level of pride of ownership, security and community.”
Restricted tenant selections may also mean that investors cannot offer their property to the whole market. This can result in the property not attracting the best applicants, he said.
The NRAS claims that it has many benefits, including improved rental yields, a tax-free incentive and no caveats or contracts with consortiums.
“Investors buying properties under the NRAS scheme should do so with open eyes and understanding the reality is that subsidised schemes are subsidised for a reason and that although property investment is an amazing medium to long tern wealth strategy, there are no shortcuts to success,” he said.