Is Property a Good Investment in Australia for Retirement?

As individuals approach retirement age, one important consideration is ensuring a secure and comfortable future. For many Australians, Specialist Disability Accommodation (SDA) properties may offer an attractive investment option that may provide both financial returns and the satisfaction of making a positive social impact.

In this article, we will explore the key factors to consider when evaluating whether an SDA property is a good investment for retirement in Australia.

Understanding SDA

SDA properties are purpose-built dwellings designed to cater to the specific needs of people with disability. These properties are funded and regulated by the National Disability Insurance Agency (NDIA) in Australia, under the National Disability Insurance Scheme (NDIS). SDA investments aim to address the shortage of accessible housing while providing a long-term income stream for investors.

Stable and secure rental income

One of the primary benefits of investing in an SDA property is the possibility of reduced vacancy risk and more reliable rental income. Unlike traditional residential properties, SDA properties provide higher certainty in rental returns due to the long-term funding by the NDIS. The SDA payments span over twenty years, which may provide investors with a stable income source throughout their retirement years.

Government support and demand

The Australian government’s commitment to improving disability accommodation and supporting individuals with disability may make investing in SDA properties an attractive proposition. The NDIS is actively promoting the development of SDA properties, and demand for such accommodation continues to outstrip supply. The consistent demand for SDA properties reduces the risk associated with vacancies and helps to improve continued rental income for investors.

Positive social impact

Investing in SDA properties also allows retirees to contribute to society by providing much-needed accommodation options for people with disability. By investing in SDA, retirees can make a tangible difference in the lives of individuals who require specialised housing. The satisfaction of knowing that their investment supports vulnerable members of the community can be a compelling factor for retirees.

Capital growth potential

When investors look at purchasing a rental property, they inevitably consider the income that can be received from the property, however, an investment property (including an SDA property) also provides the potential to grow in value over time. An SDA property works in a different supply and demand pattern to the standard rental market, which could be seen as more favourable to some investors.

Considerations before making an SDA property one of your retirement investments

While SDA properties offer several advantages, it’s important to consider the potential risks and challenges associated with this investment:

Specialist lending requirements

SDA’s upfront investment and lending requirements are quite different from traditional residential properties. Investors should carefully assess their financial situation and consider their long-term retirement goals before committing to any investment. Working with SDA investment specialists is the best course of action before you try to take on SDA investment borrowing solo.

Regulatory and compliance requirements

SDA properties are subject to specific design and compliance standards set by the NDIS. Investors must ensure their property meets these requirements and account for any potential modifications or upgrades necessary to maintain compliance.

Property management & costs involved

As with any investment property, managing an SDA property requires time, effort, and expertise. Investors need to engage specialised SDA property managers who understand the unique needs of SDA tenants and can navigate the regulatory landscape effectively. Typically, your SDA provider will come with a trusted property manager.

Some retirees enjoy doing their own maintenance on an investment property as a means to save maintenance costs, however, this is not possible as the maintenance on an SDA property needs to be carried out by specialist maintenance personnel who have been inducted under the NDIS regulations and registered as an SDA service provider.

You may pay capital gains tax when you sell

The implications of capital gains tax (CGT) when selling an investment property in Australia can significantly impact an individual’s financial situation. CGT is applied to the profit made from selling an investment property, and it is calculated based on the property’s market value at the time of sale minus the original purchase price and eligible costs. For retirees, CGT can affect their retirement income and overall financial planning.

However, certain CGT concessions may be available, which may help reduce or eliminate tax liability. Understanding these implications is crucial for retirees to make informed decisions regarding their investment property sales and retirement finances.

Talk with your accounting practitioner or financial adviser about any tax obligations or potential tax benefits to including an SDA property as part of your overall retirement investment strategy.

How to make an SDA investment property part of your retirement portfolio

Many people who purchase investment properties in retirement enjoy the tangibility of owning a physical asset over a portfolio of stocks. However, it’s often later in life that we realise what’s important to us, which is why retirees and pre-retirees are looking towards an SDA property as the next addition to their investment property portfolio. Not only may they utilise their investment property’s returns to help fund their retirement lifestyle, but they can also simultaneously give back to the community by enhancing the lifestyle of people with disability.

To ensure that you access the right financing for your NDIS investment, consult with professionals experienced in disability accommodation investments — the team at Apollo Investment have particular specialised knowledge in SDA investment. Start a conversation with the Apollo team today to learn more about SDA property investment.

Frequently asked questions about purchasing an investment property in Australia

Do I pay legal fees when I buy an investment property?

Property investment can come with some legal fees, such as conveyancing costs. We pride ourselves on providing full transparency over any and all costs when purchasing an SDA property as an investment.

How does an investment property affect my income tax?

Generally speaking, you’ll need to pay tax on any income that you make from your investments, including property. However, many tax deductions are also available for claiming against that income. Speak to your accountant to learn more!

What are the ongoing costs of owning an investment property?

Depending on the type of property you purchase, you may incur property management fees, council and water rates, maintenance costs or body corporate fees. You’ll also need to consider any investment mortgage repayments if you decide to borrow money to purchase your investment property.