Property News by Danny Buxton, Director of Triple Zero Property – A Hotspotting Partner
For anyone considering building an SDA property, be warned, this is not your regular build or investment property.
An SDA property is an ethical investment opportunity that provides a home eligible National Disability Insurance Scheme (NDIS) participants. The NDIS aims to provide specialist dwellings for those living with a severe functional impairment or high support needs.
These NDIS participants include around 6,000 younger participants living in aged care facilities, and a further 6,000 or so living at home in unsuitable and burdensome situations (with ageing parents for example, or in properties with unsafe or inappropriate design characteristics).
This recently completed SDA property on the Sunshine Coast had a total purchase price of $750,000 and has achieved a gross rental yield of 15%.
This property met the strict design criteria set out in the scheme rules to accommodate three qualifying SDA residents with “Improved Liveability” needs and a room for onsite overnight assistance (OOA).
Once the build was completed it took five months to complete all the automation and have approved SDA participants move into the home and for the funds to start flowing (10yr + 5yr + 5 yr lease).
Other SDA properties we have built for clients have achieved gross rental yields of between 9 – 18% gross rental yield, depending on the type of property, location, the design criteria category, and the number of tenants in each property.
The risks
While SDA properties deliver investors an attractive cash flow, there are also a complex series of risks to consider:
Vacancy risks: investors will need to be cautious of the potential for extended periods of vacancy and the potentially high capital costs of “getting it wrong” in terms of meeting market demand in any given locality.
Concentration limits: There are restrictions on the number of dwellings that can be registered within a single land parcel. Concentration limits are in place to eliminate large group homes over the next ten years.
SDA Payments: There is a risk that the NDIS could change the payment amount and/or frequency of SDA payments in the future. Although the NDIS has outlined that new dwellings will receive payments at the “new build” level for 20 years and then for a further 20 years at the “existing stock” level, it has also stated these payments will be reviewed each 5-years.
SDA scheme registration risk: There is a risk that a property is built to SDA standards; however, the provider cannot get it registered into the scheme because of design or construction deficiencies or misinterpretations.
The risks outlined here is why it took the team at Triple Zero Property over two years of research to choose the correct builders and NDIS providers to negate these risks for our clients.
Who can invest in SDA properties?
SDA provides the opportunity for individual investors to buy single residential assets directly and have them registered into the scheme.
Why this investment property is not for everyone…
From a practical standpoint, there are a series of complexities that are likely to negate any broad-scale direct investment by individual investors.
These include the need for:
Each property must be registered into the scheme through an “SDA Provider”. While there is nothing from a regulatory perspective to prevent an individual investor becoming a registered provider, the compliance hurdles associated with this are considered impractical for a single investment.
The complexities associated with matching properties with tenants – these present an operational challenge for single asset investors and could expose the investor to extended periods of vacancy if not appropriately handled.
SDA payments are not payable just by registering a property into the scheme – the property owner must have a qualifying tenant in the property and finding that tenant is the property owner’s responsibility.
Finally, financing the property is still a complicated process as many banks do not yet have policies around NDIS/SDA properties for individual investors. Those wanting to explore this type of ethical investing need a lender who understands the process.
The benefits
SDA presents an excellent opportunity for an “impact” investment with above-market returns; many of our clients have been attracted to investing in the scheme simply because of the significant social outcomes it can achieve.
On top of the attractive cash flow, there are longer-range returns through:
- Capital appreciation
- Counted rental growth
- Minimal vacancy (once NDIS qualified tenants are in place they are likely to be long-term due to difficulty in finding alternate accommodation)
Over 10+ years you would expect long-range annualised returns into double digits.
Where to from here?
If you are attracted to investing in SDA, the best approach is to work with a team that has all the strategic partnerships in place. The team at Triple Zero Property have devoted considerable time and research before introducing any clients to this type of investment. Talk to Danny Buxton, founder of Triple Zero Property about this savvy investment opportunity on 1300 897 000 or email us at invest@triplezeroproperty.com.au.
For more info: https://triplezeroproperty.com.au/what-is-specialist-disability-accommodation-or-sda/
Disclaimer: The content of this document is not to be considered specific advice. Your situation is specific and individual; as such, you should always consult a registered and qualified professional within a particular area of advice needed.
