Feel good about your investment portfolio with socially responsible investing
Looking for an investment property that offers high returns – higher than average market rents, is guaranteed by the Government, provides long tenancies and high rental yields?
Looking for an investment property that offers high returns – higher than average market rents, is guaranteed by the Government, provides long tenancies and high rental yields? Sound too good to be true?
The National Disability Insurance Scheme (NDIS) introduced Specialist Disability Accommodation (SDA) as a funding stream to build new accessible and affordable housing for 28,000 Australians with a disability. THE NDIS makes payments to housing providers to cover the costs incurred and provides a return on investment of over 4-5 times the average investment property.
The Australian Government estimates that there is a significant shortage of suitable accommodation available for NDIS participants, particularly across building types and categories and should be a key consideration for investors.
The 2021 Interim Update to the Annual Financial Sustainability Report Summary estimates the number of participants in supported independent living (SIL) will increase from approximately 26,000 to 35,000 over the next 4 years; projecting a significant increase in demand.
From 1 July 2021 new build SDA properties must have a report from an accredited SDA assessor in order to be enrolled as a SDA dwelling. However new builds can be pre-certified at the design stage to improve the confidence of developers and investors that upon completion, the dwelling will be enrolled as SDA.
Property investing has been a star performer during the pandemic and according to Yannick Leko, founder and managing director of NDIS Loan Experts, investing in NDIS approved dwellings has delivered stellar returns.
“What we are finding is that investors who are purchasing NDIS approved dwellings are achieving extremely attractive returns of up to 20 percent per annum. The most common question I receive is how do I find or invest in an NDIS approved property. People want to know what the process involves which is a very good question.”
Requirements include well designed accommodation in the right location to allow inhabitants more independent living arrangements, increased community connection and access to support. It’s important that suitable properties are available in local communities across the country.
Do your due diligence in finding or building a property in selected areas with demand for potential approved tenants where there is currently not adequate supply of approved dwellings.
“There is a significant undersupply of SDA properties across the country. Property investors who invest in the sector are not only generating strong returns, they are also helping to solve a social crisis,” Leko said.
The income from an SDA property is different from a standard investment property as the payments come in three separate parts; SDA payment, Commonwealth Rent Assist and the Reasonable Rent Contribution (which is 25% of the recipient’s base disability support pension).
‘Given the structure of the payments, the rent is virtually guaranteed which is important when it comes to investment returns” Said Mr Leko.
Rental incomes can range from $84,000 to $130,000 per annum based on location and type of accommodation provided, with a typical home around 3-4 bedrooms that can house 2-3 people with disability and a support worker.
For example, a 4 bedroom home with 2 tenants and a support worker with rental based on $1700 per week ($88,400 per annum) with the house valued at $680,000 gives the investor a gross return per annum of 13.12% says Maurice Watson, director of The Property Investment Company.
“SDA properties offer improved liveability. Improved liveability includes features such as external doors and outdoor private areas must be accessible by wheelchair and facilities such as the bathroom vanity and hand basin, kitchen sink, bench, cooktop and key appliances should be accessible in either a seated or standing position in order to meet the resident’s needs. In addition, the properties must also be more robust which reduces the likelihood of reactive maintenance.
“The current government incentives and structure for SDA properties means the rental income is much greater, on average by three to four times, than what investors would generally expect from a non NDIS property.”
Securing a tenant can be sought through a number of providers and specialist property management firms so you can register with SDA at the commencement of your build with the intention of having a tenant as soon as the build is complete.
“The NDIS operates under a broad market approach. On this basis, participants are expected to find and apply for appropriate advertised vacancies themselves. This is done in two ways. Either a participant finds their own property directly through sites such as realestate.com.au, or via organisations such as NDIS service providers that lease entire properties and rent out rooms to participants.
“NDIS service providers normally provide live-in house coordinators and provide other levels of support to participants. Organisations also search realestate.com.au and have connections with agents that know what properties are coming up on the market that are SDA appropriate.”
So, you want to put your money where your mouth is? Purchasing an SDA approved property can be done a number of ways. You can purchase a property and update it based on SDA design standards (this can be costly and you may need specialist builders or architects to complete the works so the property qualifies under the scheme.)
Alternatively, you can purchase an already approved property which can be sourced via agents but do tend to be in short supply, or you can purchase house and land packages and adapt it to comply with the SDA design standards during the build process.
It’s important to remember, funding for SDA housing is provided to NDIS participants who meet specific eligibility criteria. SDA funding is not for support or care services but for homes where these services can be delivered. The funding is attached to the NDIS participant not the property itself, so if you don’t have an approved participant to rent out your property you aren’t eligible for the funding.