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Specialist Disability Accommodation (SDA) is in short supply across the country. According to one expert, investors willing to take steps to navigate certain regulations can generate great returns while making a positive impact on communities.
SDA properties are those which are approved to house participants in Australia’s National Disability Insurance Scheme (NDIS).
“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,” said Yannick Ieko, founder and managing director of NDIS Loan Experts and SMSF Loan Experts.
According to him, the attractive returns these properties generate can reach up to 20 per cent per annum.
The only thing holding investors back is understanding how to navigate the field.
“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,” Mr Ieko said.
He answers a few key questions to open the field up to investors interested in providing this much-needed housing for Australian residents.
What is SDA?
SDA housing has been specially designed to suit the needs of people who have extreme functional impairment or very high support needs participating in the NDIS.
SDA properties offer improved liveability features, such as wheelchair accessibility throughout. The bathroom vanity and hand basin, kitchen sink, bench, cooktop and key appliances, for example, need to be accessible in either a seated or standing position in order to meet the resident’s needs. In addition, the properties must also be robust to reduce the likelihood of reactive maintenance.
The NDIS provides much of the funding for SDA providers who house NDIS participants.
“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,” Mr Ieko shared.
How do you invest in an SDA property?
“There are several ways you can purchase an SDA property. Firstly, you can purchase a property and adapt it based on SDA housing requirements, however, this tends to require substantial and complex work and the scheme sets a minimum spend the investor must be able to demonstrate to qualify as a new build in the scheme,” Mr Ieko explained.
If you choose to go this route, however, there are a number of builders and architects that specialise in undertaking this type of work and advisory organisations that specialise in providing guidance.
You can also seek out an approved SDA property to purchase as you would any other type of property – through a real estate agent. He warns though that SDA listings are in short supply.
“Family offices, investment groups and other institutional investors actively seek out these properties for addition to their investment portfolios,” said Mr Ieko.
The most common route for SDA investors, according to him, is the purchase of house and land packages.
“This involves the purchase of a block of land in an SDA friendly location and then the construction of an SDA approved house on that parcel,” he said.
How do you find a tenant?
“This is a good question and one that many people want to know. How do NDIS participants and SDA dwelling owners connect?” Mr Ieko said.
“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.”
In the latter scenario, NDIS service providers generally also house coordinators and support staff on the site.
Who pays the rent?
The income for an SDA property consists of several parts. The NDIS provides SDA payments, while NDIS participants pay a “reasonable rent contribution” of 25 per cent of their base disability support pension.
“Given the structure of the payments, the rent is virtually guaranteed, which is important when it comes to investment returns,” Mr Ieko noted.
And he added that owning an SDA property brings relief from the market volatility that adds much of the risk to normal investing.
“SDA properties are typically not subject to the same market forces as other sectors of the community, such as people who have lost their jobs through COVID.”