NDIS investment properties are a relatively new addition to the available property investments available in Australia and come with one major benefit that no other property investment can achieve — to provide suitable specialist disability accommodation for members of the community with disability.
If you want to access high-yield property investment that may have enormous social outcomes and doesn’t come at the cost of capital growth potential, keep reading as we discuss the basics of transitioning from general residential to NDIS investments.
Why transition into a different type of investment property?
Investing in the residential property market is familiar to many Australian private investors, and is a common strategy to save for later in life, or to pass down to their children. For some savvy investors, they understand the power of not placing all their eggs in one basket, and are transitioning their property portfolio between property markets to access the best of what they all have to offer.
Whether it’s the commercial property market, residential property market or NDIS property market, some things to consider when transitioning between property markets are:
Naturally, different types of investments have different characteristics. Property as an asset class, is generally always considered to be a long-term investment, however, some of the characteristics between different types of properties can influence an investor’s decision.
Some characteristics to keep in mind may be:
- The lease length of the tenants and potential vacancy period.
- What expenses the tenant is responsible to pay for.
- Financial requirements to buy (deposit amounts, stamp duty, lenders mortgage insurance and property insurance).
Yield and capital growth potential
It goes without saying that attracting income is one of the key drivers for investment. Of course, the appreciation of any investment over time can be equally (if not more) important, depending on your investment strategy. Looking at your property investment options will mean assessing both the income yield and capital growth potential, to understand what is important to you, the projected income and growth potential, and how this will work with other forms of income, or with the other assets in your investment portfolio.
Supply and demand
The supply and demand relationship may affect your property investment. Typically, scarcity results in higher valuations, with oversupply driving down property prices. The SDA market currently has very high demand, with low supply, which is why the Australian Government has opened the opportunity up for social and economic participation.
The benefits of NDIS property investment in Specialist Disability Accommodation
NDIS properties refer to the range of Specialist Disability Accommodation housing that has been introduced under the NDIS and made available for private investment. As a property investment option, it rivals the residential and commercial market in terms of financial return, but also provides a range of housing that has been purpose-built to meet the needs of NDIS participants with very high support needs or extreme functional impairment.
The rental yields of NDIS properties is typically anywhere from 10-15% pa (and in some cases more) thanks to backing from the Federal Government under the National Disability Insurance Scheme. However, it’s not just SDA funding that helps to create high rental yields, approved SDA housing can accommodate multiple NDIS-approved tenants.
What this means for property investors, is that they can access a better level of continuity with their rental income payments — if one tenant vacates their room, there are still remaining tenants whose payments will continue.
Capital Growth potential
Just because SDA properties are purpose-built, doesn’t mean that they lack capital growth potential. Unfortunately, disability is timeless, and there will always be a cohort of our population that require specialised housing. Secondly, an SDA property is usually located in close proximity to amenities such as public transport and shopping, meaning that the properties are in sought-after locations within their locale.
FAQs about investing in the NDIS sector
Before you purchase approved SDA housing, it might pay to look at some of the most frequently asked questions about investing in SDA homes.
What is an SDA provider?
SDA providers are typically organisations, however, can be individuals, that complete the necessary NDIS registrations to supply SDA dwellings to the market. Generally, when you purchase SDA housing, you’ll engage an SDA provider.
good to know: SDA providers are often confused with NDIS service providers. An NDIS service provider is an organisation or individual who is registered with the NDIS and provides in or out-of-home support to NDIS participants. These include occupational therapists, nurses, psychologists, physiotherapists and community support workers.
How does SDA funding work?
As a property owner, you will not receive SDA payments directly. Instead, SDA funding is approved for each tenant with their NDIS plan and is paid to the SDA provider. It’s important to note that SDA funds do make up part of the total income yield for the property, as well as reasonable rent contribution and part of the tenant’s disability support pension.
Who is eligible to rent an SDA dwelling?
Only NDIS participants who have been approved for SDA funding are considered SDA participants.
Who manages SDA homes?
SDA providers are responsible for assisting in managing SDA properties, however, the SDA rules state that a specialist property management firm must be used. Providers will often work closely with, or employ a specialist property manager.
How do I know if a home is SDA compliant?
All NDIS homes (not just new build SDA dwellings) need to be built to strict SDA design standards, by SDA builders, and certified as SDA compliant before they can be offered on the SDA market.
Transitioning your portfolio to NDIS investments
If you’ve invested in the general residential property market before, you would be very familiar with the purchasing process, characteristics and requirements for investing. Purchasing NDIS housing does come with some unique requirements, which you may not have previously needed to manage.
At Apollo Investment, we provide a complete end-to-end solution, to make the transition from a standard investment property to an ethical investment in an NDIS SDA property as seamless as can be. Reach out to our team to learn more about how you can transition your property portfolio.