An investor talks about investing in NRAS properties
John Martinovic and his wife started their property investment journey together in their mid-30s and they have since built an impressive diversified portfolio that consists of strong assets—from small- and large-scale units to off-the-plan apartments and National Rental Affordability Scheme (NRAS) properties.
After years of “living month to month” as a business development manager, John realized that he needed to do more to be able to safeguard the future of his children and afford financial freedom for him and his wife. The couple started their journey by purchasing a two-bedroom unit in a Kingsgrove-based boutique block, which they bought for $380,000 and, after four years, is currently valued at $540,000.
Moving on in their journey, John and his wife then dabbled in NRAS assets, which the property investor defined as “a government scheme where you have to rent out the property at 20 per cent below market value. Then, come tax time you get between $10- and $12,000 tax offset.”
“We've got multiple NRAS properties [in Sydney and Melbourne] which work for us very well—certainly helps when it comes to cash flow,” he added.
John tells Smart Property Investment how he and his wife decided to invest in NRAS properties and how it has helped them step up their wealth-creation efforts:
How did you find out about NRAS?
John Martinovic: Our accountants are heavily involved with NRAS properties… He's a firm believer in them, and it took us a while to grasp the idea but we dived into one and it's worked, and we've since bought many under that scheme.
It's affordable housing—how have you found the tenant turnover in these properties?
John Martinovic: They've been very good and have been quality tenants… Obviously, they need to meet a certain criteria… There certainly hasn't been a high turnover of tenants and the quality has been really good.
Do you like the idea of providing housing for people who, under normal circumstances, might not be able to afford it?
John Martinovic: [We tell our tenants], "As long as you're in here and you're looking after the property like it's your own, we won't up the rent on you..." That's the way it's been.
Does that mean that you don’t get to increase rent a lot?
John Martinovic: Yes, you want your rent to increase over time… but I'd rather have good tenants in all of our properties that look after it. If someone moves out, you've got to find someone [better]... In terms of marketing fees and so on with agents, you're just going to lose that. You know that increase—they put five per cent or whatever—it's just going to go back into their marketing and you're going to lose a couple of weeks here. To me, I'd rather just have somebody there [in my properties].
What would be your advice for investors looking into dabbling with NRAS assets?
Phil Tarrant: You should always look to review the market value of your properties every six or 12 months… But if you've got a long standing tenant, just don't try and gouge him 10 bucks a week. You're better off leaving him there... We've got some great tenants in our property, some older couples who see it as their own and I give them a little bit of money to buy some plants, and they really look after the garden. [For them], it's their own property.
Tune in to John Martinovic’s episode on The Smart Property Investment Show to know more about why he decided to be “pedantic” about his property portfolio and why he believes that keeping on top of his finances now will not only safeguard the future of his children but enable him and his wife to be debt-free by 45.
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