NDIS SDA is a powerful tool for investors seeking high rental yields along with a scope of potential and exponential growth with an ROI starting from around 9% p.a. to as high as 16% p.a.
NDIS SDA is a rapidly evolving concept in Australia and yet a bit new for all investors. So welcome aboard to the rollercoaster of information! We have all things covered for you to know about NDIS SDA/ NDIS Property Investment and how it can benefit you.
WHAT IS NDIS?
The NDIS(National Disability Insurance Scheme) is a welfare support scheme of the Australian Government entitled to assist the 14% (approx. 4.3 Million) Australians who have permanent and significant (Long-term) disability, to complete funding for any reasonable and necessary support needs related to their disability.
WHAT IS NDIS SDA?
SDA(Specialist Disability Accommodation) is an initiative by the federal government to provide new, accessible, and affordable housing that has been specially designed or modified for disabled tenants via NDIS. However, only those eligible can receive funds for the cost of this housing through SDA payments to an SDA provider.
Under the Specialist Disability Accommodation Innovation Plan, private and corporate investors are now participating at a large scale in the SDA market, thereby contributing to growing numbers of specialist dwellings developed and built across the country.
WHAT IS NDIS PROPERTY INVESTMENT?
NDIS Property investment simply means investing in NDIS approved SDA built to accommodate those with specialized accommodation requirements. For that matter, the Australian Government will pay NDIS participants’ rental costs for 20 years and provide investors with rental yields of more than-10% p.a.
SDA payments are expected to total approximately $700 million per year, building the scale of housing required for the SDA market has the potential to stimulate around $5 billion in private sector investment. Using SDA payments to leverage private capital has enormous potential to transform disability housing in Australia.
SDA is intended to compete on an equal basis with other commercial investment options in the property sector.
HOW DOES NDIS PROPERTY INVESTMENT WORKS?
At very first, the property needs to be enrolled and compatible according to SDA Rules, and the owner is required to be registered as an SDA provider.
Subsequently, NDIA(National Disability Insurance Agency) connects NDIS participants with investors and developers who provide well-developed and proper dwellings as per the standards levied thereby.
Housing providers will be funded through the individual participants having their own approved accommodation budget and negotiates rent directly with the housing provider. The accommodation can however be also shared by multiple participants and non-participants.
You may also note that rental payments also depend upon Size, Style, Location, Facilities added in, etc.
The payments made would also include the construction cost i.e. bricks and mortar along with the ROI of more than 10%.
The SDA provides / investors can find Tenants through multiple sources and they will also have authority to sell their SDA in the future if ever needed.
There are certain guidelines issued by NDIS to comply with to become SDA Provider. (SDA provider guidelines Link can be added here)
A potential investor can also check the availability of NDIS approved housing on sale on the bases of their budget, type and city.
WHY IS NDIS PROPERTY INVESTMENT A SUPER-PROFITABLE DECISION?
The SDA market in Australia is gaining momentum thereby, attracting a broader range of fund managers and providers.
NDIS properties are built in high-growth areas where clients are already investing.
- Rental yields of more than 10% p.a
- Rental guarantees
- High in demand and scarcity of actual Supply
- Prices start at a very lower cost compared to other properties.
Below mentioned data may add better clarity in understanding this WHY?
SDA DEMAND TABLE / SOURCE : REPORT OF SUMMER FOUNDATION
SDA SUPPLY TABLE / SOURCE : REPORT OF SUMMER FOUNDATION
SDA COMPARISON TABLE / SOURCE : REPORT OF SUMMER FOUNDATION
However, the NDIS property investment is not for everyone. This is particularly for those seeking a good and consistent long-term cash flow positive style of investment utilizing the government-backed schemes. It is less advisable for those chasing capital growth or development of Equity uplift, etc.
NDIS PROPERTY INVESTMENT IS A LESS BUMPY RIDE!
NDIS SDA is government-backed hence, it comes with a lower risk. Though just like any property the risk of vacancy and market rate fluctuations apply here as well. But the best part is, if you are a registered SDA provider, NDIS will assist you in acquiring the tenant.
Additionally, once your property has been enrolled and had its first tenant(s), the NDIS has contingencies for vacancy payments (NDIS SDA portion only). The amounts covered are for up to 60 days for properties with 2 or 3 participant rooms, and for up to 90 days for properties with 4 or 5 participant rooms.
SOME NEWS INSIGHTS
Investment activity within the emerging SDA sector is building. For example:
- Arena REIT acquired three SDA-funded properties in Adelaide for A$23.95 million;
- Federation Asset Management has joined with Social Ventures Australia to launch the SDA-focused Synergis Fund;
- Australian Unity is launching an SDA fund with a A$39 million capital raising; and
- Grocon is partnering with an SDA provider to tailor ten of their 77 apartments and the development of an on-site overnight assistance apartment in their Fairfield project for SDA.
CONCLUSION
SDA was essentially designed to boost the investment and development of SDA. It incorporates features that are familiar to mainstream capital markets including weighted average capital costs and investment horizon assumptions. The subsidy rates give investors more confidence to invest, thereby cutting down the risk of investors developing housing that then sits vacant.
